POS AM: Post-effective amendment to a registration statement that is not immediately effective upon filing
Published on
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 2007
REGISTRATION NO. 333-103473
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
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POST-EFFECTIVE AMENDMENT NO. 10
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(Exact Name of Registrant)
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NEW JERSEY
(State or other jurisdiction of incorporation or organization)
22-2426091
(I.R.S. Employer Identification Number)
C/O PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-7333
(Address and telephone number of principal executive offices)
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THOMAS C. CASTANO
SECRETARY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-4780
(Name, address and telephone number of agent for service)
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Copies to:
C. CHRISTOPHER SPRAGUE VICE PRESIDENT,
CORPORATE COUNSEL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-6997
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Approximate date of commencement of proposed sale to the public --
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
* Securities are not issued in predetermined units
** Registration fee for these securities, in the amount of $75 million, was
paid at the time the securities were originally registered on Form S-3 as
filed by Pruco Life Insurance Company of New Jersey on February 27, 2003.
The current amount of registered, but unsold, securities is reported
quarterly by the Registrant on Form 10-Q and annually on Form 10-K.
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Prudential Investment Management Services LLC, the principal underwriter of
these contracts under a "best efforts" arrangement, will be reimbursed by Pruco
Life Insurance Company of New Jersey for its costs and expenses incurred in
connection with the sale of these contracts.
The Risk Factors section appears 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/ PLUS 3 VARIABLE ANNUITY
Prospectus: May 1, 2007
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This Prospectus describes an Individual Variable Annuity Contract offered by
Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey) and the
Pruco Life of New Jersey Flexible Premium Annuity Account. Pruco Life of New
Jersey offers several different annuities which your representative may be
authorized to offer to you. Each Annuity has different features and benefits
that may be appropriate for you based on your financial situation, your age
and how you intend to use the Annuity. Please note that selling broker-dealer
firms through which the contract is sold may decline to make available to
their customers certain of the optional features and investment options
offered generally under the contract. Alternatively, such firms may restrict
the availability of the optional benefits that they do make available to their
customers (e.g., by imposing a lower maximum issue age for certain optional
benefits than what is prescribed generally under the contract). Please speak
to your registered representative for further details. The different features
and benefits include variations in death benefit protection and the ability to
access your annuity's contract value. The fees and charges under the annuity
contract and the compensation paid to your representative may also be
different among each annuity. If you are purchasing the contract as a
replacement for existing variable annuity or variable life coverage, you
should consider, among other things, any surrender or penalty charges you may
incur when replacing your existing coverage. Pruco Life of New Jersey is an
indirect wholly-owned subsidiary of the Prudential Insurance Company of
America.
THE FUNDS
Strategic Partners Plus 3 offers a wide variety of investment choices,
including variable investment options that invest in underlying mutual funds.
Currently, portfolios of the following underlying mutual funds are being
offered: The Prudential Series Fund, Advanced Series Trust (formerly named
American Skandia Trust), Evergreen Variable Annuity Trust, Gartmore Variable
Insurance Trust, and Janus Aspen Series (see next page for list of portfolios
currently offered).
You may choose between two basic versions of Strategic Partners Plus 3. One
version, the Contract With Credit, provides for a bonus credit that we add to
each purchase payment you make. If you choose this version of Strategic
Partners Plus 3, some charges and expenses may be higher than if you choose
the version without the credit. Those higher charges could exceed the amount
of the credit under some circumstances, particularly if you withdraw purchase
payments within a few years of making those purchase payments.
PLEASE READ THIS PROSPECTUS
Please read this prospectus before purchasing a Strategic Partners Plus 3
variable annuity contract, and keep it for future reference. The current
prospectuses for the underlying mutual funds contain important information
about the mutual funds. When you invest in a variable investment option that
is funded by a mutual fund, you should read the mutual fund prospectus and
keep it for future reference. The Risk Factors section relating to the market
value adjustment option appears in the Summary.
TO LEARN MORE ABOUT STRATEGIC PARTNERS PLUS 3
To learn more about the Strategic Partners Plus 3 variable annuity, you can
request a copy of the Statement of Additional Information (SAI) dated May 1,
2007. The SAI has been filed with the Securities and Exchange Commission (SEC)
and is legally a part of this prospectus. Pruco Life of New Jersey also files
other reports with the SEC. All of these filings can be reviewed and copied at
the SEC's offices, and can also be obtained from the SEC's Public Reference
Section, 100 F Street, N.E., Washington, D.C. 20549. (See SEC file numbers
333-49230 and 333-103473.) You may obtain information on the operation of the
Public Reference Room by calling the SEC at (202) 551-8090. The SEC maintains
a Web site (http://www.sec.gov) that contains the Strategic Partners Plus 3
SAI, material incorporated by reference, and other information regarding
registrants that file electronically with the SEC. The Table of Contents of
the SAI is set forth in Section 11 of this prospectus.
For a free copy of the SAI, call us at (888) PRU-2888, or write to us at
Prudential Annuity Service Center, P.O. Box 7960, Philadelphia, PA 19176.
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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 VARIABLE ANNUITY CONTRACT
IS SUBJECT TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR MONEY. AN INVESTMENT
IN STRATEGIC PARTNERS PLUS 3 IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
Strategic Partners/SM/ is a service mark of the Prudential Insurance Company
of America. P2401NY
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The Prudential Series Fund
Jennison Portfolio
Prudential Equity Portfolio
Prudential Global Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
Prudential Value Portfolio
SP Aggressive Growth Asset Allocation Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Growth Asset Allocation Portfolio
SP AIM Core Equity Portfolio
SP Davis Value Portfolio
SP International Growth Portfolio
SP International Value Portfolio
SP Mid Cap Growth Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP Small-Cap Growth Portfolio
SP Small Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio
SP T. Rowe Price Large-Cap Growth Portfolio
Advanced Series Trust
AST Advanced Strategies Portfolio
AST Aggressive Asset Allocation Portfolio
AST AllianceBernstein Core Value Portfolio
AST AllianceBernstein Growth & Income Portfolio
AST AllianceBernstein Managed Index 500 Portfolio
AST American Century Income & Growth Portfolio
AST American Century Strategic Allocation Portfolio
AST Balanced Asset Allocation Portfolio
AST Capital Growth Asset Allocation Portfolio
AST Cohen & Steers Realty Portfolio
AST Conservative Asset Allocation Portfolio
AST DeAM Large-Cap Value Portfolio
AST DeAM Small-Cap Value Portfolio
AST Federated Aggressive Growth Portfolio
AST First Trust Balanced Target Portfolio
AST First Trust Capital Appreciation Target Portfolio
AST Goldman Sachs Concentrated Growth Portfolio
AST Goldman Sachs Mid-Cap Growth Portfolio
AST High Yield Portfolio
AST JPMorgan International Equity Portfolio
AST Large-Cap Value Portfolio
AST Lord Abbett Bond-Debenture Portfolio
AST Marsico Capital Growth Portfolio
AST MFS Global Equity Portfolio
AST MFS Growth Portfolio
AST Mid-Cap Value Portfolio
AST Neuberger Berman Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Value Portfolio
AST Neuberger Berman Small-Cap Growth Portfolio
AST PIMCO Limited Maturity Bond Portfolio
AST Preservation Asset Allocation Portfolio
AST Small-Cap Value Portfolio
AST T. Rowe Price Asset Allocation Portfolio
AST T. Rowe Price Global Bond Portfolio
AST T. Rowe Price Natural Resources Portfolio
AST UBS Dynamic Alpha Portfolio
Evergreen Variable Annuity Trust
Evergreen VA Balanced Fund
Evergreen VA Fundamental Large Cap Fund
Evergreen VA Growth Fund
Evergreen VA International Equity Fund
Evergreen VA Omega Fund
Evergreen VA Special Values Fund
Gartmore Variable Insurance Trust
GVIT Developing Markets Fund
Janus Aspen Series
Large Cap Growth Portfolio -- Service Shares
CONTENTS
3
4
PART I SUMMARY
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STRATEGIC PARTNERS PLUS 3 PROSPECTUS
5
PART I: STRATEGIC PARTNERS PLUS 3 PROSPECTUS SUMMARY
GLOSSARY
We have tried to make this Prospectus as easy to read and understand as
possible. By the nature of the contract, however, certain technical words or
terms are unavoidable. We have identified the following as some of these words
or terms.
Accumulation Phase
The period that begins with the contract date (which we define below) and ends
when you start receiving income payments, or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
Adjusted Contract Value
When you begin receiving income payments, the value of your contract adjusted
for any market value adjustment minus any charge we impose for premium taxes
and withdrawal charges.
Annual Income Amount
Under the terms of the Lifetime Five Income Benefit, an amount that you can
withdraw each year as long as the annuitant lives. The annual income amount is
set initially as a percentage of the Protected Withdrawal Value, but will be
adjusted to reflect subsequent purchase payments, withdrawals, and any
step-up. Under the Spousal Lifetime Five Income Benefit, the annual income
amount is paid until the later death of two natural persons who are each
other's spouses at the time of election and at the first death of one of them.
Annual Withdrawal Amount
Under the terms of the Lifetime Five Income Benefit, an amount that you can
withdraw each year as long as there is Protected Withdrawal Value remaining.
The Annual Withdrawal Amount is set initially to equal 7% of the initial
Protected Withdrawal Value, but will be adjusted to reflect subsequent
purchase payments, withdrawals, and any step-up.
Annuitant
The person whose life determines the amount of income payments that we will
make. Except as indicated below, 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.
Generally, if an annuity is owned by an entity and the entity has named a
co-annuitant, the co-annuitant will become the annuitant upon the death of the
annuitant, and no death benefit is payable. Unless we agree otherwise, the
contract is eligible to have a co-annuitant designation only if the entity
that owns the contract is (1) a plan described in Internal Revenue Code
Section 72(s)(5)(A)(i) (or any successor Code section thereto); (2) an entity
described in Code Section 72(u)(1) (or any successor Code section thereto); or
(3) a custodial account established pursuant to the provisions in Code
Section 408(a) (or any successor Code section thereto) ("Custodial Account").
Where the contract is held by a Custodial Account, the co-annuitant will not
automatically become the annuitant upon the death of the annuitant. Upon the
death of the annuitant, the Custodial Account will have the choice, subject to
our rules, to either elect to receive the death benefit or elect to continue
the contract. If the Custodial Account continues the contract, then the
Contract Value as of the date of due proof of death of the annuitant will
reflect the amount that would have been payable had a death benefit been paid.
Annuity Date
The date when income payments are scheduled to begin. You must have our
permission to change the annuity date. If the co-annuitant becomes the
annuitant due to the death of the annuitant, and the co-annuitant is older
than the annuitant, then the annuity date will be based on the age of the
co-annuitant, provided that the contract's requirements for changing the
annuity date are met (e.g., the co-annuitant cannot be older than a specified
age). If the co-annuitant is younger than the annuitant, then the annuity date
will remain unchanged.
Beneficiary
The person(s) or entity you have chosen to receive a death benefit.
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.
6
Co-Annuitant
The person shown on the contract data pages who becomes the annuitant (if
eligible) upon the death of the annuitant if the contract's requirements for
changing the annuity date are met.
Contract Date
The date we accept your initial purchase payment and all necessary paperwork
in good order at the Prudential Annuity Service Center. Contract anniversaries
are measured from the contract date. A contract year starts on the contract
date or on a contract anniversary.
Contract Owner, Owner, or You
The person entitled to the ownership rights under the contract.
Contract Value
This is the total value of your contract, equal to the sum of the values of
your investment in each investment option you have chosen. Your Contract Value
will go up or down based on the performance of the investment options you
choose.
Contract with Credit
A version of the annuity contract that provides for a bonus credit with each
purchase payment that you make and has higher withdrawal charges and insurance
and administrative costs, and may provide lower interest rates for fixed rate
options than the Contract Without Credit.
Contract without Credit
A version of the annuity contract that does not provide a credit and has lower
withdrawal charges and insurance and administrative costs than the Contract
With Credit.
Credit
If you choose the Contract With Credit, this is the bonus amount that we
allocate to your account each time you make a purchase payment. The amount of
the credit is a percentage of the purchase payment. Bonus credits generally
are not recaptured once the free look period expires. Our reference in the
preceding sentence to "generally are not recaptured" refers to the fact that
we have the contractual right to deduct, from the death benefit we pay, the
amount of any credit corresponding to a purchase payment made within one year
of death.
Death Benefit
If a death benefit is payable, the beneficiary you designate will receive, at
a minimum, the total invested purchase payments, reduced proportionally by
withdrawals, or a potentially greater amount related to market appreciation.
The Guaranteed Minimum Death Benefit is available for an additional charge.
See Section 4, "What Is The Death Benefit?"
Designated Life
For purposes of the Spousal Lifetime Five Income Benefit, a Designated Life
refers to each of two natural persons who are each other's spouses at the time
of election of the Spousal Lifetime Five Income Benefit and at the first death
of one of them.
Dollar Cost Averaging Fixed Rate Option (DCA Fixed Rate Option)
An investment option that offers a fixed rate of interest for a selected
period during which periodic transfers are automatically made to selected
variable investment options or to the one-year fixed interest rate option.
Excess Income/Excess Withdrawal
Under the Lifetime Five Income Benefit and Spousal Lifetime Five Income
Benefit, Excess Income refers to cumulative withdrawals that exceed the Annual
Income Amount. Under the Lifetime Five Income Benefit, Excess Withdrawal
refers to cumulative withdrawals that exceed the Annual Withdrawal Amount.
Fixed Interest Rate Options
Investment options that offer a fixed rate of interest for either a one-year
period (fixed rate option) or a selected period during which periodic
transfers are made to selected variable investment options or to the one-year
fixed rate option.
Good Order
An instruction received at the Prudential Annuity Service Center, utilizing
such forms, signatures and dating as we require, which is sufficiently clear
that we do not need to exercise any discretion to follow such instructions.
7
GLOSSARY continued
Guarantee Period
A period of time during which your invested purchase payment in the market
value adjustment option earns interest at the declared rate. We may offer one
or more guarantee periods.
Guaranteed Minimum Death Benefit (GMDB)
An optional feature available for an additional charge that guarantees that
the death benefit that the beneficiary receives will be no less than a certain
GMDB protected value.
GMDB Protected Value
The amount guaranteed under the Guaranteed Minimum Death Benefit, which equals
the GMDB step-up value. The GMDB protected value will be subject to certain
age restrictions and time durations, however, it will still increase by
subsequent invested purchase payments and reduce proportionally by withdrawals.
GMDB Step-Up
We use the GMDB step-up value to compute the GMDB protected value of the
Guaranteed Minimum Death Benefit. Generally speaking, the GMDB step-up
establishes a "high water mark" of protected value that we would pay upon
death, even if the Contract Value has declined. For example, if the GMDB
step-up were set at $100,000 on a contract anniversary, and the Contract Value
subsequently declined to $80,000 on the date of death, the GMDB step-up value
would nonetheless remain $100,000 (assuming no additional purchase payments or
withdrawals).
Guaranteed Minimum Income Benefit (GMIB)
An optional feature available for an additional charge that guarantees that
the income payments you receive during the income phase will be no less than a
certain GMIB protected value applied to the GMIB guaranteed annuity purchase
rates.
GMIB Protected Value
We use the GMIB protected value to calculate annuity payments should you
annuitize under the Guaranteed Minimum Income Benefit. The value is calculated
daily and is equal to the GMIB roll-up, until the GMIB roll-up either reaches
its cap or if we stop applying the annual interest rate based on the age of
the annuitant, number of contract anniversaries or number of years since last
GMIB reset. At such point, the GMIB protected value will be increased by any
subsequent invested purchase payments, and any withdrawals will proportionally
reduce the GMIB protected value. The GMIB protected value is not available as
a cash surrender benefit or a death benefit, nor is it used to calculate the
cash surrender value or death benefit.
GMIB Reset
You may elect to "step-up" or "reset" your GMIB protected value if your
Contract Value is greater than the current GMIB protected value. Upon exercise
of the reset provision, your GMIB protected value will be reset to equal your
current Contract Value. You are limited to two resets over the life of your
contract, provided that certain annuitant age requirements are met.
GMIB Roll-Up
We will use the GMIB roll-up value to compute the GMIB protected value of the
Guaranteed Minimum Income Benefit. The GMIB roll-up is equal to the invested
purchase payments (after a reset, the Contract Value at the time of the reset)
compounded daily at an effective annual interest rate starting on the date
each invested purchase payment is made, subject to a cap, and reduced
proportionally by withdrawals.
Income Appreciator Benefit (IAB)
An optional feature that may be available for an additional charge that
provides a supplemental living benefit based on earnings under the contract.
IAB Automatic Withdrawal Payment Program
A series of payments consisting of a portion of your Contract Value and Income
Appreciator Benefit paid to you in equal installments over a 10 year period,
which you may choose, if you elect to receive the Income Appreciator Benefit
during the accumulation phase.
IAB Credit
An amount we add to your Contract Value that is credited in equal installments
over a 10 year period, which you may choose, if you elect to receive the
Income Appreciator Benefit during the accumulation phase.
Income Options
Options under the contract that define the frequency and duration of income
payments. In your contract, we also refer to these as payout or annuity
options.
8
Income Phase
The period during which you receive income payments under the contract.
Invested Purchase Payments
Your purchase payments (which we define below) less any deduction we make for
any tax charge.
Joint Owner
The person named as the joint owner, who shares ownership rights with the
owner as defined in the contract. A joint owner must be a natural person.
Lifetime Five Income Benefit
An optional feature available for an additional charge that guarantees your
ability to withdraw amounts equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on your Contract Value, subject to our rules regarding the
timing and amount of withdrawals. There are two options--one is designed to
provide an annual withdrawal amount for life and the other is designed to
provide a greater annual withdrawal amount (than the first option) as long as
there is Protected Withdrawal Value. We also offer a variant of the Lifetime
Five Income Benefit to certain spousal owners--see "Spousal Lifetime Five
Income Benefit."
Market Value Adjustment
An adjustment to your Contract Value or withdrawal proceeds that is based on
the relationship between interest you are currently earning within the market
value adjustment option and prevailing interest rates. This adjustment may be
positive or negative.
Market Value Adjustment Option
Under the Contract Without Credit, this investment option may offer various
guarantee periods and pays a fixed rate of interest with respect to each
guarantee period. We impose a market value adjustment on withdrawals or
transfers that you make from this option prior to the end of its guarantee
period.
Net Purchase Payments
Your total purchase payments less any withdrawals you have made.
Proportional Withdrawals
A method that involves calculating the percentage of your Contract Value that
each prior withdrawal represented when withdrawn. In general, proportional
withdrawals result in a reduction to the applicable benefit value by reducing
such value in the same proportion as the Contract Value was reduced by the
withdrawal as of the date the withdrawal occurred.
Protected Withdrawal Value
Under the Lifetime Five Income Benefit and Spousal Lifetime Five Income
Benefit, an amount that we guarantee regardless of the investment performance
of your Contract Value.
Prudential Annuity Service Center
For general correspondence: P.O. Box 7960, Philadelphia, PA 19176. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19025. The telephone number is
(888) PRU-2888. Prudential's Web site is www.prudential.com.
Purchase Payments
The amount of money you pay us to purchase the contract. Generally, you can
make additional purchase payments at any time during the accumulation phase.
Separate Account
Purchase payments allocated to the variable investment options are held by us
in a separate account called the Pruco Life of New Jersey Flexible Premium
Variable Annuity Account. The separate account is set apart from all of the
general assets of Pruco Life of New Jersey.
Spousal Lifetime Five Income Benefit
An optional feature available for an additional charge that guarantees the
ability to withdraw amounts equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on the Contract Value, subject to our rules regarding the
timing and amount of withdrawals. Under the Spousal Lifetime Five Income
Benefit, an annual income amount is paid until the later death of two natural
persons who are each other's spouses at the time of election and at the first
death of one of them.
9
GLOSSARY continued
Statement of Additional Information
A document containing certain additional information about the Strategic
Partners Plus 3 variable annuity. We have filed the Statement of Additional
Information with the Securities and Exchange Commission and it is legally a
part of this prospectus. To learn how to obtain a copy of the Statement of
Additional Information, see the front cover of this prospectus.
Tax Deferral
This is a way to increase your assets without currently being taxed.
Generally, you do not pay taxes on your contract earnings until you take money
out of your contract. You should be aware that tax favored plans (such as
IRAs) already provide tax deferral regardless of whether they invest in
annuity contracts. See Section 10, "What Are The Tax Considerations Associated
With The Strategic Partners Plus 3 Contract?"
Variable Investment Option
When you choose a variable investment option, we purchase shares of the
underlying mutual fund that are held as an investment for that option. We hold
these shares in the separate account. The division of the separate account of
Pruco Life of New Jersey that invests in a particular mutual fund is referred
to in your contract as a subaccount.
10
SUMMARY FOR SECTIONS 1-11
For a more complete discussion of the following topics, see the corresponding
section in Part II of the prospectus.
SECTION 1
What Is The Strategic Partners Plus 3 Variable Annuity?
The Strategic Partners Plus 3 variable annuity is a contract between you, the
owner, and us, the insurance company, Pruco Life Insurance Company of New
Jersey (Pruco Life of New Jersey, we or us). The contract allows you to invest
on a tax-deferred basis in variable investment options, fixed interest rate
options, and the market value adjustment option. The contract is intended for
retirement savings or other long-term investment purposes and provides for a
death benefit.
There are two basic versions of the Strategic Partners Plus 3 variable annuity.
Contract With Credit.
.. provides for a bonus credit that we add to each purchase payment that you
make,
.. has higher withdrawal charges and insurance and administrative costs than
the Contract Without Credit,
.. may provide lower interest rates for fixed interest rate options than the
Contract Without Credit, and
.. does not offer the market value adjustment option.
Contract Without Credit.
.. does not provide a credit,
.. has lower withdrawal charges and insurance and administrative costs than
the Contract With Credit.
.. may provide higher interest rates for fixed interest rate options than the
Contract With Credit, and
.. offers the market value adjustment option.
The variable investment options available under the contract offer the
opportunity for a favorable return. However, this is NOT guaranteed. It is
possible, due to market changes, that your investments may decrease in value,
including an investment in the Prudential Money Market Portfolio variable
investment option.
The fixed interest rate options offer a guaranteed interest rate. While your
money is allocated to one of these options, your principal amount will not
decrease and we guarantee that your money will earn at least a minimum
interest rate annually.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed
and the interest amount that your money will earn is guaranteed by us to be at
least the minimum interest rate dictated by applicable state law.
You may make up to 12 free transfers each contract year among the investment
options. Certain restrictions apply to transfers involving the fixed interest
rate options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase.
.. During the accumulation phase, any earnings grow on a tax-deferred basis
and are generally only taxed as income when you make a withdrawal.
.. The income phase starts when you begin receiving regular payments from your
contract.
The amount of money you are able to accumulate in your contract during the
accumulation phase will help determine the amount you will receive during the
income phase. Other factors will affect the amount of your payments, such as
age, gender, and the payout option you select.
The contract offers a choice of income and death benefit options, which may
also be available to you.
We may amend the contract as permitted by law. For example, we may add new
features to the contract. Subject to applicable law, we determine whether or
not to make such contract amendments available to contracts that already have
been issued.
If you change your mind about owning Strategic Partners Plus 3, you may cancel
your contract within 10 days after receiving it (or whatever period is
required by applicable law). This time period is referred to as the "Free
Look" period.
11
SUMMARY FOR SECTIONS 1-11 continued
SECTION 2
What Investment Options Can I Choose?
You can invest your money in several variable investment options. The variable
investment options are classified according to their investment style, and a
brief description of each portfolio's investment objective and key policies is
set forth in Section 2, to assist you in determining which portfolios may be
of interest to you.
Depending upon market conditions, you may earn or lose money in any of these
options. The value of your contract will fluctuate depending upon the
performance of the underlying mutual fund portfolios used by the variable
investment options that you choose. Past performance is not a guarantee of
future results.
You may also invest your money in fixed interest rate options or in a market
value adjustment option.
SECTION 3
What Kind Of Payments Will I Receive During The Income Phase? (Annuitization)
If you want to receive regular income from your annuity, you can choose one of
several options, including guaranteed payments for the annuitant's lifetime.
Generally, once you begin receiving regular payments, you cannot change your
payment plan.
For an additional fee, you may also choose, if it is available under your
contract, the Guaranteed Minimum Income Benefit (GMIB). The Guaranteed Minimum
Income Benefit provides that once the income period begins, your income
payments will be no less than a value that is based on a certain "GMIB
protected value" applied to the GMIB guaranteed annuity purchase rates. See
Section 3, "What Kind Of Payments Will I Receive During The Income Phase?"
The Lifetime Five Income Benefit and the Spousal Lifetime Five Income Benefit,
(each discussed in Section 5) and the Income Appreciator Benefit (discussed in
Section 6) each may provide an additional amount upon which your annuity
payments are based.
SECTION 4
What Is The Death Benefit?
In general, if the sole owner or first to die of the owner or joint owner dies
before the income phase of the contract begins, the person(s) or entity that
you have chosen as your beneficiary will receive, at a minimum, the greater of
(i) the Contract Value, (ii) either the base death benefit or, for a higher
insurance and administrative cost, a potentially larger Guaranteed Minimum
Death Benefit (GMDB).
The base death benefit equals the total invested purchase payments reduced
proportionally by withdrawals. The Guaranteed Minimum Death Benefit is equal
to the "GMDB protected value" of the highest value of the contract on any
contract anniversary, which we call the "GMDB step-up value".
On the date we receive proof of death in good order, in lieu of paying a death
benefit, we will allow the surviving spouse to continue the contract by
exercising the Spousal Continuance Option, if the conditions that we describe,
in Section 4, are met.
SECTION 5
What Is The Lifetime Five/SM/ Income Benefit?
The Lifetime Five Income Benefit is an optional feature that guarantees your
ability to withdraw an amount equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on your Contract Value, subject to our rules regarding the
timing and amounts of withdrawals. There are two options--one is designed to
provide an annual withdrawal amount for life (the "Life Income Benefit"), and
the other is designed to provide a greater annual withdrawal amount (than the
first option), as long as there is Protected Withdrawal Value (adjusted, as
described in Section 5) (the "Withdrawal Benefit"). The annuitant must be at
least 45 years old when the Lifetime Five Income Benefit is elected.
The charge for the Lifetime Five Income Benefit is a daily fee equal on an
annual basis to 0.60% of the Contract Value allocated to the variable
investment options. This charge is in addition to the charge for the
applicable death benefit.
In addition to the Lifetime Five Income Benefit, we offer a benefit called the
Spousal Lifetime Five Income Benefit. The Spousal Lifetime Five Income benefit
is similar to the Lifetime Five Income Benefit, except that it is offered only
to those who are each other's spouses at the time the benefit is elected, and
the benefit offers only a Life Income Benefit (not the Withdrawal Benefit).
The charge for the Spousal Lifetime Five Income Benefit is a daily fee equal
on an annual basis to 0.75% of the Contract Value allocated to the variable
investment options. The charge is in addition to the charge for the applicable
death benefit.
12
SECTION 6
What Is The Income Appreciator Benefit?
The Income Appreciator Benefit is an optional benefit, available for an
additional charge, that provides an additional income amount during the
accumulation period or upon annuitization. The Income Appreciator Benefit is
designed to provide you with additional funds that can be used to help defray
the impact taxes may have on distributions from your contract. You can
activate this benefit in one of three ways, as described in Section 6. Note,
however, that the annuitization options within this benefit are limited.
SECTION 7
How Can I Purchase A Strategic Partners Plus 3 Contract?
You can purchase this contract, unless we agree otherwise and subject to our
rules, with a minimum initial purchase payment of $10,000. You must get our
prior approval for any initial and additional purchase payment of $1,000,000
or more, unless we are prohibited under applicable state law from insisting on
such prior approval. Generally, you can make additional purchase payments of
$500 ($100 if made through electronic funds transfer) or more at any time
during the accumulation phase of the contract. Your representative can help
you fill out the proper forms. The Contract With Credit provides for the
allocation of a credit with each purchase payment.
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. In
addition, certain age limits apply to certain features and benefits described
herein.
SECTION 8
What Are The Expenses Associated With The Strategic Partners Plus 3 Contract?
The contract has insurance features and investment features, both of which
have related costs and charges.
.. Each year (or upon full surrender) we deduct a contract maintenance charge
if your Contract Value is less than $75,000. This charge is currently equal
to the lesser of $30 or 2% of your Contract Value. We do not impose the
contract maintenance charge if your Contract Value is $75,000 or more.
.. For insurance and administrative costs, we also deduct a daily charge based
on the average daily value of all assets allocated to the variable
investment options, depending on the death benefit (or other) option that
you choose. The daily cost is equivalent to an annual charge as follows:
-- 1.40% if you choose the base death benefit,
-- 1.65% if you choose the step-up Guaranteed Minimum Death Benefit option
(i.e., 0.25% in addition to the base death benefit charge),
-- 0.60% if you choose the Lifetime Five Income Benefit (1.50% maximum
charge). This charge is in addition to the charge for the applicable
death benefit, or
-- 0.75% if you choose the Spousal Lifetime Five Income Benefit (1.50%
maximum charge). This charge is in addition to the charge for the
applicable death benefit.
.. We impose an additional insurance and administrative charge of 0.10%
annually for the Contract With Credit.
.. We will deduct an additional charge if you choose the Guaranteed Minimum
Income Benefit. We deduct this annual charge from your Contract Value on
the contract anniversary and upon certain other events. The charge for this
benefit is equal to 0.50% for contracts sold on or after May 1, 2004 (0.45%
for all other contracts), of the average GMIB protected value (1.00%
maximum charge).
.. We will deduct an additional charge if you choose the Income Appreciator
Benefit. We deduct this charge from your Contract Value on the contract
anniversary and upon certain other events. The charge for this benefit is
based on an annual rate of 0.25% of your Contract Value.
.. There are also expenses associated with the mutual funds. For 2006, the
fees of these funds ranged from 0.37% to 1.19% annually. For certain funds,
expenses are reduced pursuant to expense waivers and comparable
arrangements. In general, these expense waivers and comparable arrangements
are not guaranteed, and may be terminated at any time.
.. If you withdraw money less than seven contract anniversaries after making a
purchase payment, then you may have to pay a withdrawal charge on all or
part of the withdrawal. This charge ranges from 1-7% for the Contract
Without Credit and 5-8% for the Contract With Credit.
For more information, including details about other possible charges under the
contract, see "Summary Of Contract Expenses" and Section 8, "What Are The
Expenses Associated With The Strategic Partners Plus 3 Contract?"
SECTION 9
How Can I Access My Money?
You may withdraw money at any time during the accumulation phase. You may,
however, be subject to income tax and, if you
13
SUMMARY FOR SECTIONS 1-11 continued
make a withdrawal prior to age 59 1/2, an additional tax penalty as well. For
the Contract Without Credit, if you withdraw money less than seven contract
anniversaries after making a purchase payment, we may impose a withdrawal
charge ranging from 1-7%. For the Contract With Credit, we may impose a
withdrawal charge ranging from 5-8%.
Under the market value adjustment option, you will be subject to a market
value adjustment if you make a withdrawal or transfer from the option prior to
the end of a guarantee period.
We offer optional living benefits--the Lifetime Five Income Benefit and
Spousal Lifetime Five Income Benefit, under which we guarantee that certain
amounts will be available to you for withdrawal, regardless of market-related
declines in your Contract Value. You need not participate in any of these
benefits in order to withdraw some or all of your money. You also may access
your Income Appreciator Benefit through withdrawals.
SECTION 10
What Are The Tax Considerations Associated With The Strategic Partners Plus 3
Contract?
Your earnings are generally not taxed until withdrawn. If you withdraw money
during the accumulation phase, the tax laws treat the withdrawal as a
withdrawal of earnings, which are taxed as ordinary income. If you are younger
than age 59 1/2 when you take money out, you may be charged a 10% federal tax
penalty on the earnings in addition to ordinary taxation. A portion of the
payments you receive during the income phase is considered a partial return of
your original investment and therefore will not be taxable as income.
Generally, all amounts withdrawn from an Individual Retirement Annuity (IRA)
contract (excluding Roth IRAs) are taxable and subject to the 10% penalty if
withdrawn prior to age 59 1/2.
SECTION 11
Other Information
This contract is issued by Pruco Life Insurance Company of New Jersey (Pruco
Life of New Jersey), an indirect subsidiary of The Prudential Insurance
Company of America, and sold by registered representatives of affiliated and
unaffiliated broker/dealers.
RISK FACTORS
There are various risks associated with an investment in the Market Value
Adjustment Option that we summarize below.
Issuer Risk. The Market Value Adjustment Option, fixed interest rate options,
and the contract's other insurance features are available under a contract
issued by Pruco Life of New Jersey, and thus backed by the financial strength
of that company. If Pruco Life of New Jersey were to experience significant
financial adversity, it is possible that Pruco Life of New Jersey's ability to
pay interest and principal under the Market Value Adjustment Option and fixed
interest rate options and to fulfill its insurance guarantees could be
impaired.
Risks Related To Changing Interest Rates. You do not participate directly in
the investment experience of the bonds and other instruments that Pruco Life
of New Jersey holds to support the Market Value Adjustment Option.
Nonetheless, the market value adjustment formula reflects the effect that
prevailing interest rates have on those bonds and other instruments. If you
need to withdraw your money prior to the end of a guarantee period and during
a period in which prevailing interest rates have risen above their level when
you made your purchase, you will experience a "negative" market value
adjustment. When we impose this market value adjustment, it could result in
the loss of both the interest you have earned and a portion of your purchase
payments. Thus, before you commit to a particular guarantee period, you should
consider carefully whether you have the ability to remain invested throughout
the guarantee period. In addition, we cannot, of course, assure you that the
Market Value Adjustment Option will perform better than another investment
that you might have made.
Risks Related To The Withdrawal Charge. We may impose withdrawal charges on
amounts withdrawn from the Market Value Adjustment Option. If you anticipate
needing to withdraw your money prior to the end of a guarantee period, you
should be prepared to pay the withdrawal charge that we will impose.
14
SUMMARY OF CONTRACT EXPENSES
THE PURPOSE OF THIS SUMMARY IS TO HELP YOU TO UNDERSTAND THE COSTS YOU WILL
PAY FOR STRATEGIC PARTNERS PLUS 3. THE FOLLOWING TABLES DESCRIBE THE FEES AND
EXPENSES THAT YOU WILL PAY WHEN BUYING, OWNING, AND SURRENDERING THE CONTRACT.
THE FIRST TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME
THAT YOU BUY THE CONTRACT, SURRENDER THE CONTRACT, OR TRANSFER CASH VALUE
BETWEEN INVESTMENT OPTIONS.
For more detailed information, including additional information about current
and maximum charges, see Section 8, "What Are The Expenses Associated With The
Strategic Partners Plus 3 Contract?" The individual fund prospectuses contain
detailed expense information about the underlying mutual funds.
-----------------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
-----------------------------------------------------------------------------
WITHDRAWAL CHARGE/ 1/
-----------------------------------------------------------------------------
Number of Contract
Anniversaries Since
Purchase Payment Contract With Credit Contract Without Credit
-----------------------------------------------------------------------------
0 8% 7%
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1 8% 6%
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2 8% 5%
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3 8% 4%
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4 7% 3%
-----------------------------------------------------------------------------
5 6% 2%
-----------------------------------------------------------------------------
6 5% 1%
-----------------------------------------------------------------------------
7 0% 0%
-----------------------------------------------------------------------------
1 Each contract year, you may withdraw a specified amount of your Contract
Value without incurring a withdrawal charge. We will waive the withdrawal
charge if we pay a death benefit or under certain other circumstances. See
"Withdrawal Charge" in Section 8.
2 Currently, we charge $25 for each transfer after the twelfth in a contract
year. As shown in the table, we can increase that charge up to a maximum of
$30, but have no current intention to do so. We will not charge you for
transfers made in connection with Dollar Cost Averaging and
Auto-Rebalancing or transfers from the market value adjustment option at
the end of a guarantee period, and do not count them toward the limit of 12
free transfers per year. There is a unique transfer fee under the
Beneficiary Continuation Option.
15
SUMMARY OF CONTRACT EXPENSES continued
The next table describes the fees and expenses that you will pay periodically
during the time that you own the contract, not including underlying mutual
fund fees and expenses.
3 Currently, we waive this fee if your Contract Value is greater than or
equal to $75,000. If your Contract Value is less than $75,000, we currently
charge the lesser of $30 or 2% of your Contract Value. This is a single fee
that we assess (a) annually or (b) upon full withdrawal made on a date
other than a contract anniversary.
4 The charge for the Lifetime Five Income Benefit and Spousal Lifetime Five
is imposed based on the value of assets in the variable investment options
only. We have the right to increase the charge for each of these benefits
to that maximum level.
5 We impose this charge only if you choose the Guaranteed Minimum Income
Benefit. This charge is equal to 0.50% for contracts sold on or after
May 1, 2004 (0.45% for all other contracts), of the average GMIB protected
value, which is calculated daily and generally is equal to the GMIB roll-up
value. The fee is withdrawn from each variable investment option in the
same proportion as the Contract Value allocated to that variable investment
option represents to the total Contract Value in all variable investment
options. Subject to certain age or duration restrictions, the roll-up value
is the total of all invested purchase payments (after a reset, the Contract
Value at the time of the reset) compounded daily at an effective annual
rate of 5%, subject to a cap of 200% of all invested purchase payments.
Withdrawals reduce both the roll-up value and the 200% cap. When the GMIB
roll-up is increasing at an effective annual interest rate of 5%, the
reduction is equal to the amount of the withdrawal for the first 5% of the
roll-up value, calculated as of the latest contract anniversary (or
contract date). The amount of the withdrawal in excess of 5% of the roll-up
value further reduces the roll-up value and 200% cap proportionally to the
additional reduction in Contract Value after the first 5% withdrawal
occurs. We assess this fee each contract anniversary and when you begin the
income phase of your contract. We also assess this fee if you make a full
withdrawal, but prorate the fee based on the portion of the contract
16
year that has elapsed since the full annual fee was most recently deducted.
If you make a partial withdrawal, we will assess the prorated fee if the
remaining Contract Value after the withdrawal would be less than the amount
of the prorated fee; otherwise we will not assess the fee at that time. We
reserve the right to increase this charge up to the maximum indicated upon
any reset of the benefit or new election.
6 We impose this charge only if you choose the Income Appreciator Benefit.
The charge for this benefit is based on an annual rate of 0.25% of your
Contract Value. The Income Appreciator Benefit charge is calculated: on
each contract anniversary, on the annuity date, upon the death of the sole
owner or first to die of the owner or joint owner prior to the annuity
date, upon a full or partial withdrawal, and upon a subsequent purchase
payment. The fee is based on the Contract Value at the time of the
calculation, and is prorated based on the portion of the contract year
since the date that the charge was last deducted. Although it may be
calculated more often, it is deducted only: on each contract anniversary,
on the annuity date, upon the death of the sole owner or first to die of
the owner or joint owner prior to the annuity date, upon a full withdrawal,
and upon a partial withdrawal if the Contract Value remaining after such
partial withdrawal is not enough to cover the then-applicable charge. With
respect to full and partial withdrawals, we prorate the fee based on the
portion of the contract year that has elapsed since the full annual fee was
most recently deducted. We reserve the right to calculate and deduct the
fee more frequently than annually, such as quarterly.
7 The other Insurance and Administrative Expense charges do not apply if you
are a beneficiary under the Beneficiary Continuation Option. Instead, the
Settlement Service Charge set forth here applies, if your beneficiary
elects the Beneficiary Continuation Option. The 1.00% charge is an annual
charge that is assessed daily against the assets in the variable investment
options.
--------------------------------------
TOTAL ANNUAL MUTUAL FUND OPERATING
EXPENSES
--------------------------------------
The next item shows the minimum and maximum total operating expenses (expenses
that are deducted from underlying mutual fund assets, including management
fees, distribution and/or service (12b-1) fees, and other expenses) charged by
the underlying mutual funds that you may pay periodically during the time that
you own the contract. More detail concerning each underlying mutual fund's
fees and expenses is contained below and in the prospectus for each underlying
mutual fund. The minimum and maximum total operating expenses depicted below
are based on historical fund expenses for the year ended December 31, 2006.
Fund expenses are not fixed or guaranteed by the Strategic Partners Plus 3
contract, and may vary from year to year.
* See "Summary of Contract Expenses" - Underlying Mutual Fund Portfolio
Annual Expenses for more detail on the expenses of the underlying mutual
funds.
17
SUMMARY OF CONTRACT EXPENSES continued
18
1 Each Asset Allocation Portfolio invests in shares of other Portfolios of
the Fund and the Advanced Series Trust (the Acquired Portfolios). In
addition, each Portfolio may invest otherwise uninvested cash in the Dryden
Core Investment Fund (Money Market and/or Short-Term Bond Series).
Investors in an Asset Allocation Portfolio or other Portfolio indirectly
bear the fees and expenses of the Acquired Portfolios and/or Dryden Core
Investment Fund. The expenses shown in the column "Acquired Portfolio Fees
and Expenses" represent a weighted average of the expense ratios of the
Acquired Portfolios and/or Dryden Core Investment Fund, in which the Asset
Allocation Portfolios or other Portfolios invested during the year ended
December 31, 2006. The Asset Allocation Portfolios do not pay any
transaction fees when they purchase and redeem shares of the Acquired
Portfolios.
Where "Acquired Portfolio Fees and Expenses" are less than 0.01%, such
expenses are included in the column titled "Other Expenses." This may cause
the Total Annual Portfolio Operating Expenses to differ from those set
forth in the Financial Highlights tables of the respective Portfolios.
Effective March 1, 2007, each of the Asset Allocation Portfolios became
responsible for the payment of its own "Other Expenses," including, without
limitation, custodian fees, legal fees, trustee fees and audit fees, in
accordance with the terms of the management agreement. Prior to that time,
Prudential Investments LLC or an affiliate paid the "other expenses" of the
Asset Allocation Portfolios. The table reflects an annualized estimate of
the "Other Expenses" of the Asset Allocation Portfolios for the year ended
December 31, 2006 had the current arrangement been in place during that
year.
2 Prudential Investments LLC has voluntarily agreed to waive a portion of its
management fee and/or limit total expenses (expressed as an annual
percentage of average daily net assets) for certain Portfolios of the Fund.
These arrangements, which are set forth as follows, may be discontinued or
otherwise modified at any time. Equity Portfolio: 0.75%; Jennison
Portfolio: 0.75%; Money Market Portfolio: 0.75%; Stock Index Portfolio:
0.75%; Value Portfolio: 0.75%; SP AIM Core Equity Portfolio: 1.00%; SP
International Value Portfolio: 1.00%; SP International Growth Portfolio:
1.24%; SP Mid Cap Growth Portfolio: 1.00%; SP PIMCO High Yield Portfolio:
0.82%; SP PIMCO Total Return Portfolio: 0.76%; SP Small Cap Growth
Portfolio: 1.15%; SP Small Cap Value Portfolio: 1.05%; SP T. Rowe Price
Large Cap Growth Portfolio: 1.06%.
3 As noted above, shares of the Portfolios generally are purchased through
variable insurance products. Many of the Portfolios and/or their investment
advisers and/or distributors have entered into arrangements with us as the
issuer of each Annuity under which they compensate us for providing ongoing
services in lieu of the Trust providing such services. Amounts paid by a
Portfolio under those arrangements are included under "Other Expenses." For
more information see the prospectus for each underlying portfolio and
Variable Investment Options in this section.
4 The Portfolio's contractual management fee rate is as follows: 0.35% for
average net assets up to $4 billion, and 0.30% for average net assets in
excess of $4 billion.
5 Effective November 13, 2006, Marsico Capital Management, LLC was added as a
Sub-advisor to the Portfolio. Prior to November 13, 2006, William Blair &
Company, LLC served as the sole Sub-advisor of the Portfolio, then named
the "SP William Blair International Growth Portfolio."
6 Effective November 13, 2006, Thornburg Investment Management, Inc. was
added as a Sub-advisor to the Portfolio. Prior to November 13, 2006, LSV
Asset Management served as the sole Sub-advisor of the Portfolio, then
named the "SP LSV International Value Portfolio."
7 The AST Aggressive Asset Allocation, the AST Balanced Asset Allocation, the
AST Capital Growth Asset Allocation, the AST Conservative Asset Allocation
and the AST Preservation Asset Allocation Portfolios (the "Dynamic Asset
Allocation Portfolios") each invest in other investment companies (the
Acquired Portfolios). For example, each Dynamic Asset Allocation Portfolio
invests in shares of other Portfolios of the Advanced Series Trust, and
some Portfolios invest in other funds, including the Dryden Core Investment
Fund. Investors in a Portfolio indirectly bear the fees and expenses of the
Acquired Portfolios. The expenses shown in the column "Acquired Portfolio
Fees and Expenses" represent a weighted average of the expense ratios of
the Acquired Portfolios in which each Dynamic Asset Allocation Portfolio
invested during the year ended December 31, 2006. The Dynamic Asset
Allocation Portfolios do not pay any transaction fees when they purchase or
redeem shares of the Acquired Portfolios. Where "Acquired Portfolio Fees
and Expenses" are less than 0.01%, such expenses are included in the column
titled "Other Expenses." This may cause the Total Annual Portfolio
Operating Expenses to differ from those set forth in the Financial
Highlights tables in the prospectus for the Portfolios.
Where "Acquired Portfolio Fees and Expenses" are less than 0.01%, such
expenses are included in the column titled "Other Expenses." This may cause
the Total Annual Portfolio Operating Expenses to differ from those set
forth in the Financial Highlights tables of the respective Portfolios.
8 Prudential Investments LLC and AST Investment Services, Inc. have
voluntarily agreed to waive a portion of their management fee and/or limit
total expenses (expressed as an annual percentage of average daily net
assets) for certain Portfolios of the Fund. These arrangements, which are
set forth as follows, may be discontinued or otherwise modified at any
time. AST AllianceBernstein Core Value: 1.25%; AST AllianceBernstein
Growth & Income: 1.25%; AST AllianceBernstein Managed Index 500: 0.80%; AST
American Century Income & Growth: 1.25%; AST American Century Strategic
Allocation: 1.25%; AST Cohen & Steers Realty: 1.45%; AST DeAM Large-Cap
Value: 1.25%; AST DeAM Small-Cap Value: 1.14%; AST Neuberger Berman
Small-Cap Growth: 1.35%; AST Federated Aggressive Growth: 1.35%; AST
Goldman Sachs Concentrated Growth: 0.86%; AST Goldman Sachs Mid-Cap Growth:
1.12%; AST High Yield: 0.88%; AST JPMorgan International Equity: 1.01%; AST
Large-Cap Value: 1.20%; AST Lord Abbett Bond-Debenture: 0.88%; AST MFS
Global Equity: 1.18%; AST MFS Growth: 1.35%; AST Marsico Capital Growth:
1.35%; AST Mid-Cap Value: 1.45%; AST Neuberger Berman Mid-Cap Growth:
1.25%; AST Neuberger Berman Mid-Cap Value: 1.25%; AST PIMCO Limited
Maturity Bond: 1.05%; AST Small-Cap Value: 1.30%; AST T. Rowe Price Asset
Allocation: 1.25%; AST T. Rowe Price Global Bond: 1.75%; AST T. Rowe Price
Natural Resources: 1.35%; AST Dynamic Asset Allocation Portfolios: 0.20%.
9 Effective May 1, 2007, Neuberger Berman Management, Inc. became Sub-advisor
to the Portfolio. Prior to May 1, 2007, Deutsche Asset Management, Inc.
served as Sub-advisor of the Portfolio, then named the "AST DeAM Small-Cap
Growth Portfolio."
10 Prior to May 1, 2007 the Portfolio was named the "AST American Century
Strategic Balanced Portfolio."
11 Prior to May 1, 2007 the Portfolio was named the "AST Global Allocation
Portfolio." Expenses shown are the annualized estimated operating expense
for AST UBS Dynamic Alpha Portfolio effective May 1, 2007. Operating
expenses for the AST Global Allocation Portfolio based upon the year ended
December 31, 2006 would be as follows: Shareholder Fees (fees paid directly
from your investment) - None; Management Fees - .10%; Distribution (12b-1)
Fees - None; Other Expenses - .09%; Acquired Portfolio Fees & Expenses -
.88%; Total Annual Portfolio Operating Expenses - 1.07%.
12 Effective June 16, 2006, Goldman Sachs Asset Management L.P. no longer
serves as a Sub-advisor of the Portfolio.
13 Effective January 1, 2006, the management fee was lowered by 0.10% to the
base fee described above. Beginning January 1, 2007, the management fee may
be adjusted, on a quarterly basis, upward or downward depending on the
Fund's performance relative to its benchmark, the MSCI Emerging Markets
Free Index. As a result, beginning January 1, 2007, if the management fee
were calculated taking into account the current base fee (as stated in the
table above) and the maximum performance fee adjustment of 0.10% (+/-), the
management fee could range from 0.95% at its lowest to 1.15% at its highest.
19
EXPENSE EXAMPLES
THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE
COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE
ACCOUNT ANNUAL EXPENSES, AND UNDERLYING MUTUAL FUND FEES AND EXPENSES.
THE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME
PERIODS INDICATED. THE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5%
RETURN EACH YEAR AND ASSUME THE MAXIMUM FEES AND EXPENSES OF ANY OF THE MUTUAL
FUNDS, WHICH DO NOT REFLECT ANY EXPENSE REIMBURSEMENTS OR WAIVERS. ALTHOUGH
YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS, YOUR
COSTS WOULD BE AS INDICATED IN THE TABLES THAT FOLLOW.
Example 1a: Contract With Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You
Withdraw All Your Assets
This example assumes that:
.. You invest $10,000 in the Contract With Credit,
.. You choose the Step-Up Guaranteed Minimum Death Benefit,
.. You choose the Guaranteed Minimum Income Benefit (for contracts sold on or
after May 1, 2004),
.. You choose the Income Appreciator Benefit,
.. You allocate all of your assets to the variable investment option having
the maximum total operating expenses,*
.. The investment has a 5% return each year,
.. The mutual fund's total operating expenses remain the same each year,
.. For each Separate Account charge, we deduct the current charge rather than
any maximum charge, and
You withdraw all your assets at the end of the indicated period.
* Note: Not all portfolios offered are available if you elect certain
optional benefits.
Example 1b: Contract With Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the
indicated period.
Example 2a: Contract With Credit: Base Death Benefit, and You Withdraw All
Your Assets
This example assumes that:
.. You invest $10,000 in the Contract With Credit,
.. You do not choose any optional insurance benefit,
.. You allocate all of your assets to the variable investment option having
the maximum total operating expenses,*
.. The investment has a 5% return each year,
.. The mutual fund's total operating expenses remain the same each year,
.. For each Separate Account charge, we deduct the current charge rather than
any maximum charge, and
.. You withdraw all your assets at the end of the indicated period.
* Note: Not all portfolios offered are available if you elect certain
optional benefits.
Example 2b: Contract With Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the
indicated period.
Example 3a: Contract Without Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You
Withdraw All Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you invest in the Contract Without Credit.
20
Example 3b: Contract Without Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 1b except that it
assumes that you invest in the Contract Without Credit.
Example 4a: Contract Without Credit: Base Death Benefit; and You Withdraw All
Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you invest in the Contract Without Credit.
Example 4b: Contract Without Credit: Base Death Benefit; and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 2b except that it
assumes that you invest in the Contract Without Credit.
NOTES FOR EXPENSE EXAMPLES:
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Note that withdrawal charges (which are reflected in Examples 1a, 2a, 3a and
4a) are assessed in connection with some annuity options, but not others.
The values shown in the 10 year column are the same for Example 1a and 1b, 2a
and 2b, 3a and 3b, and 4a and 4b. This is because if 10 years have elapsed
since your last purchase payment, we would no longer deduct withdrawal charges
when you make a withdrawal.
The examples use an average contract maintenance charge, which we calculated
based on our general estimate of the total contract fees we expect to collect
in 2007. Your actual fees will vary based on the amount of your contract and
your specific allocation among the investment options.
A table of accumulation unit values appears in Appendix A to this prospectus.
Contract with Credit: Step-up Guaranteed Minimum Death Benefit Option,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit
Example 1a: Example 1b:
--------------------------------------------------------------
If you withdraw your assets If you do not withdraw your assets
--------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
--------------------------------------------------------------
$1,216 $2,152 $3,004 $4,757 $464 $1,400 $2,346 $4,757
--------------------------------------------------------------
Contract With Credit: Base Death Benefit
Example 2a: Example 2b:
--------------------------------------------------------------
If you withdraw your assets If you do not withdraw your assets
--------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
--------------------------------------------------------------
$1,114 $1,854 $2,523 $3,879 $362 $1,102 $1,865 $3,879
--------------------------------------------------------------
Contract Without Credit: Step-up Guaranteed Minimum Death Benefit Option,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit
Example 3a: Example 3b:
--------------------------------------------------------------
If you withdraw your assets If you do not withdraw your assets
--------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
--------------------------------------------------------------
$1,066 $1,768 $2,481 $4,494 $436 $1,318 $2,211 $4,494
--------------------------------------------------------------
Contract Without Credit: Base Death Benefit
Example 4a: Example 4b:
--------------------------------------------------------------
If you withdraw your assets If you do not withdraw your assets
--------------------------------------------------------------
1 yr 3 yrs 5 yrs 10 yrs 1 yr 3 yrs 5 yrs 10 yrs
--------------------------------------------------------------
$968 $1,480 $2,015 $3,640 $338 $1,030 $1,745 $3,640
--------------------------------------------------------------
21
PART II SECTIONS 1 - 11
- --------------------------------------------------------------------------------
STRATEGIC PARTNERS PLUS 3 PROSPECTUS
22
1: WHAT IS THE STRATEGIC PARTNERS PLUS 3 VARIABLE ANNUITY?
THE STRATEGIC PARTNERS PLUS 3 VARIABLE ANNUITY IS A CONTRACT BETWEEN YOU, THE
OWNER, AND US, PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY (PRUCO LIFE OF NEW
JERSEY, WE OR US).
Under our contract, in exchange for your payment to us, we promise to pay you
a guaranteed income stream that can begin any time on or after the first
contract anniversary. Your annuity is in the accumulation phase until you
decide to begin receiving annuity payments. The date you begin receiving
annuity payments is the annuity date. On the annuity date, your contract
switches to the income phase.
This annuity contract benefits from tax deferral when it is sold outside a
tax-favored plan (generally called a non-qualified annuity). 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. In other words, you need not purchase this contract to gain the
preferential tax treatment provided by your retirement plan. Therefore, before
purchasing an annuity in a tax-favored plan, you should consider whether its
features and benefits beyond tax deferral, including the death benefit and
income benefits, meet your needs and goals. You should consider the relative
features, benefits and costs of this annuity compared with any other
investment that you may use in connection with your retirement plan or
arrangement.
There are two basic versions of Strategic Partners Plus 3 variable annuity.
Contract With Credit.
.. provides for a bonus credit that we add to each purchase payment that you
make,
.. has higher withdrawal charges and insurance and administrative costs than
the Contract Without Credit,
.. may provide a lower interest rate for the fixed interest rate options than
the Contract Without Credit, and
.. does not offer the market value adjustment option.
Contract Without Credit.
.. does not provide a credit,
.. has lower withdrawal charges and insurance and administrative costs than
the Contract With Credit,
.. may provide a higher interest rate for the fixed interest rate options than
the Contract With Credit, and
.. offers the Market Value Adjustment Option.
Unless we state otherwise, when we use the word contract, it applies to both
versions.
In replacing another annuity you may own, please consider all charges
associated with that annuity. Credits applicable to bonus products, such as
the Contract With Credit, should not be viewed as an offset of any surrender
charge that applies to another annuity contract you may currently own.
Because of the higher withdrawal charges, if you choose the Contract With
Credit and you withdraw a purchase payment, depending upon the performance of
the investment options you choose, you may be worse off than if you had chosen
the Contract Without Credit. We do not recommend purchase of either version of
Strategic Partners Plus 3 if you anticipate having to withdraw a significant
amount of your purchase payments within a few years of making those purchase
payments.
Strategic Partners Plus 3 is a variable annuity contract. During the
accumulation phase, you can allocate your assets among the variable investment
options, guaranteed fixed interest rate options and a market value adjustment
option. The market value adjustment option is only available in the Contract
Without Credit. If you select variable investment options, the amount of money
you are able to accumulate in your contract during the accumulation phase
depends upon the investment performance of the underlying mutual fund(s)
associated with that variable investment option.
Because the underlying mutual funds' portfolios fluctuate in value depending
upon market conditions, your Contract Value can either increase or decrease.
This is important, since the amount of the annuity payments you receive during
the income phase depends upon the value of your contract at the time you begin
receiving payments.
As the owner of the contract, you have all of the decision-making rights under
the contract. You will also be the annuitant unless you designate someone
else. The annuitant is the person whose life is used to determine how much and
how long (if applicable) the annuity payments will continue once the annuity
phase begins. On or after the annuity date, the annuitant may not be changed.
23
1: WHAT IS THE STRATEGIC PARTNERS PLUS 3 VARIABLE ANNUITY? continued
The beneficiary is the person(s) or entity you designate to receive any death
benefit. You may change the beneficiary any time prior to the annuity date by
making a written request to us.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners Plus 3, you may cancel
your contract within 10 days after receiving it (or whatever period is
required by applicable law). You can request a refund by returning the
contract either to the representative who sold it to you, or to the Prudential
Annuity Service Center at the address shown on the first page of this
prospectus. You will receive a refund equal to your Contract Value (plus the
amount of any fees or other charges) as of the date you surrendered your
contract.
If you have purchased the Contract With Credit, we will deduct any credit we
had added to your Contract Value.
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE?
THE CONTRACT GIVES YOU THE CHOICE OF ALLOCATING YOUR PURCHASE PAYMENTS TO ANY
OF THE VARIABLE INVESTMENT OPTIONS, FIXED INTEREST RATE OPTIONS, AND A MARKET
VALUE ADJUSTMENT OPTION.
The variable investment options invest in underlying mutual funds managed by
leading investment advisers. These underlying mutual funds may sell their
shares to both variable annuity and variable life separate accounts of
different insurance companies, which could create the kinds of risk that are
described in more detail in the current prospectus for the underlying mutual
fund. The current prospectuses for the underlying mutual funds also contain
other important information about the mutual funds. When you invest in a
variable investment option that is funded by a mutual fund, you should read
the mutual fund prospectus and keep it for future reference. The mutual fund
options that you select are your choice. We do not recommend or endorse any
particular underlying mutual fund.
VARIABLE INVESTMENT OPTIONS
The following chart classifies each of the portfolios based on our assessment
of their investment style (as of the date of this prospectus). The chart also
provides a description of each portfolio's investment objective and a short,
summary description of their key policies to assist you in determining which
portfolios may be of interest to you. What appears in the chart below is
merely a summary--please consult the portfolio's prospectus for a
comprehensive discussion of the portfolio's investment policies. There is no
guarantee that any portfolio will meet its investment objective. The name of
the adviser/subadviser for each portfolio appears next to the description.
The Jennison Portfolio, Prudential Equity Portfolio, Prudential Global
Portfolio, Prudential Money Market Portfolio, Prudential Stock Index
Portfolio, Prudential Value Portfolio, and each "SP" Portfolio of the
Prudential Series Fund, are managed by an indirect wholly-owned subsidiary of
Prudential Financial, Inc. called Prudential Investments LLC (PI) under a
"manager-of-managers" approach.
Under the manager-of-managers approach, PI has the ability to assign
subadvisers to manage specific portions of a portfolio, and the portion
managed by a subadviser may vary from 0% to 100% of the portfolio's assets.
The subadvisers that manage some or all of a Prudential Series Fund portfolio
are listed on the following chart.
The portfolios of the Advanced Series Trust are co-managed by PI and AST
Investment Services Inc., also under a manager-of- managers approach. AST
Investment Services, Inc. is an indirect, wholly-owned subsidiary of
Prudential Financial, Inc. Under the agreement through which Prudential
Financial, Inc. acquired American Skandia Life Assurance Corporation and
certain of its affiliates in May 2003, Prudential Financial may not use the
"American Skandia" name in any context after May 1, 2008. Therefore,
Prudential Financial has begun a "rebranding" project that involves renaming
certain American Skandia legal entities. As pertinent to this annuity: 1)
American Skandia Investment Services, Inc. has been renamed AST Investment
Services, Inc.; and 2) American Skandia Trust has been renamed Advanced Series
Trust. These name changes will not impact the manner in which customers do
business with Prudential.
A fund or portfolio may have a similar name or an investment objective and
investment policies resembling those of a mutual fund managed by the same
investment adviser that is sold directly to the public. Despite such
similarities, there can be no assurance that the investment performance of any
such fund or portfolio will resemble that of the publicly available mutual
fund.
Pruco Life of New Jersey has entered into agreements with certain underlying
portfolios and/or the investment adviser or distributor of such portfolios.
Pruco Life of New Jersey may provide administrative and support services to
such portfolios
24
pursuant to the terms of these agreements and under which it receives a fee of
up to 0.55% annually (as of May 1, 2007) of the average assets allocated to
the portfolio under the contract. These agreements, including the fees paid
and services provided, can vary for each underlying mutual fund whose
portfolios are offered as sub-accounts.
In addition, an investment adviser, sub-adviser or distributor of the
underlying portfolios may also compensate us by providing reimbursement,
defraying the costs of, or paying directly for, among other things, marketing
and/or administrative services and/or other services they provide in
connection with the contract. These services may include, but are not limited
to: sponsoring or co-sponsoring various promotional, educational or marketing
meetings and seminars attended by distributors, wholesalers, and/or broker
dealer firms' registered representatives, and creating marketing material
discussing the contract, available options, and underlying portfolios. The
amounts paid depend on the nature of the meetings, the number of meetings
attended by the adviser, sub-adviser, or distributor, the number of
participants and attendees at the meetings, the costs expected to be incurred,
and the level of the adviser's, sub-adviser's or distributor's participation.
These payments or reimbursements may not be offered by all advisers,
sub-advisers, or distributors, and the amounts of such payments may vary
between and among each adviser, sub-adviser, and distributor depending on
their respective participation. During 2006, with regard to amounts that were
paid under these kinds of arrangements, the amounts ranged from approximately
$53 to approximately $190,514. These amounts may have been paid to one or more
Prudential-affiliated insurers issuing individual variable annuities.
Upon the introduction of the Advanced Series Trust Asset Allocation Portfolios
on December 5, 2005, we ceased offering the Prudential Series Fund Asset
Allocation Portfolios to new purchasers and to existing contract owners who
had not previously invested in those Portfolios. However, a contract owner who
had Contract Value allocated to a Prudential Series Fund Asset Allocation
Portfolio prior to December 5, 2005 may continue to allocate purchase payments
to that Portfolio after that date. In addition, after December 5, 2005, we
ceased offering the Prudential Series Fund SP Large Cap Value Portfolio to new
purchasers and to existing contract owners who had not previously invested in
that Portfolio. However, a contract owner who had Contract Value allocated to
the SP Large Cap Value Portfolio prior to December 5, 2005 may continue to
allocate purchase payments to that Portfolio after that date.
25
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
PRUDENTIAL SERIES FUND
-----------------------------------------------------------------
LARGE Jennison Portfolio: seeks long-term Jennison
CAP growth of capital. The Portfolio Associates LLC
GROWTH invests primarily in equity
securities of major, established
corporations that the subadviser
believes offer above-average growth
prospects. The Portfolio may invest
up to 30% of its total assets in
foreign securities. Stocks are
selected on a company-by-company
basis using fundamental analysis.
Normally 65% of the Portfolio's total
assets are invested in common stocks
and preferred stocks of companies
with capitalization in excess of $1
billion.
-----------------------------------------------------------------
LARGE Equity Portfolio: seeks long-term Jennison
CAP growth of capital. The Portfolio Associates LLC;
BLEND invests at least 80% of its net ClearBridge
assets plus borrowings for investment Advisors, LLC
purposes in common stocks of major
established corporations as well as
smaller companies that the Sub
advisers believe offer attractive
prospects of appreciation. In the
Jennison portion, over a full market
cycle, the subadviser seeks to
outperform the S&P 500 Index by
investing in a portfolio with
earnings growth greater than the
index at valuations comparable to
that of the index.
-----------------------------------------------------------------
INTER Global Portfolio: seeks long-term LSV Asset
NATIONAL growth of capital. The Portfolio Management/
EQUITY invests primarily in common stocks Marsico Capital
(and their equivalents) of foreign Management, LLC/
and U.S. companies. Each Sub-adviser T. Rowe Price
for the Portfolio generally will use Associates, Inc./
either a "growth" approach or a William Blair &
"value" approach in selecting either Company, LLC
foreign or U.S. common stocks.
-----------------------------------------------------------------
FIXED Money Market Portfolio: seeks maximum Prudential
INCOME current income consistent with the Investment
stability of capital and the Management, Inc.
maintenance of liquidity. The
Portfolio invests in high-quality
short-term money market instruments
issued by the U.S. Government or its
agencies, as well as by corporations
and banks, both domestic and foreign.
The Portfolio will invest only in
instruments that mature in thirteen
months or less, and which are
denominated in U.S. dollars.
-----------------------------------------------------------------
LARGE Value Portfolio: seeks long-term Jennison
CAP growth of capital through Associates LLC
VALUE appreciation and income. The
Portfolio invests primarily in common
stocks that the subadviser believes
are undervalued - those stocks that
are trading below their underlying
asset value, cash generating ability
and overall earnings and earnings
growth. There is a risk that "value"
stocks can perform differently from
the market as a whole and other types
of stocks and can continue to be
undervalued by the markets for long
periods of time. Normally at least
65% of the Portfolio's total assets
is invested in the common stock and
convertible securities of companies
that the subadviser believes will
provide investment returns above
those of the Russell 1000(R) Value
Index. Most of the investments will
be securities of large capitalization
companies. The Portfolio may invest
up to 25% of its total assets in real
estate investment trusts (REITs) and
up to 30% of its total assets in
foreign securities.
-----------------------------------------------------------------
ASSET SP Aggressive Growth Asset Allocation Prudential
ALLOCA- Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), and the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST) (the
Underlying Portfolios). Under normal
circumstances, the Portfolio
generally will focus on equity
Underlying Portfolios but will also
invest in fixed-income Underlying
Portfolios.
-----------------------------------------------------------------
ASSET SP Balanced Asset Allocation Prudential
ALLOCA- Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), and the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST) (the
Underlying Portfolios). The Portfolio
will invest in equity and
fixed-income Underlying Portfolios.
-----------------------------------------------------------------
26
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
ASSET SP Conservative Asset Allocation Prudential
ALLOCA- Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), and the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST) (the
Underlying Portfolios). Under normal
circumstances, the Portfolio
generally will focus on fixed-income
Underlying Portfolios but will also
invest in equity Underlying
Portfolios.
------------------------------------------------------------------
ASSET SP Growth Asset Allocation Portfolio: Prudential
ALLOCA- seeks to obtain the highest potential Investments LLC
TION/ total return consistent with the
BALANCED specified level of risk tolerance.
The Portfolio may invest in any other
Portfolio of the Fund (other than
another SP Asset Allocation
Portfolio), and the AST Marsico
Capital Growth Portfolio of Advanced
Series Trust (AST) (the Underlying
Portfolios). Under normal
circumstances, the Portfolio
generally will focus on equity
Underlying Portfolios but will also
invest in fixed-income Underlying
Portfolios.
------------------------------------------------------------------
LARGE SP AIM Core Equity Portfolio: seeks A I M Capital
CAP long-term growth of capital. The Management, Inc.
BLEND Portfolio normally invests at least
80% of investable assets in equity
securities, including convertible
securities of established companies
that have long-term above-average
growth in earnings and growth
companies that the subadviser
believes have the potential for
above-average growth in earnings.
------------------------------------------------------------------
LARGE SP Davis Value Portfolio: seeks Davis Selected
CAP growth of capital. The Portfolio Advisers, L.P.
VALUE invests primarily in common stocks of
U.S. companies with market
capitalizations within the market
capitalization range of the Russell
1000 Value Index. It may also invest
in stocks of foreign companies and
U.S. companies with smaller
capitalizations. The subadviser
attempts to select common stocks of
businesses that possess
characteristics that the subadviser
believe foster the creation of
long-term value, such as proven
management, a durable franchise and
business model, and sustainable
competitive advantages. The
subadviser aims to invest in such
businesses when they are trading at a
discount to their intrinsic worth.
There is a risk that "value" stocks
can perform differently from the
market as a whole and other types of
stocks and can continue to be
undervalued by the markets for long
periods of time.
------------------------------------------------------------------
INTER SP International Value Portfolio LSV Asset
NATIONAL (formerly SP LSV International Value Management,
EQUITY Portfolio): seeks capital growth. The Thornburg
Portfolio normally invests at least Investment
65% of the Portfolio's investable Management, Inc.
assets (net assets plus borrowings
made for investment purposes) in the
equity securities of companies in
developed countries outside the
United States that are represented in
the MSCI EAFE Index.
------------------------------------------------------------------
MID CAP SP Mid Cap Growth Portfolio: seeks Calamos Advisors
GROWTH long-term growth of capital. The LLC
Portfolio normally invests at least
80% of investable assets in common
stocks and related securities, such
as preferred stocks, convertible
securities and depositary receipts
for those securities. These
securities typically are of medium
market capitalizations, which the
subadviser believes have
above-average growth potential. The
Portfolio generally defines medium
market capitalization companies as
those companies with market
capitalizations within the market
capitalization range of the Russell
Mid Cap Growth Index. The Portfolio's
investments may include securities
listed on a securities exchange or
traded in the over-the-counter
markets. The subadviser uses a
bottom-up and top-down analysis in
managing the Portfolio. This means
that securities are selected based
upon fundamental analysis, as well as
a top-down approach to
diversification by industry and
company, and by paying attention to
macro-level investment themes. The
Portfolio may invest in foreign
securities (including emerging
markets securities).
------------------------------------------------------------------
FIXED SP PIMCO High Yield Portfolio: seeks Pacific Investment
INCOME to maximize total return consistent Management
with preservation of capital and Company LLC
prudent investment management. The (PIMCO)
Portfolio will invest in a
diversified portfolio of fixed-income
investment instruments of varying
maturities. The average portfolio
duration of the Portfolio generally
will vary within a two- to six-year
time frame based on the Sub-advisor's
forecast for interest rates.
------------------------------------------------------------------
27
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
FIXED SP PIMCO Total Return Portfolio: Pacific Investment
INCOME seeks to maximize total return Management
consistent with preservation of Company LLC
capital and prudent investment (PIMCO)
management. The Portfolio will invest
in a diversified portfolio of
fixed-income investment instruments
of varying maturities. The average
portfolio duration of the Portfolio
generally will vary within a three-
to six-year time frame based on the
Sub-advisor's forecast for interest
rates.
-----------------------------------------------------------------
MID CAP SP Prudential U.S. Emerging Growth Jennison
GROWTH Portfolio: seeks long-term capital Associates LLC
appreciation. The Portfolio normally
invests at least 80% of investable
assets in equity securities of small
and medium sized U.S. companies that
the subadviser believes have the
potential for above-average earnings
growth. The subadviser seeks to
invest in companies that it believes
are poised to benefit from an
acceleration of growth or an
inflection point in a company's
growth rate that is not currently
reflected in the stock price. The
team uses a research-intensive
approach based on internally
generated fundamental research.
-----------------------------------------------------------------
SMALL SP Small Cap Growth Portfolio: seeks Eagle Asset
CAP long-term capital growth. The Management/
GROWTH Portfolio pursues its objective by Neuberger Berman
primarily investing in the common Management, Inc.
stocks of small-capitalization
companies, which is defined as a
company with a market capitalization,
at the time of purchase, no larger
than the largest capitalized company
included in the Russell 2000 Index
during the most recent 11-month
period (based on month-end data) plus
the most recent data during the
current month.
-----------------------------------------------------------------
SMALL SP Small-Cap Value Portfolio: seeks Goldman Sachs
CAP long-term capital growth. The Asset
VALUE Portfolio normally invests at least Management, L.P.;
80% its net assets plus borrowings ClearBridge
for investment purposes in the equity Advisors, LLC
securities of small capitalization
companies. The Portfolio focuses on
equity securities that are believed
to be undervalued in the marketplace.
-----------------------------------------------------------------
LARGE SP Strategic Partners Focused Growth AllianceBernstein
CAP Portfolio: seeks long-term growth of L.P.; Jennison
GROWTH capital. The Portfolio normally Associates LLC
invests at least 65% of total assets
in equity-related securities of U.S.
companies that the subadvisers
believe to have strong capital
appreciation potential. The
Portfolio's strategy is to combine
the efforts of two subadvisers and to
invest in the favorite stock
selection ideas of three portfolio
managers (two of whom invest as a
team). Each investment Sub-adviser to
the Portfolio utilizes a growth
style: Jennison selects approximately
20 securities and AllianceBernstein
selects approximately 30 securities.
The portfolio managers build a
portfolio with stocks in which they
have the highest confidence and may
invest more than 5% of the
Portfolio's assets in any one issuer.
The Portfolio is nondiversified,
meaning it can invest a relatively
high percentage of its assets in a
small number of issuers. Investing in
a nondiversified portfolio,
particularly a portfolio investing in
approximately 50 equity-related
securities, involves greater risk
than investing in a diversified
portfolio because a loss resulting
from the decline in the value of one
security may represent a greater
portion of the total assets of a
nondiversified portfolio.
-----------------------------------------------------------------
LARGE Stock Index Portfolio: seeks Quantitative
CAP investment results that generally Management
BLEND correspond to the performance of Associates LLC
publicly-traded common stocks. With
the price and yield performance of
the Standard & Poor's 500 Composite
Stock Price Index (S&P 500) as the
benchmark, the Portfolio normally
invests at least 80% of investable
assets in S&P 500 stocks. The S&P 500
represents more than 70% of the total
market value of all publicly-traded
common stocks and is widely viewed as
representative of publicly-traded
common stocks as a whole. The
Portfolio is not "managed" in the
traditional sense of using market and
economic analyses to select stocks.
Rather, the portfolio manager
purchases stocks in proportion to
their weighting in the S&P 500.
-----------------------------------------------------------------
LARGE SP T. Rowe Price Large-Cap Growth T. Rowe Price
CAP Portfolio: seeks long-term capital Associates, Inc.
GROWTH growth. Under normal circumstances,
the Portfolio invests at least 80% of
its net assets plus borrowings for
investment purposes in the equity
securities of large-cap companies.
The Sub-adviser generally looks for
companies with an above-average rate
of earnings and cash flow growth and
a lucrative niche in the economy that
gives them the ability to sustain
earnings momentum even during times
of slow economic growth.
-----------------------------------------------------------------
28
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
INTER- SP International Growth Portfolio Marsico Capital
NATIONAL (formerly, SP William Blair Management, LLC;
EQUITY International Growth Portfolio): William Blair &
seeks long-term capital appreciation. Company, LLC.
The Portfolio invests primarily in
equity-related securities of foreign
issuers. The Portfolio invests
primarily in the common stock of
large and medium-sized foreign
companies, although it may also
invest in companies of all sizes.
Under normal circumstances, the
Portfolio invests at least 65% of its
total assets in common stock of
foreign companies operating or based
in at least five different countries,
which may include countries with
emerging markets. The Portfolio looks
primarily for stocks of companies
whose earnings are growing at a
faster rate than other companies or
which offer attractive growth
potential.
-----------------------------------------------------------------
ADVANCED SERIES TRUST
-----------------------------------------------------------------
ASSET AST Advanced Strategies Portfolio: LSV Asset
ALLOCA seeks a high level of absolute Management;
TION/ return. The Portfolio invests Marsico Capital
BALANCED primarily in a diversified portfolio Management,
of equity and fixed income securities LLC; Pacific
across different investment Investment
categories and investment managers. Management
The Portfolio pursues a combination Company LLC
of traditional and non-traditional (PIMCO);
investment strategies. T. Rowe Price
Associates, Inc.;
William Blair &
Company, L.L.C.
-----------------------------------------------------------------
ASSET AST Aggressive Asset Allocation AST
ALLOCA Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 92.5% to 100% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 0% to 7.5% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
-----------------------------------------------------------------
LARGE AST AllianceBernstein Core Value AllianceBernstein
CAP Portfolio: seeks long-term capital L.P.
VALUE growth by investing primarily in
common stocks. The Sub-advisor
expects that the majority of the
Portfolio's assets will be invested
in the common stocks of large
companies that appear to be
undervalued. Among other things, the
Portfolio seeks to identify
compelling buying opportunities
created when companies are
undervalued on the basis of investor
reactions to near-term problems or
circumstances even though their
long-term prospects remain sound. The
Sub-advisor seeks to identify
individual companies with earnings
growth potential that may not be
recognized by the market at large.
-----------------------------------------------------------------
LARGE AST AllianceBernstein Growth & Income AllianceBernstein
CAP Portfolio: seeks long-term growth of L.P.
VALUE capital and income while attempting
to avoid excessive fluctuations in
market value. The Portfolio normally
will invest in common stocks (and
securities convertible into common
stocks). The Sub-advisor will take a
value-oriented approach, in that it
will try to keep the Portfolio's
assets invested in securities that
are selling at reasonable valuations
in relation to their fundamental
business prospects. The stocks that
the Portfolio will normally invest in
are those of seasoned companies.
-----------------------------------------------------------------
LARGE AST AllianceBernstein Managed Index AllianceBernstein
CAP 500 Portfolio: seeks to outperform L.P.
BLEND the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500")
through stock selection resulting in
different weightings of common stocks
relative to the index. The Portfolio
will invest, under normal
circumstances, at least 80% of its
net assets in securities included in
the S&P(R) 500.
-----------------------------------------------------------------
29
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
LARGE AST American Century Income & Growth American Century
CAP Portfolio: seeks capital growth with Investment
VALUE current income as a secondary Management, Inc.
objective. The Portfolio invests
primarily in common stocks that offer
potential for capital growth, and
may, consistent with its investment
objective, invest in stocks that
offer potential for current income.
The Sub-advisor utilizes a
quantitative management technique
with a goal of building an equity
portfolio that provides better
returns than the S&P 500 Index
without taking on significant
additional risk and while attempting
to create a dividend yield that will
be greater than the S&P 500 Index.
-----------------------------------------------------------------
ASSET AST American Century Strategic American Century
ALLOCA Allocation Portfolio (formerly known Investment
TION/ as AST American Century Strategic Management, Inc.
BALANCED Balanced Portfolio): seeks capital
growth and current income. The
Sub-advisor intends to maintain
approximately 60% of the Portfolio's
assets in equity securities and the
remainder in bonds and other fixed
income securities. Both the
Portfolio's equity and fixed income
investments will fluctuate in value.
The equity securities will fluctuate
depending on the performance of the
companies that issued them, general
market and economic conditions, and
investor confidence. The fixed income
investments will be affected
primarily by rising or falling
interest rates and the credit quality
of the issuers.
-----------------------------------------------------------------
ASSET AST Balanced Asset Allocation AST
ALLOCA Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 57.5% to 72.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 27.5% to 42.5% of its
net assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
-----------------------------------------------------------------
ASSET AST Capital Growth Asset Allocation AST
ALLOCA Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 72.5% to 87.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 12.5% to 27.5% of its
net assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
-----------------------------------------------------------------
SPECIALTY AST Cohen & Steers Realty Portfolio: Cohen & Steers
seeks to maximize total return Capital
through investment in real estate Management, Inc.
securities. The Portfolio pursues its
investment objective by investing,
under normal circumstances, at least
80% of its net assets in securities
of real estate issuers. Under normal
circumstances, the Portfolio will
invest substantially all of its
assets in the equity securities of
real estate companies, i.e., a
company that derives at least 50% of
its revenues from the ownership,
construction, financing, management
or sale of real estate or that has at
least 50% of its assets in real
estate. Real estate companies may
include real estate investment trusts
or REITs.
-----------------------------------------------------------------
ASSET AST Conservative Asset Allocation AST
ALLOCA Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 47.5% to 62.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 37.5% to 52.5% of its
net assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
-----------------------------------------------------------------
LARGE AST DeAM Large-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of capital by Investment
VALUE investing primarily in the value Management
stocks of larger companies. The Americas, Inc.
Portfolio pursues its objective,
under normal market conditions, by
primarily investing at least 80% of
the value of its assets in the equity
securities of large-sized companies
included in the Russell 1000(R) Value
Index. The Sub-advisor employs an
investment strategy designed to
maintain a portfolio of equity
securities which approximates the
market risk of those stocks included
in the Russell 1000(R) Value Index,
but which attempts to outperform the
Russell 1000(R) Value Index through
active stock selection.
-----------------------------------------------------------------
30
----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
----------------------------------------------------------------
SMALL AST Neuberger Berman Small-Cap Growth Neuberger Berman
CAP Portfolio (formerly known as AST DeAM Management Inc.
GROWTH Small-Cap Growth Portfolio): seeks
maximum growth of investors' capital
from a portfolio of growth stocks of
smaller companies. The Portfolio
pursues its objective, under normal
circumstances, by primarily investing
at least 80% of its total assets in
the equity securities of small-sized
companies included in the Russell
2000 Growth(R) Index.
----------------------------------------------------------------
SMALL AST DeAM Small-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of investors' Investment
VALUE capital by investing primarily in the Management
value stocks of smaller companies. Americas, Inc.
The Portfolio pursues its objective,
under normal market conditions, by
primarily investing at least 80% of
its total assets in the equity
securities of small-sized companies
included in the Russell 2000(R) Value
Index. The Sub-advisor employs an
investment strategy designed to
maintain a portfolio of equity
securities which approximates the
market risk of those stocks included
in the Russell 2000(R) Value Index,
but which attempts to outperform the
Russell 2000(R) Value Index.
----------------------------------------------------------------
SMALL AST Federated Aggressive Growth Federated Equity
CAP Portfolio: seeks capital growth. The Management
GROWTH Portfolio pursues its investment Company of
objective by investing primarily in Pennsylvania/
the stocks of small companies that Federated Global
are traded on national security Investment
exchanges, NASDAQ stock exchange and Management
the over-the-counter-market. Small Corp.; Federated
companies will be defined as MDTA LLC
companies with market capitalizations
similar to companies in the Russell
2000 Growth Index.
----------------------------------------------------------------
ASSET AST First Trust Balanced Target First Trust
ALLOCA- Portfolio: seeks long-term capital Advisors L.P.
TION/ growth balanced by current income.
BALANCED The Portfolio seeks to achieve its
objective by investing approximately
65% in common stocks and 35% in fixed
income securities. The Portfolio
allocates the equity portion of the
portfolio across five uniquely
specialized strategies - the Dow/SM/
Target Dividend, the Value Line(R)
Target 25, the Global Dividend Target
15, the NYSE(R) International Target
25, and the Target Small Cap. Each
strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using a
multi-factor scoring system to select
the common stocks. The fixed income
allocation is determined by the Dow
Jones Income strategy which utilizes
certain screens to select bonds from
the Dow Jones Corporate Bond Index or
like-bonds not in the index.
----------------------------------------------------------------
ASSET AST First Trust Capital Appreciation First Trust
ALLOCA- Target Portfolio: seeks long-term Advisors L.P.
TION/ growth of capital. The Portfolio
BALANCED seeks to achieve its objective by
investing approximately 80% in common
stocks and 20% in fixed income
securities. The portfolio allocates
the equity portion of the portfolio
across five uniquely specialized
strategies - the Value Line(R) Target
25, the Global Dividend Target 15,
the Target Small Cap, the Nasdaq(R)
Target 15, and the NYSE(R)
International Target 25. Each
strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using a
multi-factor scoring system to select
the common stocks. The fixed income
allocation is determined by the Dow
Jones Income strategy utilizes
certain screens to select bonds from
the Dow Jones Corporate Bond Index or
like-bonds not in the index.
----------------------------------------------------------------
ASSET AST UBS Dynamic Alpha Portfolio UBS Global Asset
ALLOCA- (formerly known as AST Global Management
TION/ Allocation Portfolio): seeks to (Americas) Inc.
BALANCED maximize total return, consisting of
capital appreciation and current
income. The Portfolio invests in
securities and financial instruments
to gain exposure to global equity,
global fixed income and cash
equivalent markets, including global
currencies. The Portfolio may invest
in equity and fixed income securities
of issuers located within and outside
the United States or in open-end
investment companies advised by UBS
Global Asset Management (Americas)
Inc., the Portfolio's Sub-Advisor, to
gain exposure to certain global
equity and global fixed income
markets.
----------------------------------------------------------------
31
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
LARGE AST Goldman Sachs Concentrated Growth Goldman Sachs
CAP Portfolio: seeks growth of capital in Asset
GROWTH a manner consistent with the Management, L.P.
preservation of capital. Realization
of income is not a significant
investment consideration and any
income realized on the Portfolio's
investments, therefore, will be
incidental to the Portfolio's
objective. The Portfolio will pursue
its objective by investing primarily
in equity securities of companies
that the Sub-advisor believes have
the potential to achieve capital
appreciation over the long-term. The
Portfolio seeks to achieve its
investment objective by investing,
under normal circumstances, in
approximately 30 - 45 companies that
are considered by the Sub-advisor to
be positioned for long-term growth.
------------------------------------------------------------------
MID CAP AST Goldman Sachs Mid-Cap Growth Goldman Sachs
GROWTH Portfolio: seeks long-term capital Asset
growth. The Portfolio pursues its Management, L.P.
investment objective, by investing
primarily in equity securities
selected for their growth potential,
and normally invests at least 80% of
the value of its assets in medium
capitalization companies. For
purposes of the Portfolio,
medium-sized companies are those
whose market capitalizations
(measured at the time of investment)
fall within the range of companies in
the Russell Mid Cap Growth Index. The
Sub-advisor seeks to identify
individual companies with earnings
growth potential that may not be
recognized by the market at large.
------------------------------------------------------------------
FIXED AST High Yield Portfolio: seeks a Pacific Investment
INCOME high level of current income and may Management
also consider the potential for Company LLC
capital appreciation. The Portfolio (PIMCO)
invests, under normal circumstances,
at least 80% of its net assets plus
any borrowings for investment
purposes (measured at time of
purchase) in high yield, fixed-income
securities that, at the time of
purchase, are non-investment grade
securities. Such securities are
commonly referred to as "junk bonds".
------------------------------------------------------------------
INTER- AST JPMorgan International Equity J.P. Morgan
NATIONAL Portfolio: seeks long-term capital Investment
EQUITY growth by investing in a diversified Management Inc.
portfolio of international equity
securities. The Portfolio seeks to
meet its objective by investing,
under normal market conditions, at
least 80% of its assets in a
diversified portfolio of equity
securities of companies located or
operating in developed non-U.S.
countries and emerging markets of the
world. The equity securities will
ordinarily be traded on a recognized
foreign securities exchange or traded
in a foreign over-the-counter market
in the country where the issuer is
principally based, but may also be
traded in other countries including
the United States.
------------------------------------------------------------------
LARGE AST Large-Cap Value Portfolio: seeks Dreman Value
CAP current income and long-term growth Management LLC,
VALUE of income, as well as capital Hotchkis and
appreciation. The Portfolio invests, Wiley Capital
under normal circumstances, at least Management LLC;
80% of its net assets in common J.P. Morgan
stocks of large cap U.S. companies. Investment
The Portfolio focuses on common Management, Inc.
stocks that have a high cash dividend
or payout yield relative to the
market or that possess relative value
within sectors.
------------------------------------------------------------------
FIXED AST Lord Abbett Bond-Debenture Lord, Abbett &
INCOME Portfolio: seeks high current income Co. LLC
and the opportunity for capital
appreciation to produce a high total
return. To pursue its objective, the
Portfolio will invest, under normal
circumstances, at least 80% of the
value of its assets in fixed income
securities and normally invests
primarily in high yield and
investment grade debt securities,
securities convertible into common
stock and preferred stocks. The
Portfolio may find good value in high
yield securities, sometimes called
"lower-rated bonds" or "junk bonds,"
and frequently may have more than
half of its assets invested in those
securities. At least 20% of the
Portfolio's assets must be invested
in any combination of investment
grade debt securities, U.S.
Government securities and cash
equivalents. The Portfolio may also
make significant investments in
mortgage-backed securities. Although
the Portfolio expects to maintain a
weighted average maturity in the
range of five to twelve years, there
are no restrictions on the overall
Portfolio or on individual
securities. The Portfolio may invest
up to 20% of its net assets in equity
securities.
------------------------------------------------------------------
32
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
LARGE AST Marsico Capital Growth Portfolio: Marsico Capital
CAP seeks capital growth. Income Management, LLC
GROWTH realization is not an investment
objective and any income realized on
the Portfolio's investments,
therefore, will be incidental to the
Portfolio's objective. The Portfolio
will pursue its objective by
investing primarily in common stocks
of larger, more established
companies. In selecting investments
for the Portfolio, the Sub-advisor
uses an approach that combines "top
down" economic analysis with "bottom
up" stock selection. The "top down"
approach identifies sectors,
industries and companies that may
benefit from the trends the
Sub-advisor has observed. The
Sub-advisor then looks for individual
companies with earnings growth
potential that may not be recognized
by the market at large, utilizing a
"bottom up" stock selection process.
The Portfolio will normally hold a
core position of between 35 and 50
common stocks. The Portfolio may hold
a limited number of additional common
stocks at times when the Portfolio
manager is accumulating new
positions, phasing out existing or
responding to exceptional market
conditions.
------------------------------------------------------------------
INTER- AST MFS Global Equity Portfolio: Massachusetts
NATIONAL seeks capital growth. Under normal Financial Services
EQUITY circumstances the Portfolio invests Company
at least 80% of its assets in equity
securities of U.S. and foreign
issuers (including issuers in
developing countries). While the
portfolio may invest its assets in
companies of any size, the Portfolio
generally focuses on companies with
large capitalizations.
------------------------------------------------------------------
LARGE AST MFS Growth Portfolio: seeks Massachusetts
CAP long-term capital growth and future Financial Services
GROWTH income. Under normal market Company
conditions, the Portfolio invests at
least 80% of its total assets in
common stocks and related securities,
such as preferred stocks, convertible
securities and depositary receipts,
of companies. The Sub-advisor focuses
on investing the Portfolio's assets
in the stock of companies it believes
to have above average earnings growth
potential compared to other companies
(growth companies). The Portfolio may
invest up to 35% of its net assets in
foreign securities.
------------------------------------------------------------------
MID CAP AST Mid Cap Value Portfolio: seeks to EARNEST
VALUE provide capital growth by investing Partners LLC/
primarily in mid-capitalization WEDGE Capital
stocks that appear to be undervalued. Management, LLP
The Portfolio has a non-fundamental
policy to invest, under normal
circumstances, at least 80% of the
value of its net assets in
mid-capitalization companies.
------------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Growth Neuberger Berman
GROWTH Portfolio: seeks capital growth. Management Inc.
Under normal market conditions, the
Portfolio primarily invests at least
80% of its net assets in the common
stocks of mid-cap companies. The
Sub-adviser looks for fast-growing
companies that are in new or rapidly
evolving industries.
------------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Value Neuberger Berman
VALUE Portfolio: seeks capital growth. Management Inc.
Under normal market conditions, the
Portfolio primarily invests at least
80% of its net assets in the common
stocks of mid-cap companies. For
purposes of the Portfolio, companies
with equity market capitalizations
that fall within the range of the
Russell Midcap(R) Index at the time
of investment are considered mid-cap
companies. Some of the Portfolio's
assets may be invested in the
securities of large-cap companies as
well as in small-cap companies. Under
the Portfolio's value-oriented
investment approach, the Sub-advisor
looks for well-managed companies
whose stock prices are undervalued
and that may rise in price before
other investors realize their worth.
------------------------------------------------------------------
FIXED AST PIMCO Limited Maturity Bond Pacific Investment
INCOME Portfolio: seeks to maximize total Management
return consistent with preservation Company LLC
of capital and prudent investment (PIMCO)
management. The Portfolio will invest
in a diversified portfolio of
fixed-income investment instruments
of varying maturities. The average
portfolio duration of the Portfolio
generally will vary within a one- to
three-year time frame based on the
Sub-advisor's forecast for interest
rates.
------------------------------------------------------------------
ASSET AST Preservation Asset Allocation AST
ALLOCA- Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 27.5% to 42.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 57.5% to 72.5% of its
net assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
------------------------------------------------------------------
33
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
--------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------
SMALL AST Small-Cap Value Portfolio: seeks ClearBridge
CAP to provide long-term capital growth Advisors, LLC;
VALUE by investing primarily in Dreman Value
small-capitalization stocks that Management LLC;
appear to be undervalued. The J.P. Morgan
Portfolio will have a non-fundamental Investment
policy to invest, under normal Management, Inc.;
circumstances, at least 80% of the Lee Munder
value of its net assets in small Investments, Ltd
capitalization stocks. The Portfolio
will focus on common stocks that
appear to be undervalued.
--------------------------------------------------------------------
ASSET AST T. Rowe Price Asset Allocation T. Rowe Price
ALLOCA- Portfolio: seeks a high level of Associates, Inc.
TION/ total return by investing primarily
BALANCED in a diversified portfolio of fixed
income and equity securities. The
Portfolio normally invests
approximately 60% of its total assets
in equity securities and 40% in fixed
income securities. This mix may vary
depending on the sub-advisor's
outlook for the markets. The
Sub-advisor concentrates common stock
investments in larger, more
established companies, but the
Portfolio may include small and
medium-sized companies with good
growth prospects. The fixed income
portion of the Portfolio will be
allocated among investment grade
securities, high yield or "junk"
bonds, emerging market securities,
foreign high quality debt securities
and cash reserves.
--------------------------------------------------------------------
FIXED AST T. Rowe Price Global Bond T. Rowe Price
INCOME Portfolio: seeks to provide high International, Inc.
current income and capital growth by
investing in high-quality foreign and
U.S. dollar-denominated bonds. The
Portfolio will invest at least 80% of
its total assets in fixed income
securities, including high quality
bonds issued or guaranteed by U.S. or
foreign governments or their agencies
and by foreign authorities, provinces
and municipalities as well as
investment grade corporate bonds and
mortgage and asset-backed securities
of U.S. and foreign issuers. The
Portfolio generally invests in
countries where the combination of
fixed-income returns and currency
exchange rates appears attractive,
or, if the currency trend is
unfavorable, where the Sub-advisor
believes that the currency risk can
be minimized through hedging. The
Portfolio may also invest up to 20%
of its assets in the aggregate in
below investment-grade, high-risk
bonds ("junk bonds"). In addition,
the Portfolio may invest up to 30% of
its assets in mortgage-related
(including derivatives, such as
collateralized mortgage obligations
and stripped mortgage securities) and
asset-backed securities.
--------------------------------------------------------------------
SPECIALTY AST T. Rowe Price Natural Resources T. Rowe Price
Portfolio: seeks long-term capital Associates, Inc.
growth primarily through the common
stocks of companies that own or
develop natural resources (such as
energy products, precious metals and
forest products) and other basic
commodities. The Portfolio normally
invests primarily (at least 80% of
its total assets) in the common
stocks of natural resource companies.
The Portfolio looks for companies
that have the ability to expand
production, to maintain superior
exploration programs and production
facilities, and the potential to
accumulate new resources. At least
50% of Portfolio assets will be
invested in U.S. securities, up to
50% of total assets also may be
invested in foreign securities.
--------------------------------------------------------------------
34
------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------
EVERGREEN VARIABLE ANNUITY TRUST
------------------------------------------------------------
ASSET Evergreen VA Balanced: seeks capital Evergreen
ALLOCA- growth and current income. The Investment
TION/ Portfolio invests in a combination of Management
BALANCED equity and debt securities. The Company, LLC
equity securities that the Portfolio
invests in primarily consist of the
common stocks, preferred stocks and
securities convertible or
exchangeable for common stocks of
large U.S. companies (i.e., companies
whose market capitalizations fall
within the range tracked by the
Russell 1000(R) Index, measured at
the time of purchase). Under normal
circumstances, the Portfolio will
invest at least 25% of its assets in
debt securities and the remainder in
equity securities. The Portfolio's
managers use a diversified equity
style of management, best defined as
a blend between growth and value
stocks. The Portfolio normally
invests primarily all of the fixed
income portion in U.S.
dollar-denominated investment grade
debt securities, including debt
securities issued or guaranteed by
the U.S. Treasury or by an agency or
instrumentality of the U.S.
government, corporate bonds,
mortgage-backed securities,
asset-backed securities, and other
income producing securities. The
Portfolio is not required to sell or
otherwise dispose of any security
that loses its rating or has its
rating reduced after the Portfolio
has purchased it. The Portfolio
maintains a bias toward corporate and
mortgage-backed securities in order
to capture higher levels of income.
The Portfolio may, but will not
necessarily, use a variety of
derivative instruments, such as
futures contracts, options and swaps,
including, for example, index
futures, Treasury futures, Eurodollar
futures, interest rate swap
agreements, credit default swaps, and
total return swaps.
------------------------------------------------------------
LARGE Evergreen VA Fundamental Large Cap: Evergreen
CAP seeks capital growth with the Investment
VALUE potential for current income. The Management
Portfolio invests, under normal Company, LLC
conditions, at least 80% of its
assets in common stocks of large U.S.
companies (i.e., companies whose
market capitalizations fall within
the market capitalization range of
the companies tracked by the Russell
1000(R) Index, measured at the time
of purchase). The Portfolio earns
current income from dividends paid on
equity securities and may seek
additional income primarily by
investing up to 20% of its assets in
convertible bonds, including below
investment grade bonds, and
convertible preferred stocks of any
quality. The Portfolio may invest up
to 20% of its assets in foreign
securities. The Portfolio's stock
selection is based on a diversified
style of equity management that
allows the Portfolio to invest in
both value- and growth-oriented
equity securities. "Value" securities
are securities which the Portfolio's
manager believes are currently
undervalued in the marketplace.
"Growth" stocks are stocks of
companies which the Portfolio's
manager believes have anticipated
earnings ranging from steady to
accelerated growth. The Portfolio's
manager looks for companies that he
believes are temporarily undervalued
in the marketplace, sell at a
discount to their private market
values and display certain
characteristics such as earning a
high return on investments and having
a competitive advantage in their
industry.
------------------------------------------------------------
SMALL Evergreen VA Growth: seeks long-term Evergreen
CAP capital growth. The Portfolio invests Investment
GROWTH at least 75% of its assets in common Management
stocks of small- and medium-sized Company, LLC
companies (i.e., companies whose
market capitalizations fall within
the market capitalization range of
the companies tracked by the Russell
2000(R) Growth Index, measured at the
time of purchase). The remaining
portion of the Portfolio's assets may
be invested in companies of any size.
The Portfolio's managers employ a
growth-style of equity management and
will generally seek to purchase
stocks of companies that have
demonstrated earnings growth
potential which they believe is not
yet reflected in the stock's market
price. The Portfolio's managers
consider earnings growth above the
average earnings growth of companies
included in the Russell 2000(R)
Growth Index as a key factor in
selecting investments.
------------------------------------------------------------
35
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
INTER- Evergreen VA International Equity: Evergreen
NATIONAL seeks long-term capital growth and Investment
EQUITY secondarily, modest income. The Management
Portfolio will normally invest 80% of Company, LLC
its assets in equity securities
issued by , in the manager's opinion,
established and quality non-U.S.
companies located in countries with
developed markets. The Portfolio may
purchase securities across all market
capitalizations. The Portfolio
normally invests at least 65% of its
assets in securities of companies in
at least three countries (other than
the U.S.). The Portfolio may also
invest in emerging markets. The
Portfolio's managers seek both growth
and value opportunities For growth
investments, the Portfolio's manager
seeks, among other things, good
business models, good management and
growth in cash flows. For value
investments, the Portfolio's manager
seeks companies that are undervalued
in the marketplace compared to their
assets. The Portfolio normally
intends to seek modest income from
dividends paid by its equity
holdings. Excluding repurchase
agreements and other cash
equivalents, the Portfolio intends to
invest substantially all of its
assets in the securities of non-U.S.
issuers.
------------------------------------------------------------------
SPECIALTY Evergreen VA Omega: seeks long-term Evergreen
capital growth. The Portfolio invests Investment
primarily, and under normal Management
conditions substantially all of its Company, LLC
assets, in common stocks of U.S.
companies across all market
capitalizations. The Portfolio's
manager employs a growth style of
equity management that emphasizes
companies with cash flow growth,
sustainable competitive advantages,
returns on invested capital above
their cost of capital and the ability
to manage for profitable growth that
can create long-term value for
shareholders.
------------------------------------------------------------------
SMALL Evergreen VA Special Values: seeks Evergreen
CAP capital growth in the value of its Investment
VALUE shares. The Portfolio normally Management
invests at least 80% of its assets in Company, LLC
common stocks of small U.S. companies
(i.e. companies whose market
capitalizations fall within the
market capitalization range of the
companies tracked by the Russell
2000(R) Index, measured at the time
of purchase). The remaining 20% of
the Portfolio's assets may be
represented by cash or invested in
various cash equivalents or common
stocks of any market capitalization.
The Portfolio's manager seeks to
limit the investment risk of small
company investing by seeking stocks
that trade below what the manager
considers their intrinsic value. The
Portfolio's manager looks
specifically for various growth
triggers, or catalysts, that will
bring the stock's price into line
with its actual or potential value,
such as new products, new management,
changes in regulation and/or
restructuring potential.
------------------------------------------------------------------
GARTMORE VARIABLE INSURANCE TRUST
------------------------------------------------------------------
INTER- GVIT Developing Markets: seeks NWD Management
NATIONAL long-term capital appreciation, under & Research Trust/
EQUITY normal conditions by investing at Gartmore Global
least 80% of its total assets in Partners
stocks of companies of any size based
in the world's developing economies.
Under normal market conditions,
investments are maintained in at
least six countries at all times and
no more than 35% of total assets in
any single one of them.
------------------------------------------------------------------
JANUS ASPEN SERIES
------------------------------------------------------------------
LARGE Janus Aspen Series: Large Cap Growth Janus Capital
CAP Portfolio - Service Shares: seeks Management LLC
GROWTH long-term growth of capital in a
manner consistent with the
preservation of capital. The
Portfolio invests at least 80% of its
net assets plus the amount of any
borrowings for investment purposes in
common stocks of large-sized
companies. Large-sized companies are
those whose market capitalizations
fall within the range of companies in
the Russell 1000 Index at the time of
purchase.
------------------------------------------------------------------
FIXED INTEREST RATE OPTIONS
We offer two fixed interest rate options:
.. a one-year fixed interest rate option, and
.. a dollar cost averaging fixed rate option (DCA Fixed Rate Option).
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. A new interest rate
period is established every time you allocate or transfer money into a fixed
interest rate option. (You may not transfer amounts from other investment
options into the DCA Fixed Rate Option.) You may have money allocated in more
than
36
one interest rate period at the same time. This could result in your money
earning interest at different rates and each interest rate period maturing at
a different time. While these interest rates may change from time to time,
they will not be less than the minimum interest rate dictated by applicable
state law. We may offer lower interest rates for Contracts With Credit than
for Contracts Without Credit. The interest rates we pay on the fixed interest
rate options may be influenced by the asset-based charges assessed against the
Separate Account.
Payments allocated to the fixed interest rate options become part of Pruco
Life of New Jersey's general assets.
One-year Fixed Interest Rate Option
We set a one-year base guaranteed annual interest rate for the one-year fixed
interest rate option. Additionally, we may provide a higher interest rate on
each purchase payment allocated to this option for the first year after the
payment. This higher interest rate will not apply to amounts transferred from
other investment options within the contract or amounts remaining in this
option for more than one year.
Dollar Cost Averaging Fixed Rate Option
You may allocate all or part of any purchase payment to the DCA Fixed Rate
Option. Under this option, you automatically transfer amounts over a stated
period (currently, six or twelve months) from the DCA Fixed Rate Option to the
variable investment options and/or to the one-year fixed interest rate option,
as you select. We will invest the assets you allocate to the DCA Fixed Rate
Option in our general account until they are transferred. You may not transfer
from other investment options to the DCA Fixed Rate Option. Transfers to the
one-year fixed interest rate option will remain in the general account.
If you choose to allocate all or part of a purchase payment to the DCA Fixed
Rate Option, the minimum amount of the purchase payment you may allocate is
$2,000. The first periodic transfer will occur on the date you allocate your
purchase payment to the DCA Fixed Rate Option. Subsequent transfers will occur
on the monthly anniversary of the first transfer. Currently, you may choose to
have the purchase payment allocated to the DCA Fixed Rate Option transferred
to the selected variable investment option, or to the one-year fixed interest
rate option in either six or twelve monthly installments, and you may not
change that number of monthly installments after you have chosen the DCA Fixed
Rate Option. You may allocate to both the six-month and twelve-month options.
(In the future, we may make available other numbers of transfers and other
transfer schedules - for example, quarterly as well as monthly.)
If you choose a six-payment transfer schedule, each transfer generally will
equal 1/6/th/ of the amount you allocated to the DCA Fixed Rate Option, and
if you choose a twelve-payment transfer schedule, each transfer generally will
equal 1/12/th/ of the amount you allocated to the DCA Fixed Rate Option. In
either case, the final transfer amount generally will also include the
credited interest. You may change at any time the investment options into
which the DCA Fixed Rate Option assets are transferred. You may make a one
time transfer of the remaining value out of your DCA Fixed Rate Option, if you
so choose. Transfers from the DCA Fixed Rate Option do not count toward the
maximum number of free transfers allowed under the contract.
If you make a withdrawal or have a fee assessed from your contract, and all or
part of that withdrawal or fee comes out of the DCA Fixed Rate Option, we will
recalculate the periodic transfer amount to reflect the change. This
recalculation may include some or all of the interest credited to the date of
the next scheduled transfer. If a withdrawal or fee assessment reduces the
monthly transfer amount below $100, we will transfer the remaining balance in
the DCA Fixed Rate Option on the next scheduled transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
Under the Market Value Adjustment Option, we may offer one or more of several
guarantee periods provided that the interest rate we are able to declare will
be no less than the minimum interest rate dictated by applicable state law
with respect to any guarantee period. This option is only available in the
Contract Without Credit. The Market Value Adjustment Option is registered
separately from the variable investment options, and the amount of market
value adjustment option securities registered is stated in that registration
statement.
IF AMOUNTS ARE WITHDRAWN FROM A GUARANTEE PERIOD, OTHER THAN DURING THE 30-DAY
PERIOD IMMEDIATELY FOLLOWING THE END OF THE GUARANTEE PERIOD, THEY WILL BE
SUBJECT TO A MARKET VALUE ADJUSTMENT EVEN IF THEY ARE NOT SUBJECT TO A
WITHDRAWAL CHARGE.
You will earn interest on your invested purchase payment at the rate that we
have declared for the guarantee period you have chosen. You must invest at
least $1,000 if you choose this option.
We refer to interest rates as annual rates, although we credit interest within
each guarantee period on a daily basis. The daily interest that we credit is
equal to the pro rated portion of the interest that would be earned on an
annual basis. We credit interest
37
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
from the business day on which your purchase payment is received in good order
at the Prudential Annuity Service Center until the earliest to occur of any of
the following events: (a) full surrender of the contract, (b) commencement of
annuity payments or settlement, (c) end of the guarantee period, (d) transfer
of the value in the guarantee period, (e) payment of a death benefit, or
(f) the date the amount is withdrawn.
During the 30-day period immediately following the end of a guarantee period,
we allow you to do any of the following, without the imposition of the market
value adjustment:
(a)withdraw or transfer the value of the guarantee period,
(b)allocate the value to another available guarantee period or other
investment option (provided that the new guarantee period ends prior to the
annuity date). You will receive the interest rate applicable on the date we
receive your instruction, or
(c)apply the value in the guarantee period to the annuity or settlement option
of your choice.
If we do not receive instructions from you concerning the disposition of the
Contract Value in your maturing guarantee period, we will reinvest the amount
in the Prudential Money Market Portfolio investment option.
During the 30-day period immediately following the end of the guarantee
period, or until you elect to do (a), (b) or (c) listed immediately above, you
will receive the current interest rate applicable to the guarantee period
having the same duration as the guarantee period that just matured, which is
offered on the day immediately following the end of the matured guarantee
period. However, if at that time we do not offer a guarantee period with the
same duration as that which matured, you will then receive the current
interest rate applicable to the shortest guarantee period then offered.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed by
us and the interest amount that your money will earn is guaranteed by us to be
at least the minimum interest rate dictated by applicable state law.
Payments allocated to the market value adjustment option are held as a
separate pool of assets. Any gains or losses experienced by these assets will
not directly affect the contracts. The strength of our guarantees under these
options is based on the overall financial strength of Pruco Life of New Jersey.
Market Value Adjustment
When you allocate a purchase payment or transfer Contract Value to a guarantee
period, we use that money to buy and sell securities and other instruments to
support our obligation to pay interest. Generally, we buy bonds for this
purpose. The duration of the bonds and other instruments that we buy with
respect to a particular guarantee period is influenced significantly by the
length of the guarantee period. For example, we typically would acquire
longer-duration bonds with respect to the 10 year guarantee period than we do
for the 3 year guarantee period. The value of these bonds is affected by
changes in interest rates, among other factors. The market value adjustment
that we assess against your Contract Value if you withdraw or transfer outside
the 30-day period discussed above involves our attributing to you a portion of
our investment experience on these bonds and other instruments.
For example, if you make a full withdrawal when interest rates have risen
since the time of your investment, the bonds and other investments in the
guarantee period likely would have decreased in value, meaning that we would
impose a "negative" market value adjustment on you (i.e., one that results in
a reduction of the withdrawal proceeds that you receive). For a partial
withdrawal, we would deduct a negative market value adjustment from your
remaining Contract Value. Conversely, if interest rates have decreased, the
market value adjustment would be positive.
Other things you should know about the market value adjustment include the
following:
.. We determine the market value adjustment according to a mathematical
formula, which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we
also provide hypothetical examples of how the formula works.
.. A negative market value adjustment could cause you to lose not only the
interest you have earned but also a portion of your principal.
.. In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the Contract Value you apply to an
annuity or settlement option, unless you annuitize within the 30-day period
discussed above.
YOU SHOULD REALIZE, HOWEVER, THAT APART FROM THE MARKET VALUE ADJUSTMENT, THE
VALUE OF THE BENEFIT IN YOUR GUARANTEE PERIOD 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.
38
TRANSFERS AMONG OPTIONS
Subject to certain restrictions, you can transfer money among the variable
investment options and the one-year fixed interest rate option. The minimum
transfer amount is the lesser of $250 or the amount in the investment option
from which the transfer is to be made. In addition, you can transfer your
Contract Value out of a market value adjustment guarantee period into another
market value adjustment guarantee period, into a variable investment option,
or into a one-year fixed interest rate option, although a market value
adjustment will apply to any transfer you make outside the 30-day period
discussed above. You may transfer Contract Value into the Market Value
Adjustment Option at any time, provided it is at least $1,000.
In general, you may make your transfer request by telephone, electronically,
or otherwise in paper form to the Prudential Annuity Service Center. We have
procedures in place to confirm that instructions received by telephone or
electronically are genuine. We will not be liable for following unauthorized
telephone or electronic instructions that we reasonably believed to be
genuine. Your transfer request will take effect at the end of the business day
on which it was received in good order by us, or by certain entities that we
have specifically designated. Our business day generally closes at 4:00 p.m.
Eastern time. Our business day may close earlier, for example if regular
trading on the New York Stock Exchange closes early. Transfer requests
received after the close of the business day will take effect at the end of
the next business day.
With regard to the Market Value Adjustment Option, you can specify the
guarantee period from which you wish to transfer. If you request a transfer
from the market value adjustment option, but you do not specify the guarantee
period from which funds are to be taken, then we will transfer funds from the
guarantee period that has the least time remaining until its maturity date.
YOU CAN MAKE TRANSFERS OUT OF A FIXED INTEREST RATE OPTION, OTHER THAN THE DCA
FIXED RATE OPTION, ONLY DURING THE 30-DAY PERIOD FOLLOWING THE END OF THE ONE
YEAR INTEREST RATE PERIOD. TRANSFERS FROM THE DCA FIXED RATE OPTION ARE MADE
ON A PERIODIC BASIS FOR THE PERIOD THAT YOU SELECT.
During the contract accumulation phase, you can make up to 12 transfers each
contract year, among the investment options, without charge. (As noted in the
fee table, we have different transfer rules under the beneficiary continuation
option). Currently we charge $25 for each transfer after the twelfth in a
contract year, and we have the right to increase this charge up to $30.
(Dollar Cost Averaging and Auto-Rebalancing transfers do not count toward the
12 free transfers per year.)
For purposes of the 12 free transfers per year that we allow, we will treat
multiple transfers that are submitted on the same business day as a single
transfer.
ADDITIONAL TRANSFER RESTRICTIONS
We limit your ability to transfer among your contract's variable investment
options as permitted by applicable law. We impose a yearly restriction on
transfers. Specifically, once you have made 20 transfers among the subaccounts
during a contract year, we will accept any additional transfer request during
that year only if the request is submitted to us in writing with an original
signature and otherwise is in good order. For purposes of this transfer
restriction, we (i) do not view a facsimile transmission as a "writing",
(ii) will treat multiple transfer requests submitted on the same business day
as a single transfer, and (iii) do not count any transfer that involves one of
our systematic programs, such as asset allocation and automated withdrawals.
Frequent transfers among variable investment options in response to short-term
fluctuations in markets, sometimes called "market timing," can make it very
difficult for a portfolio manager to manage an underlying mutual fund's
investments. Frequent transfers may cause the fund to hold more cash than
otherwise necessary, disrupt management strategies, increase transaction
costs, or affect performance. For those reasons, the contract was not designed
for persons who make programmed, large, or frequent transfers.
In light of the risks posed to contract owners and other fund investors by
frequent transfers, we reserve the right to limit the number of transfers in
any contract year for all existing or new contract owners, and to take the
other actions discussed below. We also reserve the right to limit the number
of transfers in any contract year or to refuse any transfer request for an
owner or certain owners if: (a) we believe that excessive transfer activity
(as we define it) or a specific transfer request or group of transfer requests
may have a detrimental effect on accumulation unit values or the share prices
of the underlying mutual funds; or (b) we are informed by a fund (e.g., by the
fund's portfolio manager) that the purchase or redemption of fund shares must
be restricted because the fund believes the transfer activity to which such
purchase and redemption relates would have a detrimental effect on the share
prices of the affected fund. Without limiting the above, the most likely
scenario where either of the above could occur would be if the aggregate
amount of a trade or trades represented a relatively large proportion of the
total assets of a particular underlying mutual fund. In furtherance of our
general authority to restrict transfers as described above, and without
limiting other actions we may take in the future, we have adopted the
following specific restrictions:
.. With respect to each variable investment option (other than the Prudential
Money Market Portfolio), we track amounts exceeding a certain dollar
threshold that were transferred into the option. If you transfer such
amount into a particular variable investment option, and within 30 calendar
days thereafter transfer (the "Transfer Out") all or a portion of that
amount into
39
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
another variable investment option, then upon the Transfer Out, the former
variable investment option becomes restricted (the "Restricted Option").
Specifically, we will not permit subsequent transfers into the Restricted
Option for 90 calendar days after the Transfer Out if the Restricted Option
invests in a non-international fund, or 180 calendar days after the
Transfer Out if the Restricted Option invests in an international fund. For
purposes of this rule, we do not (i) count transfers made in connection
with one of our systematic programs, such as asset allocation and automated
withdrawals and (ii) categorize as a transfer the first transfer that you
make after the contract date, if you make that transfer within 30 calendar
days after the contract date. Even if an amount becomes restricted under
the foregoing rules, you are still free to redeem the amount from your
contract at any time.
.. We reserve the right to effect exchanges on a delayed basis for all
contracts. That is, we may price an exchange involving a variable
investment option on the business day subsequent to the business day on
which the exchange request was received. Before implementing such a
practice, we would issue a separate written notice to contract owners that
explains the practice in detail. In addition, if we do implement a delayed
exchange policy, we will apply the policy on a uniform basis to all
contracts in the relevant class.
.. The portfolios may have adopted their own policies and procedures with
respect to excessive trading of their respective shares, and we reserve the
right to enforce these policies and procedures. The prospectuses for the
portfolios describe any such policies and procedures, which may be more or
less restrictive than the policies and procedures we have adopted. Under
SEC rules, we are required to: (1) enter into a written agreement with each
portfolio or its principal underwriter that obligates us to provide to the
portfolio promptly upon request certain information about the trading
activity of individual contract owners, and (2) execute instructions from
the portfolio to restrict or prohibit further purchases or transfers by
specific contract owners who violate the excessive trading policies
established by the portfolio. In addition, you should be aware that some
portfolios may receive "omnibus" purchase and redemption orders from other
insurance companies or intermediaries such as retirement plans. The omnibus
orders reflect the aggregation and netting of multiple orders from
individual owners of variable insurance contracts and/or individual
retirement plan participants. The omnibus nature of these orders may limit
the portfolios in their ability to apply their excessive trading policies
and procedures. In addition, the other insurance companies and/or
retirement plans may have different policies and procedures or may not have
any such policies and procedures because of contractual limitations. For
these reasons, we cannot guarantee that the portfolios (and thus the
contract owners) will not be harmed by transfer activity relating to other
insurance companies and/or retirement plans that may invest in the
portfolios.
.. A portfolio also may assess a short term trading fee in connection with a
transfer out of the variable investment option investing in that portfolio
that occurs within a certain number of days following the date of
allocation to the variable investment option. Each portfolio determines the
amount of the short term trading fee and when the fee is imposed. The fee
is retained by or paid to the portfolio and is not retained by us. The fee
will be deducted from your Contract Value, to the extent permitted by law.
At present, no Portfolio has adopted a short-term trading fee.
.. If we deny one or more transfer requests under the foregoing rules, we will
inform you promptly of the circumstances concerning the denial.
.. We will not implement these rules in jurisdictions that have not approved
contract language authorizing us to do so, or may implement different rules
in certain jurisdictions if required by such jurisdictions. Contract owners
in jurisdictions with such limited transfer restrictions, and contract
owners who own variable life insurance or variable annuity contracts
(regardless of jurisdiction) that do not impose the above-referenced
transfer restrictions, might make more numerous and frequent transfers than
contract owners who are subject to such limitations. Because contract
owners who are not subject to the same transfer restrictions may have the
same underlying mutual fund portfolios available to them, unfavorable
consequences associated with such frequent trading within the underlying
mutual fund (e.g., greater portfolio turnover, higher transaction costs, or
performance or tax issues) may affect all contract owners. Apart from
jurisdiction-specific and contract differences in transfer restrictions, we
will apply these rules uniformly, and will not waive a transfer restriction
for any contract owner.
Although our transfer restrictions are designed to prevent excessive
transfers, they are not capable of preventing every potential occurrence of
excessive transfer activity.
DOLLAR COST AVERAGING
The dollar cost averaging (DCA) feature (which is distinct from the DCA Fixed
Rate Option) allows you to systematically transfer either a fixed dollar
amount or a percentage out of any variable investment option into any other
variable investment option or the one-year fixed interest rate option. You can
have these automatic transfers occur monthly, quarterly, semiannually or
annually. By investing amounts on a regular basis instead of investing the
total amount at one time, dollar cost averaging may decrease the effect of
market fluctuation on the investment of your purchase payment. Of course,
dollar cost averaging cannot ensure a profit or protect against loss in
declining markets.
Transfers will be made automatically on the schedule you choose until the
entire amount you chose to have transferred has been transferred or until you
tell us to discontinue the transfers. You can allocate subsequent purchase
payments to be transferred under this option at any time.
40
Your transfers will occur on the last calendar day of each transfer period you
have selected, provided that the New York Stock Exchange is open on that date.
If the New York Stock Exchange is not open on a particular transfer date, the
transfer will take effect on the next business day.
Any dollar cost averaging transfers you make do not count toward the 12 free
transfers you are allowed each contract year. The dollar cost averaging
feature is available only during the contract accumulation phase and is
offered without charge.
ASSET ALLOCATION PROGRAM
We recognize the value of having asset allocation models when deciding how to
allocate your purchase payments among the investment options. If you choose to
participate in the Asset Allocation Program, your representative will give you
a questionnaire to complete that will help determine a program that is
appropriate for you. Your asset allocation will be prepared based on your
answers to the questionnaire. You will not be charged for this service, and
you are not obligated to participate or to invest according to program
recommendations.
Asset allocation is a sophisticated method of diversification which allocates
assets among classes in order to manage investment risk and enhance returns
over the long term. However, asset allocation does not guarantee a profit or
protect against a loss. You are not obligated to participate or to invest
according to the program recommendations. We do not intend to provide any
personalized investment advice in connection with these programs and you
should not rely on these programs as providing individualized investment
recommendations to you. The asset allocation programs do not guarantee better
investment results. We reserve the right to terminate or change the asset
allocation programs at any time. You should consult your representative before
electing any asset allocation program.
AUTO-REBALANCING
Once your money has been allocated among the variable investment options, the
actual performance of the investment options may cause your allocation to
shift. For example, an investment option that initially holds only a small
percentage of your assets could perform much better than another investment
option. Over time, this option could increase to a larger percentage of your
assets than you desire. You can direct us to automatically rebalance your
assets to return to your original allocation percentage or to a subsequent
allocation percentage you select. We will rebalance only the variable
investment options that you have designated. If you also participate in the
DCA feature, then the variable investment option from which you make the DCA
transfers will not be rebalanced.
You may choose to have your rebalancing occur monthly, quarterly,
semiannually, or annually. The rebalancing will occur on the last calendar day
of the period you have chosen, provided that the New York Stock Exchange is
open on that date. If the New York Stock Exchange is not open on that date,
the rebalancing will take effect on the next business day.
Any transfers you make because of auto-rebalancing are not counted toward the
12 free transfers you are allowed per year. This feature is available only
during the contract accumulation phase, and is offered without charge. If you
choose auto-rebalancing and dollar cost averaging, auto-rebalancing will take
place after the transfers from your DCA account.
SCHEDULED TRANSACTIONS
Scheduled transactions include transfers under dollar cost averaging, the
asset allocation program, auto-rebalancing, systematic withdrawals, systematic
investments, required minimum distributions, substantially equal periodic
payments under Section 72(t) or 72(q) of the Internal Revenue Code of 1986, as
amended (Code), and annuity payments. Scheduled transactions are processed and
valued as of the date they are scheduled, unless the scheduled day is not a
business day. In that case, the transaction will be processed and valued on
the next business day, unless (with respect to required minimum distributions,
substantially equal periodic payments under Section 72(t) or 72(q) of the
Code, and annuity payments only), the next business day falls in the
subsequent calendar year, in which case the transaction will be processed and
valued on the prior business day.
VOTING RIGHTS
We are the legal owner of the shares of the underlying mutual funds used by
the variable investment options. However, we vote the shares of the mutual
funds according to voting instructions we receive from contract owners. When a
vote is required, we will mail you a proxy which is a form that you need to
complete and return to us to tell us how you wish us to vote. When we receive
those instructions, we will vote all of the shares we own on your behalf in
accordance with those instructions. We will vote fund shares for which we do
not receive instructions, and any other shares that we own in our own right,
in the same proportion as shares for which we receive instructions from
contract owners. This voting procedure is sometimes referred to as "mirror
voting" because, as indicated in the immediately preceding sentence, we mirror
the votes that are actually cast, rather than decide on our own how to vote.
In addition, because all the shares of a given mutual fund held within our
separate account are legally owned by us, we intend to vote all of such shares
when that underlying fund seeks a vote of its shareholders. As such, all such
shares will be counted towards whether there is a quorum at the underlying
fund's shareholder meeting and towards the ultimate outcome of the vote. Thus,
under "mirror voting," it is possible that the votes of a small percentage of
contract owners who actually vote will determine the ultimate outcome. We may
change the way your voting instructions are calculated if it is required or
permitted by federal or state regulation.
41
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
SUBSTITUTION
We may substitute one or more of the underlying mutual funds used by the
variable investment options. We may also cease to allow investments in
existing funds. We would not do this without the approval of the Securities
and Exchange Commission (SEC) and any necessary state insurance departments.
You will be given specific notice in advance of any substitution we intend to
make.
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION)
PAYMENT PROVISIONS
We can begin making annuity payments any time on or after the first contract
anniversary. Annuity payments must begin no later than the later of the
contract anniversary coinciding with or next following the annuitant's 90/th/
birthday or the tenth contract anniversary.
Upon annuitization, any value in a guarantee period of the market value
adjustment option may be subject to a market value adjustment.
The Strategic Partners Plus 3 variable annuity contract offers an optional
Guaranteed Minimum Income Benefit, which we describe below. Your annuity
options vary depending upon whether you choose this benefit.
Please note that annuitization essentially involves converting your Contract
Value to an annuity payment stream, the length of which depends on the terms
of the applicable annuity option. Thus, once annuity payments begin, your
death benefit is determined solely under the terms of the applicable annuity
payment option, and you no longer participate in any optional living benefit
(unless you have annuitized under that benefit).
PAYMENT PROVISIONS WITHOUT THE GUARANTEED MINIMUM INCOME BENEFIT
We make the income plans described below available at any time before the
annuity date. These plans are called "annuity options" or "settlement
options." During the income phase, all of the annuity options under this
contract are fixed annuity options. This means that your participation in the
variable investment options ends on the annuity date. If an annuity option is
not selected by the annuity date, the Life Income Annuity Option (Option 2,
described below) will automatically be selected unless prohibited by
applicable law. GENERALLY, ONCE THE ANNUITY PAYMENTS BEGIN, THE ANNUITY OPTION
CANNOT BE CHANGED AND YOU CANNOT MAKE WITHDRAWALS. IN ADDITION TO THE ANNUITY
PAYMENT OPTIONS DISCUSSED IN THIS SECTION, PLEASE NOTE THAT IF YOU CHOOSE THE
OPTIONAL LIFETIME FIVE INCOME BENEFIT, THERE ARE ADDITIONAL ANNUITY PAYMENT
OPTIONS THAT ARE ASSOCIATED WITH THAT BENEFIT. SEE SECTION 5 OF THIS
PROSPECTUS FOR ADDITIONAL DETAILS.
Option 1
Annuity Payments for a Fixed Period: Under this option, we will make equal
payments for the period chosen, up to 25 years (but not to exceed life
expectancy). The annuity payments may be made monthly, quarterly,
semiannually, or annually, as you choose, for the fixed period. If the
annuitant dies during the income phase, payments will continue to the
beneficiary for the remainder of the fixed period or, if the beneficiary so
chooses, we will make a single lump-sum payment. The amount of the lump sum
payment is determined by calculating the present value of the unpaid future
payments. This is done by using the interest rate used to compute the actual
payments. The interest rate will be at least 3% a year.
Option 2
Life Income Annuity Option: Under this option, we will make annuity payments
monthly, quarterly, semiannually, or annually as long as the annuitant is
alive. If the annuitant dies before we have made 10 years worth of payments,
we will pay the beneficiary in one lump sum the present value of the annuity
payments scheduled to have been made over the remaining portion of that 10
year period, unless we were specifically instructed that such remaining
annuity payments continue to be paid to the beneficiary. The present value of
the remaining annuity payments is calculated by using the interest rate used
to compute the amount of the original 120 payments. The interest rate will be
at least 3% a year.
If an annuity option is not selected by the annuity date, this is the option
we will automatically select for you.
Other Annuity Options
We currently offer a variety of other annuity options not described above. At
the time annuity payments are chosen, we may make available to you any of the
fixed annuity options that are offered at your annuity date.
42
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.
GUARANTEED MINIMUM INCOME BENEFIT
The Guaranteed Minimum Income Benefit (GMIB), is an optional feature that
guarantees that once the income period begins, your income payments will be no
less than the GMIB protected value applied to the GMIB guaranteed annuity
purchase rates. If you want the Guaranteed Minimum Income Benefit, you must
elect it when you make your initial purchase payment. Once elected, the
Guaranteed Minimum Income Benefit cannot be revoked. You may not elect both
GMIB and the Lifetime Five Income Benefit.
The GMIB protected value is calculated daily and is equal to the GMIB roll-up
until the GMIB roll-up either reaches its cap or if we stop applying the
annual interest rate based on the age of the annuitant, number of contract
anniversaries, or number of years since the last GMIB reset, as described
below. At this point, the GMIB protected value will be increased by any
subsequent invested purchase payments and reduced proportionally by
withdrawals.
The Guaranteed Minimum Income Benefit is subject to certain restrictions
described below.
.. The annuitant must be 75 or younger in order for you to elect the
Guaranteed Minimum Income Benefit.
.. If you choose the Guaranteed Minimum Income Benefit, we will impose an
annual charge equal to 0.50% for contracts sold on or after May 1, 2004
(0.45% for all other contracts) of the average GMIB protected value
described below. The maximum GMIB charge is 1.00% of average GMIB protected
value. Please note that the charge is calculated based on average GMIB
protected value, not Contract Value. Thus, for example, the fee would not
decline on account of a reduction in Contract Value.
.. Under the contract terms governing the GMIB, we can require GMIB
participants to invest only in designated underlying mutual funds or can
require GMIB participants to invest according to an asset allocation model.
Owners electing this benefit currently, must allocate contract value to one
or more of the following asset allocation portfolios of the Advanced Series
Trust (we reserve the right to change these required portfolios on a
prospective basis): AST Capital Growth Asset Allocation Portfolio, AST
Balanced Asset Allocation Portfolio, AST Conservative Asset Allocation
Portfolio, AST Preservation Asset Allocation Portfolio, AST Advanced
Strategies Portfolio, AST First Trust Balanced Target Portfolio, AST First
Trust Capital Appreciation Target Portfolio, or AST T. Rowe Price Asset
Allocation Portfolio.
.. TO TAKE ADVANTAGE OF THE GUARANTEED MINIMUM INCOME BENEFIT, YOU MUST WAIT A
CERTAIN AMOUNT OF TIME BEFORE YOU BEGIN THE INCOME PHASE. THE WAITING
PERIOD IS THE PERIOD EXTENDING FROM THE CONTRACT DATE TO THE 7/TH/ CONTRACT
ANNIVERSARY BUT, IF THE GUARANTEED MINIMUM INCOME BENEFIT HAS BEEN RESET
(AS DESCRIBED BELOW), THE WAITING PERIOD IS THE 7 YEAR PERIOD BEGINNING
WITH THE DATE OF THE MOST RECENT RESET. IN LIGHT OF THIS WAITING PERIOD
UPON RESETS, IT IS NOT RECOMMENDED THAT YOU RESET YOUR GUARANTEED MINIMUM
INCOME BENEFIT IF THE REQUIRED BEGINNING DATE UNDER IRS REQUIRED MINIMUM
DISTRIBUTION PROVISIONS WOULD COMMENCE DURING THE 7 YEAR WAITING PERIOD.
SEE "REQUIRED MINIMUM DISTRIBUTIONS AND PAYMENT OPTIONS" IN SECTION 10 FOR
ADDITIONAL INFORMATION ON IRS REQUIREMENTS.
Once the waiting period has elapsed, you will have a 30-day period each year,
beginning on the contract anniversary (or in the case of a reset, the
anniversary of the most recent reset), during which you may begin the income
phase with the Guaranteed Minimum Income Benefit by submitting the necessary
forms in good order to the Prudential Annuity Service Center.
GMIB Roll-Up
The GMIB roll-up is equal to the invested purchase payments (after a reset,
the Contract Value at the time of the reset), increased daily at an effective
annual interest rate of 5% starting on the date each invested purchase payment
is made, until the cap is reached (GMIB roll-up cap). We will reduce this
amount by the effect of withdrawals. The GMIB roll-up cap is equal to two
times each invested purchase payment (for a reset, two times the sum of
(1) the Contract Value at the time of the reset, and (2) any invested purchase
payments made subsequent to the reset).
Even if the GMIB roll-up cap has not been reached, we will nevertheless stop
increasing the GMIB roll-up value by the effective annual interest rate on the
latest of:
.. the contract anniversary coinciding with or next following the annuitant's
80/th/ birthday,
.. the 7/th/ contract anniversary, or
.. 7 years from the most recent GMIB reset (as described below).
However, even if we stop increasing the GMIB roll-up value by the effective
annual interest rate, we will still increase the GMIB protected value by
subsequent invested purchase payments, reduced proportionally by withdrawals.
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3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION) continued
EFFECT OF WITHDRAWALS
In any contract year when the GMIB protected value is increasing at the rate
of 5%, withdrawals will first reduce the GMIB protected value on a
dollar-for-dollar basis, by the same dollar amount of the withdrawal up to the
first 5% of GMIB protected value calculated on the contract anniversary (or,
during the first contract year, on the contract date). Any withdrawals made
after the dollar-for-dollar limit has been reached will proportionally reduce
the GMIB protected value. We calculate the proportional reduction by dividing
the Contract Value after the withdrawal by the Contract Value immediately
following the withdrawal of any available dollar-for-dollar amount. The
resulting percentage is multiplied by the GMIB protected value after
subtracting the amount of the withdrawal that does not exceed 5%. In each
contract year during which the GMIB protected value has stopped increasing at
the 5% rate, withdrawals will reduce the GMIB protected value proportionally.
The GMIB roll-up cap is reduced by the sum of all reductions described above.
The following examples of dollar-for-dollar and proportional reductions
assume: 1.) the contract date and the effective date of the GMIB are
January 1, 2006; 2.) an initial purchase payment of $250,000; 3.) an initial
GMIB protected value of $250,000; 4.) an initial 200% cap of $500,000; and 5.)
an initial dollar-for-dollar limit of $12,500 (5% of $250,000):
Example 1. Dollar-for-dollar Reduction
A $10,000 withdrawal is taken on February 1, 2006 (in the first contract
year). No prior withdrawals have been taken. Immediately prior to the
withdrawal, the GMIB protected value is $251,038.10 (the initial value
accumulated for 31 days at an annual effective rate of 5%). As the amount
withdrawn is less than the dollar-for-dollar limit:
.. The GMIB protected value is reduced by the amount withdrawn (i.e., by
$10,000, from $251,038.10 to $241,038.10).
.. The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000,
from $500,000 to $490,000).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance
of the first contract year is also reduced by the amount withdrawn (from
$12,500 to $2,500).
Example 2. Dollar-for-dollar and Proportional Reductions
A second $10,000 withdrawal is taken on March 1, 2006 (still within the first
contract year). Immediately before the withdrawal, the Contract Value is
$220,000 and the GMIB protected value is $241,941.95. As the amount withdrawn
exceeds the Remaining Limit of $2,500 from Example 1:
.. The GMIB protected value is first reduced by the Remaining Limit (from
$241,941.95 to $239,441.95).
.. The result is then further reduced by the ratio of A to B, where:
.. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
.. B is the Contract Value less the Remaining Limit ($220,000 - $2,500, or
$217,500). The resulting GMIB protected value is: $239,441.95 X (1 -
($7,500/$217,500)), or $231,185.33.
.. The GMIB 200% cap is reduced by the sum of all reductions above ($490,000 -
$2,500 - $8,256.62, or $479,243.38).
.. The Remaining Limit is set to zero (0) for the balance of the first
contract year.
Example 3. Dollar-for-dollar Limit in Second Contract Year
A $10,000 withdrawal is made on the first anniversary of the contract date,
January 1, 2007 (second contract year). Prior to the withdrawal, the GMIB
protected value is $240,837.69. The dollar-for-dollar limit is equal to 5% of
this amount, or $12,041.88. As the amount withdrawn is less than the
dollar-for-dollar limit:
.. The GMIB protected value is reduced by the amount withdrawn (i.e., reduced
by $10,000, from $240,837.69 to $230,837.69).
.. The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000,
from $479,243.38 to $469,243.38).
.. The Remaining Limit for the balance of the second contract year is also
reduced by the amount withdrawn (from $12,041.88 to $2,041.88).
GMIB Reset Feature
You may elect to "reset" your GMIB protected value to equal your current
Contract Value twice over the life of the contract. You may only exercise this
reset option if the annuitant has not yet reached his or her 76/th/ birthday.
If you reset, you must wait a new 7-year period from the most recent reset to
exercise the Guaranteed Minimum Income Benefit. Further, we will reset the
GMIB roll-up cap to equal two times the GMIB protected value as of such date.
Additionally, if you reset, we will determine the GMIB payout amount by using
the GMIB guaranteed annuity purchase rates (specified in your contract) based
on the number of years since the most recent reset. These purchase rates may
be less advantageous than the rates that would have applied absent a reset.
Payout Amount
The Guaranteed Minimum Income Benefit payout amount is based on the age and
sex of the annuitant (and, if there is one, the co-annuitant). After we first
deduct a charge for any applicable premium taxes that we are required to pay,
the payout amount will equal the greater of:
1) the GMIB protected value as of the date you exercise the GMIB payout
option, applied to the GMIB guaranteed annuity purchase rates (which are
generally less favorable than the annuity purchase rates for annuity
payments not involving GMIB) and based on the annuity payout option as
described below, or
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2) the adjusted Contract Value--that is, the value of the contract adjusted
for any market value adjustment minus any charge we impose for premium
taxes and withdrawal charges--as of the date you exercise the GMIB payout
option applied to the current annuity purchase rates then in use.
GMIB Annuity Payout Options
We currently offer two Guaranteed Minimum Income Benefit annuity payout
options. Each option involves payment for at least a period certain of ten
years. In calculating the amount of the payments under the GMIB we apply
certain assumed interest rates, equal to 2% annually for a waiting period of
7-9 years, and 2.5% annually for waiting periods of 10 years or longer for
contracts sold on or after May 1, 2004 (and 2.5% annually for a waiting period
of 7-9 years, 3% annually for a waiting period of 10-14 years, and 3.5%
annually for waiting periods of 15 years or longer for all other contracts).
GMIB Option 1
Single Life Payout Option: We will make monthly payments for as long as the
annuitant lives, with payments for a period certain. We will stop making
payments after the later of the death of the annuitant or the end of the
period certain.
GMIB Option 2
Joint Life Payout Option: In the case of an annuitant and co-annuitant, we
will make monthly payments for the joint lifetime of the annuitant and
co-annuitant, with payments for a period certain. If the co-annuitant dies
first, we will continue to make payments until the later of the death of the
annuitant and the end of the period certain. If the annuitant dies first, we
will continue to make payments until the later of the death of the
co-annuitant and the end of the period certain, but if the period certain ends
first, we will reduce the amount of each payment to 50% of the original amount.
You have no right to withdraw amounts early under either GMIB payout option.
We may make other payout frequencies available, such as quarterly,
semi-annually or annually.
Because we do not impose a new waiting period for each subsequent purchase
payment, if you choose the Guaranteed Minimum Income Benefit, we reserve the
right to limit subsequent purchase payments if we discover that by the timing
of your purchase payments, your GMIB protected value is increasing in ways we
did not intend. In determining whether to limit purchase payments, we will
look at purchase payments which are disproportionately larger than your
initial purchase payment and other actions that may artificially increase the
GMIB protected value. Certain state laws may prevent us from limiting your
subsequent purchase payments. You must exercise one of the GMIB payout options
described above no later than 30 days after the later of the contract
anniversary coinciding with or next following the annuitant's attainment of
age 90 or the 10/th/ contract anniversary.
You should note that GMIB is designed to provide a type of insurance that
serves as a safety net only in the event that your Contract Value declines
significantly due to negative investment performance. If your Contract Value
is not significantly affected by negative investment performance, it is
unlikely that the purchase of GMIB will result in your receiving larger
annuity payments than if you had not purchased GMIB. This is because the
assumptions that we use in computing the GMIB, such as the annuity purchase
rates, (which include assumptions as to age-setbacks and assumed interest
rates), are more conservative than the assumptions that we use in computing
non-GMIB annuity payout options. Therefore, you may generate higher income
payments if you were to annuitize a lower Contract Value at the current
annuity purchase rates, than if you were to annuitize under the GMIB with a
higher GMIB protected value than your Contract Value but at the annuity
purchase rates guaranteed under the GMIB.
Terminating The Guaranteed Minimum Income Benefit
The Guaranteed Minimum Income Benefit cannot be terminated by the owner once
elected. The GMIB automatically terminates as of the date the contract is
fully surrendered, on the date the death benefit is payable to your
beneficiary (unless your surviving spouse elects to continue the contract), or
on the date that your Contract Value is transferred to begin making annuity
payments. The GMIB may also be terminated if you designate a new annuitant who
would not be eligible to elect the GMIB based on his or her age at the time of
the change.
Upon termination of the GMIB, we will deduct the charge from your Contract
Value for the portion of the contract year since the prior contract
anniversary (or the contract date if in the first contract year).
HOW WE DETERMINE ANNUITY PAYMENTS
Generally speaking, the annuity phase of the contract involves our
distributing to you in increments the value that you have accumulated. We make
these incremental payments either over a specified time period (e.g., 15
years) (fixed period annuities) or for the duration of the life of the
annuitant (and possibly co-annuitant) (life annuities). There are certain
assumptions that are common to both fixed period annuities and life annuities.
In each type of annuity, we assume that the value you apply at the outset
toward your annuity payments earns interest throughout the payout period. For
annuity options within the GMIB, this interest rate ranges from 2% to 2.5% for
contracts sold on or after May 1, 2004 (and 2.5% to 3.5% for all other
contracts). For non-GMIB annuity options, the guaranteed minimum rate is 3%.
The GMIB guaranteed annuity purchase rates in your contract depict the
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3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION) continued
minimum amounts we will pay (per $1000 of adjusted Contract Value). If our
current annuity purchase rates on the annuity date are more favorable to you
than the guaranteed rates, we will make payments based on those more favorable
rates.
Other assumptions that we use for life annuities and fixed period annuities
differ, as detailed in the following overview:
Fixed Period Annuities
Currently, we offer fixed period annuities only under the Income Appreciator
Benefit and non-GMIB annuity options. Generally speaking, in determining the
amount of each annuity payment under a fixed period annuity, we start with the
adjusted Contract Value, add interest assumed to be earned over the fixed
period, and divide the sum by the number of payments you have requested. The
life expectancy of the annuitant and co-annuitant are relevant to this
calculation only in that we will not allow you to select a fixed period that
exceeds life expectancy.
Life Annuities
There are more variables that affect our calculation of life annuity payments.
Most importantly, we make several assumptions about the annuitant's or
co-annuitant's life expectancy, including the following:
.. The Annuity 2000 Mortality Table is the starting point for our life
expectancy assumptions. This table anticipates longevity of an insured
population based on historical experience and reflecting anticipated
experience for the year 2000.
Guaranteed and GMIB Annuity Payments
Because life expectancy has lengthened over the past few decades, and likely
will increase in the future, our life annuity calculations anticipate these
developments. We do this largely by making a hypothetical reduction in the age
of the annuitant (or co-annuitant), in lieu of using the annuitant's (or
co-annuitant's) actual age, in calculating the payment amounts. By using such
a reduced age, we base our calculations on a younger person, who generally
would live longer and therefore draw life annuity payments over a longer time
period. Given the longer pay-out period, the payments made to the younger
person would be less than those made to an older person. We make two such age
adjustments:
1) First, for all annuities, we start with the age of the annuitant (or
co-annuitant) on his/her most recent birthday and reduce that age by either
(a) four years, for life annuities under the GMIB sold in contracts on or
after May 1, 2004 or (b) two years, with respect to guaranteed payments
under life annuities not involving GMIB, as well as GMIB payments under
contracts not described in (a) immediately above. For the reasons explained
above in this section, the four year age reduction causes a greater
reduction in the amount of the annuity payments than does the two-year age
reduction.
2) Second, for life annuities under both versions of GMIB as well as
guaranteed payments under life annuities not involving GMIB, we make a
further age reduction according to the table in your contract entitled
"Translation of Adjusted Age." As indicated in the table, the further into
the future the first annuity payment is, the longer we expect the person
receiving those payments to live, and the more we reduce the annuitant's
(or co-annuitant's) age.
Current Annuity Payments
Immediately above, we have referenced how we determine annuity payments based
on "guaranteed" annuity purchase rates. By "guaranteed" annuity purchase
rates, we mean the minimum annuity purchase rates that are set forth in your
annuity contract and thus contractually guaranteed by us. "Current" annuity
purchase rates, in contrast, refer to the annuity purchase rates that we are
applying to contracts that are entering the annuity phase at a given point in
time. These current annuity purchase rates vary from period to period,
depending on changes in interest rates and other factors. We do not guarantee
any particular level of current annuity purchase rates. When calculating
current annuity purchase rates, we use the actual age of the annuitant (or
co-annuitant), rather than any reduced age.
4: WHAT IS THE DEATH BENEFIT?
The Death Benefit Feature Protects The Contract Value For The Beneficiary.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless
you change it at a later date. A change of beneficiary will take effect on the
date you sign the change request form, provided we receive the form in good
order. Unless an irrevocable beneficiary has been named, during the
accumulation period, you can change the beneficiary at any time before the
owner dies. However, if the contract is jointly owned, the owner must name the
joint owner and the joint owner must name the owner as the beneficiary. For
entity-owned contracts, we pay a death benefit upon the death of the annuitant.
46
CALCULATION OF THE DEATH BENEFIT
If the owner or joint owner dies during the accumulation phase, we will, upon
receiving the appropriate proof of death and any other needed documentation in
good order (proof of death), pay a death benefit to the beneficiary designated
by the deceased owner or joint owner. If there is a sole owner and there is
only one beneficiary who is the owner's spouse on the date of death, then the
surviving spouse may continue the contract under the Spousal Continuance
Option. If there are an owner and joint owner of the contract, and the owner's
spouse is both the joint owner and the beneficiary on the date of death, then,
at the death of the first to die, the death benefit will be paid to the
surviving owner or the surviving owner may continue the contract under the
Spousal Continuance Option.
Upon receiving appropriate proof of death, the beneficiary will receive the
greater of the following:
1) The current Contract Value (as of the time we receive proof of death in
good order). If you have purchased the Contract With Credit, we will first
deduct any credit corresponding to a purchase payment made within one year
of death. We impose no market value adjustment on Contract Value held
within the market value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or, if
you have chosen the Guaranteed Minimum Death Benefit (GMDB), the GMDB
protected value.
GUARANTEED MINIMUM DEATH BENEFIT
The Guaranteed Minimum Death Benefit provides for the option to receive an
enhanced death benefit upon the death of the sole owner or the first to die of
the owner or joint owner during the accumulation phase.
The GMDB protected value option equals the GMDB step-up. The GMDB protected
value is calculated daily.
GMDB Step-Up
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE
80 ON THE CONTRACT DATE, the GMDB step-up before the first contract
anniversary is the initial invested purchase payment increased by subsequent
invested purchase payments, and proportionally reduced by the effect of
withdrawals. The GMDB step-up on each contract anniversary will be the greater
of the previous GMDB step-up and the Contract Value as of such contract
anniversary. Between contract anniversaries, the GMDB step-up will increase by
invested purchase payments and reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the Contract Value
on the later of:
.. the contract anniversary coinciding with or next following the sole or
older owner's 80/th/ birthday, or
.. the 5th contract anniversary.
However, we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
Here is an example of a proportional reduction:
The current Contract Value is $100,000 and the protected value is $80,000. The
owner makes a withdrawal that reduces the Contract Value by 25% (including the
effect of any withdrawal charges). The new protected value is $60,000, or 75%
of what it was before the withdrawal.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary, we will adjust the GMDB
step-up to the greater of the then current GMDB step-up or the Contract Value
as of that contract anniversary. Thereafter, we will only increase the GMDB
protected value by subsequent invested purchase payments and proportionally
reduce it by withdrawals.
Special rules apply if the beneficiary is the spouse of the owner and the
contract does not have a joint owner. In that case, upon the death of the
owner, the spouse will have the choice of the following:
.. If the sole beneficiary under the contract is the owner's spouse, and the
other requirements of the Spousal Continuance Option are met, then the
contract can continue, and the spouse will become the new owner of the
contract; or
.. The spouse can receive the death benefit. A surviving spouse who is
eligible for the Spousal Continuance Option must choose between that
benefit and receiving the death benefit during the first 60 days following
our receipt of proof of death.
If ownership of the contract changes as a result of the owner assigning it to
someone else, we will reset the value of the death benefit to equal the
Contract Value on the date the change of ownership occurs, and for purposes of
computing the future death benefit, we will treat that Contract Value as a
purchase payment occurring on that date.
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4: WHAT IS THE DEATH BENEFIT? continued
SPECIAL RULES IF JOINT OWNERS
If the contract has an owner and a joint owner and they are spouses at the
time that one dies, the Spousal Continuance Option may apply. If the contract
has an owner and a joint owner and they are not spouses at the time one dies,
we will pay the death benefit and the contract will end.
PAYOUT OPTIONS
Originally, a beneficiary could, within 60 days of providing proof of death,
take the death benefit as follows:
Choice 1. Lump sum payment of the death benefit. If the beneficiary does not
choose a payout option within sixty days, the beneficiary will receive this
payout option.
Choice 2. The payment of the entire death benefit within a period of 5 years
from the date of death of the first-to-die of the owner or joint owner.
The entire death benefit will include any increases or losses resulting from
the performance of the variable or fixed interest rate options during this
period. During this period the beneficiary may: reallocate the Contract Value
among the variable, fixed interest rate, or the market value adjustment
options; name a beneficiary to receive any remaining death benefit in the
event of the beneficiary's death; and make withdrawals from the Contract
Value, in which case, any such withdrawals will not be subject to any
withdrawal charges. However, the beneficiary may not make any purchase
payments to the contract.
During this 5 year period, we will continue to deduct from the death benefit
proceeds the charges and costs that were associated with the features and
benefits of the contract. Some of these features and benefits may not be
available to the beneficiary, such as the Guaranteed Minimum Income Benefit.
Choice 3. Payment of the death benefit under an annuity or annuity settlement
option over the lifetime of the beneficiary or over a period not extending
beyond the life expectancy of the beneficiary with distribution beginning
within one year of the date of death of the owner.
If the owner and joint owner are spouses, any portion of the death benefit not
applied under Choice 3 within one year of the date of death of the first to
die must be distributed within five years of that date of death.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See Section 9, "What Are The Tax Considerations Associated
With The Strategic Partners Plus Contract?"
With respect to death benefits paid on or after March 19, 2007, unless the
surviving spouse opts to continue the contract (or spousal continuance is
required under the terms of your contract), a beneficiary of the death benefit
may, within 60 days of providing proof of death, also take the death benefit
as indicated above, or as follows:
. As a lump sum. If the beneficiary does not choose a payout option within
sixty days, the beneficiary will be paid in this manner; or
. As payment of the entire death benefit within a period of 5 years from
the date of death; or
. As a series of payments not extending beyond the life expectancy of the
beneficiary, or over the life of the beneficiary. Payments under this
option must begin within one year of the date of death; or
. As the beneficiary continuation option, described immediately below.
Beneficiary Continuation Option
Instead of receiving the death benefit in a single payment, or under an
annuity option, a beneficiary may also take the death benefit under an
alternative death benefit payment option, as provided by the Code. This
"Beneficiary Continuation Option" is described below and is only available for
an IRA, Roth IRA, SEP IRA, 403(b), or a non-qualified contract.
Under the Beneficiary Continuation Option:
.. The Owner's contract will be continued in the Owner's name, for the benefit
of the beneficiary.
.. The beneficiary will be charged an amount equal to 1.00% daily against the
average daily net assets allocated to the variable investment options.
.. The beneficiary will incur an annual maintenance fee equal to the lesser of
$30 or 2% of Contract Value if the Contract Value is less than $25,000 at
the time the fee is assessed. The fee will not apply if it is assessed 30
days prior to a surrender request.
.. The initial Contract Value will be equal to any death benefit (including
any optional death benefit) that would have been payable to the beneficiary
if they had taken a lump sum distribution.
.. The available variable investment options will be among those available to
the Owner at the time of death, however certain variable investment options
may not be available.
48
.. The beneficiary may request transfers among variable investment options,
subject to the same limitations and restrictions that applied to the Owner.
Transfers in excess of 20 per year will incur a $10 transfer fee.
.. No additional Purchase Payments can be applied to the contract.
.. The basic death benefit and any optional benefits elected by the Owner will
no longer apply to the beneficiary.
.. The beneficiary can request a withdrawal of all or a portion of the
Contract Value at any time without application of any applicable CDSC
unless the Beneficiary Continuation Option was the payout predetermined by
the owner and the owner restricted the beneficiary's withdrawal rights.
.. Withdrawals are not subject to CDSC.
.. Upon the death of the beneficiary, any remaining Contract Value will be
paid in a lump sum to the person(s) named by the beneficiary, unless the
beneficiary named a successor who may continue receiving payments.
Currently only investment options corresponding to Portfolios of the Advanced
Series Trust and the Prudential Money Market Portfolio of The Prudential
Series Fund are available under the Beneficiary Continuation Option.
Your beneficiary will be provided with a prospectus and a settlement agreement
that will describe this option. Please contact us for additional information
on the availability, restrictions and limitations that will apply to a
beneficiary under the beneficiary continuation option. We may pay compensation
to the selling broker-dealer based on amounts held in the Beneficiary
Continuation Option.
ALTERNATIVE DEATH BENEFIT PAYMENT OPTIONS - CONTRACTS OWNED BY INDIVIDUALS
(NOT ASSOCIATED WITH TAX-FAVORED PLANS)
Except in the case of spousal continuance as described below, upon your death,
certain distributions must be made under the contract. The required
distributions depend on whether you die before you start taking annuity
payments under the contract or after you start taking annuity payments under
the contract.
If you die on or after the annuity date, the remaining portion of the interest
in the contract must be distributed at least as rapidly as under the method of
distribution being used as of the date of death.
In the event of your death before the annuity date, the death benefit must be
distributed:
. by December 31/st/ of the year including the five year anniversary of the
date of death; or
. as a series of annuity payments not extending beyond the life expectancy
of the beneficiary or over the life of the beneficiary. Payments under
this option must begin within one year of the date of death.
Unless you have made an election prior to death benefit proceeds becoming due,
a beneficiary can elect to receive the death benefit proceeds under the
Beneficiary Continuation Option as described above in the section entitled
"Beneficiary Continuation Option," or as a series of fixed annuity payments.
See the section entitled "What Kind of Payments Will I Receive During the
Income Phase?"
Alternative Death Benefit Payment Options - Contracts Held by Tax-Favored Plans
The Code provides for alternative death benefit payment options when a
contract is used as an IRA, 403(b) or other "qualified investment" that
requires minimum distributions. 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 to begin, whether you have
named a designated beneficiary and whether the beneficiary is your surviving
spouse.
.. If you die after a designated beneficiary has been named, the death benefit
must be distributed by 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 (provided
such 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 within five years from 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
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4: WHAT IS THE DEATH BENEFIT? continued
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.
The tax consequences to the beneficiary may vary among the different death
benefit payment options. See the Tax Considerations section of this
prospectus, and consult your tax advisor.
SPOUSAL CONTINUANCE OPTION
This option is available if, on the date we receive proof of the owner's death
(or annuitant's death, for custodial contracts) in good order (1) there is
only one owner of the contract and there is only one beneficiary who is the
owner's spouse, or (2) there are an owner and joint owner of the contract, and
the joint owner is the owner's spouse and the owner's beneficiary under the
contract or 3) the contract is held by a Custodial Account and the custodian
of the account has elected to continue the contract, and designate the
surviving spouse as annuitant. Continuing the contract in the latter scenario
will result in the contract no longer qualifying for tax deferral under the
Internal Revenue Code. However, such tax deferral should result from the
ownership of the contract by the Custodial Account. Spousal continuance may be
available where the contract is owned by certain other types of entity-owners.
Please consult your tax or legal adviser.
In no event, however, can the annuitant be older than the maximum age for
annuitization on the date of the owner's death, nor can the surviving spouse
be older than 95 on the date of the owner's death (or the annuitant's death,
in the case of a custodially-owned contract referenced above). Assuming the
above conditions are present, the surviving spouse (or custodian, for the
custodially-owned contracts referenced above) can elect the Spousal
Continuance Option, but must do so no later than 60 days after furnishing
proof of death in good order.
Upon activation of the Spousal Continuance Option, the Contract Value is
adjusted to equal the amount of the death benefit to which the surviving
spouse would have been entitled. This Contract Value will serve as the basis
for calculating any death benefit payable upon the death of the surviving
spouse. We will allocate any increase in the adjusted Contract Value among the
variable, fixed interest rate or market value adjustment options in the same
proportions that existed immediately prior to the spousal continuance
adjustment. We will waive the $1,000 minimum requirement for the market value
adjustment option.
Under the Spousal Continuance Option, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the
Spousal Continuance Option. However, we will continue to impose withdrawal
charges on purchase payments made after activation of this benefit. In
addition, Contract Value allocated to the market value adjustment option will
remain subject to a potential market value adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the Spousal
Continuance Option, we will adjust the Contract Value to equal the greater of:
. the Contract Value, or
. the sum of all invested purchase payments (adjusted for withdrawals).
IF YOU HAVE ELECTED THE GMDB STEP-UP, we will adjust the Contract Value to
equal the greater of:
. the Contract Value, or
. the GMDB step-up.
After we have made the adjustment to Contract Value set out immediately above,
we will continue to compute the GMDB step-up under the surviving spousal
owner's contract, and will do so in accordance with the preceding discussion
in this section.
If the contract is being continued by the surviving spouse, the attained age
of the surviving spouse will be the basis used in determining the death
benefit payable under the Guaranteed Minimum Death Benefit provisions of the
contract. The contract may not be continued upon the death of a spouse who had
assumed ownership of the contract through the exercise of the Spousal
Continuance Option.
IF YOU ELECTED THE GUARANTEED MINIMUM INCOME BENEFIT, it will be continued for
the surviving spousal owner. All provisions of the Guaranteed Minimum Income
Benefit (i.e., waiting period, GMIB roll-up cap, etc.) will remain the same as
50
on the date of the owner's death. If the GMIB reset feature was never
exercised, the surviving spousal owner can exercise the GMIB reset feature
twice. If the original owner had previously exercised the GMIB reset feature
once, the surviving spousal owner can exercise the GMIB reset once. However,
the surviving spouse (or new annuitant designated by the surviving spouse)
must be under 76 years of age at the time of reset. If the original owner had
previously exercised the GMIB reset feature twice, the surviving spousal owner
may not exercise the GMIB reset at all. If the attained age of the surviving
spouse at activation of the Spousal Continuance Option, when added to the
remainder of the GMIB waiting period to be satisfied, would preclude the
surviving spouse from utilizing the Guaranteed Minimum Income Benefit, we will
revoke the Guaranteed Minimum Income Benefit under the contract at that time
and we will no longer charge for that benefit.
IF YOU ELECTED THE LIFETIME FIVE INCOME BENEFIT OR SPOUSAL LIFETIME FIVE, on
the owner's death, the Benefit will end. However, if the owner's surviving
spouse would be eligible to acquire the Benefit as if he/she were a new
purchaser, then the surviving spouse may elect Benefit under the Spousal
Continuance Option.
IF YOU ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death (or
first-to-die, in the case of joint owners), the Income Appreciator Benefit
will end unless the contract is continued by the deceased owner's surviving
spouse under the Spousal Continuance Option. If the contract is continued by
the surviving spouse, we will continue to pay the balance of any Income
Appreciator Benefit payments until the earliest to occur of the following:
(a) the date on which 10 years' worth of IAB automatic withdrawal payments or
IAB credits, as applicable, have been paid, (b) the latest date on which
annuity payments would have had to have commenced had the owner not died
(i.e., the later of the contract anniversary next following the annuitant's
90/th/ birthday or the 10/th/ contract anniversary), or (c) the later of the
10/th/ contract anniversary or the contract anniversary next following the
surviving spouse's 90/th/ birthday (or the annuitant's 90/th/ birthday if
other than the surviving spouse).
If the Income Appreciator Benefit has not been in force for 7 contract years,
the surviving spouse may not activate the benefit until it has been in force
for 7 contract years. If the attained age of the surviving spouse at
activation of the Spousal Continuance Option, when added to the remainder of
the Income Appreciator Benefit waiting period to be satisfied, would preclude
the surviving spouse from utilizing the Income Appreciator Benefit, we will
revoke the Income Appreciator Benefit under the contract at that time and we
will no longer charge for that benefit. If the Income Appreciator Benefit has
been in force for 7 contract years or more, but the benefit has not been
activated, the surviving spouse may activate the benefit at any time after the
contract has been continued. If the Income Appreciator Benefit is activated
after the contract is continued by the surviving spouse, the Income
Appreciator Benefit calculation will exclude any amount added to the contract
at the time of spousal continuance resulting from any death benefit value
exceeding the Contract Value.
5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT?
LIFETIME FIVE INCOME BENEFIT
The Lifetime Five Income Benefit (Lifetime Five) is an optional feature that
guarantees your ability to withdraw amounts equal to a percentage of an
initial principal value (called the "Protected Withdrawal Value"), regardless
of the impact of market performance on your Contract Value, subject to our
rules regarding the timing and amount of withdrawals. There are two options -
one is designed to provide an annual withdrawal amount for life (the "Life
Income Benefit") and the other is designed to provide a greater annual
withdrawal amount (than the first option) as long as there is Protected
Withdrawal Value (adjusted as described below) (the "Withdrawal Benefit"). If
there is no Protected Withdrawal Value, the Withdrawal Benefit will be zero.
You do not choose between these two options; each option will continue to be
available as long as the annuity has a Contract Value and Lifetime Five is in
effect. Certain benefits under Lifetime Five may remain in effect even if the
Contract Value is zero. The option may be appropriate if you intend to make
periodic withdrawals from your contract and wish to ensure that market
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals - the guarantees are not lost if you withdraw
less than the maximum allowable amount each year.
Lifetime Five is subject to certain restrictions described below.
.. Currently, Lifetime Five can only be elected once each contract year, and
only where the annuitant and the contract owner are the same person or, if
the contract owner is an entity, where there is only one annuitant. We
reserve the right to limit the election frequency in the future. Before
making any such change to the election frequency, we will provide prior
notice to contract owners who have an effective Lifetime Five Income
Benefit.
.. The annuitant must be at least 45 years old when Lifetime Five is elected.
.. Lifetime Five is not available if you elect the Guaranteed Minimum Income
Benefit or Income Appreciator Benefit.
.. Owners electing this benefit prior to December 5, 2005, were required to
allocate Contract Value to one or more of the following asset allocation
portfolios of the Prudential Series Fund: SP Balanced Asset Allocation
Portfolio, SP Conservative Asset Allocation Portfolio, and SP Growth Asset
Allocation Portfolio. Owners electing this benefit after December 5, 2005
must allocate Contract Value to one or more of the following asset
allocation portfolios of Advanced Series Trust: AST Capital Growth Asset
Allocation Portfolio, AST Balanced Asset Allocation Portfolio, AST
Conservative Asset Allocation Portfolio, AST Preservation Asset Allocation
Portfolio, AST Advanced Strategies Portfolio, AST First Trust Balanced
Target Portfolio,
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5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT? continued
AST First Trust Capital Appreciation Target Portfolio, AST T. Rowe Price
Asset Allocation Portfolio, AST American Century Strategic Allocation
Portfolio, or AST UBS Dynamic Alpha Portfolio. As specified in this
paragraph, you generally must allocate your Contract Value in accordance
with the then-available option(s) that we may prescribe, in order to elect
and maintain Lifetime Five. If, subsequent to your election of the benefit,
we change our requirements for how Contract Value must be allocated under
the benefit, that new requirement will apply only to new elections of the
benefit, and will not compel you to re-allocate your Contract Value in
accordance with our newly-adopted requirements. All subsequent transfers
and purchase payments will be subject to the new investment limitations.
Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Life Income Benefit and the Withdrawal Benefit. The initial
Protected Withdrawal Value is determined as of the date you make your first
withdrawal under your contract following your election of Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of:
(A)the Contract Value on the date you elect Lifetime Five, plus any additional
Purchase Payments (and any Credits), each growing at 5% per year from the
date of your election of the benefit, or application of the Purchase
Payment to your contract, as applicable, until the date of your first
withdrawal or the 10/th/ anniversary of the benefit effective date, if
earlier;
(B)the Contract Value on the date of the first withdrawal from your contract,
prior to the withdrawal;
(C)the highest Contract Value on each contract anniversary, plus subsequent
Purchase Payments (plus any Credits) prior to the first withdrawal or the
10/th/ anniversary of the benefit effective date, if earlier.
With respect to A and C above, after the 10/th/ anniversary of the benefit
effective date, each value is increased by the amount of any subsequent
Purchase Payments (plus any Credits).
.. If you elect Lifetime Five at the time you purchase your contract, the
Contract Value will be your initial purchase payment.
.. For existing contract owners who are electing the Lifetime Five Benefit,
the Contract Value on the date of the contract owner's election of Lifetime
Five will be used to determine the initial Protected Withdrawal Value.
.. If you make additional purchase payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each
additional purchase payment.
You may elect to step-up your Protected Withdrawal Value if, due to positive
market performance, your Contract Value is greater than the Protected
Withdrawal Value.
If you elected Lifetime Five on or after March 20, 2006, then:
. you are eligible to step-up the Protected Withdrawal Value on or after
the 1st anniversary of the first withdrawal under Lifetime Five.
. the Protected Withdrawal Value can be stepped up again on or after the
1st anniversary of the preceding step-up.
If you elected Lifetime Five prior to March 20, 2006 and that original
election remains in effect:
. you are eligible to step-up the Protected Withdrawal Value on or after
the 5th anniversary of the first withdrawal under Lifetime Five.
. the Protected Withdrawal Value can be stepped up again on or after the
5th anniversary of the preceding step-up.
In either scenario (i.e., elections before or after March 20, 2006) if you
elect to step-up the Protected Withdrawal Value, and on the date you elect to
step-up, the charges under Lifetime Five have changed for new purchasers, you
may be subject to the new charge at the time of step-up. Upon election of the
step-up, we increase the Protected Withdrawal Value to be equal to the then
current Contract Value. For example, assume your initial Protected Withdrawal
Value was $100,000 and you have made cumulative withdrawals of $40,000,
reducing the Protected Withdrawal Value to $60,000. On the date you are
eligible to step-up the Protected Withdrawal Value, your Contract Value is
equal to $75,000. You could elect to step-up the Protected Withdrawal Value to
$75,000 on the date you are eligible. If your current Annual Income Amount and
Annual Withdrawal Amount are less than they would be if we did not reflect the
step-up in Protected Withdrawal Value, then we will increase these amounts to
reflect the step-up as described below.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force.
If you elected Lifetime Five on or after March 20, 2006 and have also elected
the Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the 1st contract
anniversary that is at least one year after the later of (1) the date of
the first withdrawal under Lifetime Five or (2) the most recent step-up.
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.. your Protected Withdrawal Value will only be stepped-up if 5% of the
Contract Value is greater than the Annual Income Amount by any amount.
.. if at the time of the first Auto Step-Up opportunity, 5% of the Contract
Value is not greater than the Annual Income Amount, an Auto Step-Up
opportunity will occur on each successive contract anniversary until a
step-up occurs.
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
1st contract anniversary that is at least one year after the most recent
step-up.
If you elected Lifetime Five prior to March 20, 2006 and have also elected the
Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the contract anniversary
that is at least five years after the later of (1) the date of the first
withdrawal under Lifetime Five or (2) the most recent step-up.
.. your Protected Withdrawal Value will only be stepped-up if 5% of the
Contract Value is greater than the Annual Income Amount by 5% or more.
.. if at the time of the first Auto Step-Up opportunity, 5% of the Contract
Value does not exceed the Annual Income Amount by 5% or more, an Auto
Step-Up opportunity will occur on each successive contract anniversary
until a step-up occurs.
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
contract anniversary that is at least 5 years after the most recent step-up.
In either scenario (i.e., elections before or after March 20, 2006), if on the
date that we implement an Auto Step-Up to your Protected Withdrawal Value, the
charge for Lifetime Five has changed for new purchasers, you may be subject to
the new charge at the time of such step-up. Subject to our rules and
restrictions, you will still be permitted to manually step-up the Protected
Withdrawal Value even if you elect the Auto Step-Up feature. The Protected
Withdrawal Value is reduced each time a withdrawal is made on a
"dollar-for-dollar" basis up to 7% per contract year of the Protected
Withdrawal Value and on the greater of a "dollar-for-dollar" basis or a pro
rata basis for withdrawals in a contract year in excess of that amount until
the Protected Withdrawal Value is reduced to zero. At that point, the Annual
Withdrawal Amount will be zero until such time (if any) as the contract
reflects a Protected Withdrawal Value (for example, due to a step-up or
additional purchase payments being made into the contract).
Annual Income Amount Under the Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals in a
contract year are less than or equal to the Annual Income Amount, they will
not reduce your Annual Income Amount in subsequent contract years. If your
cumulative withdrawals are in excess of the Annual Income Amount (Excess
Income), your Annual Income Amount in subsequent years will be reduced (except
with regard to required minimum distributions) by the result of the ratio of
the Excess Income to the Contract Value immediately prior to such withdrawal
(see examples of this calculation below). Reductions include the actual amount
of the withdrawal, including any withdrawal charges that may apply. A
withdrawal can be considered Excess Income under the Life Income Benefit even
though it does not exceed the Annual Withdrawal Amount under the Withdrawal
Benefit. When you elect a step-up, your Annual Income Amount increases to
equal 5% of your Contract Value after the step-up if such amount is greater
than your Annual Income Amount. Your Annual Income Amount also increases if
you make additional purchase payments. The amount of the increase is equal to
5% of any additional purchase payments. Any increase will be added to your
Annual Income Amount beginning on the day that the step-up is effective or the
purchase payment is made. A determination of whether you have exceeded your
Annual Income Amount is made at the time of each withdrawal; therefore, a
subsequent increase in the Annual Income Amount will not offset the effect of
a withdrawal that exceeded the Annual Income Amount at the time the withdrawal
was made.
Annual Withdrawal Amount Under the Withdrawal Benefit
The initial Annual Withdrawal Amount is equal to 7% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals each
contract year are less than or equal to the Annual Withdrawal Amount, your
Protected Withdrawal Value will be reduced on a "dollar-for-dollar" basis. If
your cumulative withdrawals are in excess of the Annual Withdrawal Amount
(Excess Withdrawal), your Annual Withdrawal Amount will be reduced (except
with regard to required minimum distributions) by the result of the ratio of
the Excess Withdrawal to the Contract Value immediately prior to such
withdrawal (see the examples of this calculation below). Reductions include
the actual amount of the withdrawal, including any withdrawal charges that may
apply. When you elect a step-up, your Annual Withdrawal Amount increases to
equal 7% of your Contract Value after the step-up if such amount is greater
than your Annual Withdrawal Amount. Your Annual Withdrawal Amount also
increases if you make additional purchase payments. The amount of the increase
is equal to 7% of any additional purchase payments. A determination of whether
you have exceeded your Annual Withdrawal Amount is made at the time of each
withdrawal; therefore, a subsequent increase in the Annual Withdrawal Amount
will not offset the effect of a withdrawal that exceeded the Annual Withdrawal
Amount at the time the withdrawal was made.
Lifetime Five does not affect your ability to make withdrawals under your
contract or limit your ability to request withdrawals that exceed the Annual
Income Amount and the Annual Withdrawal Amount. You are not required to
withdraw all or any portion of the Annual Withdrawal Amount or Annual Income
Amount in each contract year.
.. If, cumulatively, you withdraw an amount less than the Annual Withdrawal
Amount under the Withdrawal Benefit in any contract year, you cannot
carry-over the unused portion of the Annual Withdrawal Amount to subsequent
contract years.
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5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT? continued
.. If, cumulatively, you withdraw an amount less than the Annual Income Amount
under the Life Income Benefit in any contract year, you cannot carry-over
the unused portion of the Annual Income Amount to subsequent contract years.
However, because the Protected Withdrawal Value is only reduced by the actual
amount of withdrawals you make under these circumstances, any unused Annual
Withdrawal Amount or Annual Income Amount may
extend the period of time until the remaining Protected Withdrawal Value is
reduced to zero.
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and
Annual Income Amount assume: 1.) the contract date and the effective date of
Lifetime Five are February 1, 2005; 2.) an initial purchase payment of
$250,000; 3.) the Contract Value on February 1, 2006 is equal to $265,000; and
4.) the first withdrawal occurs on March 1, 2006 when the Contract Value is
equal to $263,000.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05(393/365) = $263,484.33
(b)Contract value on March 1, 2006 (the date of the first withdrawal) =
$263,000
(c)Contract value on February 1, 2006 (the first contract anniversary) =
$265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7%
of $265,000). The Annual Income Amount is equal to $13,250 under the Life
Income Benefit (5% of $265,000).
Example 1. Dollar-for-dollar Reduction
If $10,000 was withdrawn (less than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
.. Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$10,000 = $8,550
.. Annual Withdrawal Amount for future contract years remains at $18,550
.. Remaining Annual Income Amount for current contract year = $13,250 -
$10,000 = $3,250
.. Annual Income Amount for future contract years remains at $13,250
.. Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000
Example 2. Dollar-for-dollar and Proportional Reductions
a) If $15,000 was withdrawn (more than the Annual Income Amount but less than
the Annual Withdrawal Amount) on March 1, 2006, then the following values
would result:
. Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$15,000 = $3,550
. Annual Withdrawal Amount for future contract years remains at $18,550
. Remaining Annual Income Amount for current contract year = $0
. Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future contract years.
. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $1,750/($263,000 - $13,250) X
$13,250 = $93
. Annual Income Amount for future contract years = $13,250 - $93 = $13,157
. Protected Withdrawal Value is reduced by $15,000 from $265,000 to $250,000
b) If $25,000 was withdrawn (more than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
. Remaining Annual Withdrawal Amount for current contract year = $0
. Excess of withdrawal over the Annual Withdrawal Amount ($25,000 - $18,550
= $6,450) reduces Annual Withdrawal Amount for future contract years.
. Reduction to Annual Withdrawal Amount = Excess Withdrawal/Contract Value
before Excess Withdrawal X Annual Withdrawal Amount = $6,450/($263,000 -
$18,550) X $18,550 = $489
. Annual Withdrawal Amount for future contract years = $18,550 - $489 =
$18,061
. Remaining Annual Income Amount for current contract year = $0
. Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 =
$11,750) reduces Annual Income Amount for future contract years.
. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $11,750/($263,000 - $13,250) X
$13,250 = $623
. Annual Income Amount for future contract years = $13,250 - $623 = $12,627
. Protected Withdrawal Value is first reduced by the Annual Withdrawal
Amount ($18,550) from $265,000 to $246,450. It is further reduced by the
greater of a dollar-for-dollar reduction or a proportional reduction.
54
. Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450
. Proportional reduction = Excess Withdrawal/Contract Value before Excess
Withdrawal X Protected Withdrawal Value = $6,450/($263,000 - $18,550) X
$246,450 = $6,503
. Protected Withdrawal Value = $246,450 - max [$6,450, $6,503] = $239,947
EXAMPLE 3. Step-up of the Protected Withdrawal Value
If the Annual Income Amount ($13,250) is withdrawn each year starting on
March 1, 2006 for a period of 3 years, the Protected Withdrawal Value on
February 1, 2012 would be reduced to $225,250 {$265,000 - ($13,250 X 3)}. If a
step-up is elected on February 1, 2012, and the Contract Value on February 1,
2012 is $280,000, then the following values would result:
.. Protected Withdrawal Value = Contract Value on February 1, 2012 = $280,000
.. Annual Income Amount is equal to the greater of the current Annual Income
Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual
Income Amount is $13,250. 5% of the stepped up Protected Withdrawal Value
is 5% of $280,000, which is $14,000. Therefore, the Annual Income Amount is
increased to $14,000.
.. Annual Withdrawal Amount is equal to the greater of the current Annual
Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value.
Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected
Withdrawal Value is 7% of $280,000, which is $19,600. Therefore the Annual
Withdrawal Amount is increased to $19,600.
.. Because the Contract Date and Effective Date of Lifetime Five for this
example is prior to March 20, 2006, if the step-up request on February 1,
2012 was due to the election of the auto step-up feature, we would first
check to see if an auto step-up should occur by checking to see if 5% of
the Contract Value exceeds the Annual Income Amount by 5% or more. 5% of
the Contract Value is equal to 5% of $280,000, which is $14,000. 5% of the
Annual Income Amount ($13,250) is $662.50, which added to the Annual Income
Amount is $13,912.50. Since 5% of the Contract Value is greater than
$13,912.50, the step-up would still occur in this scenario, and all of the
values would be increased as indicated above. Had the Contract Date and
Effective Date of the Lifetime Five benefit been on or after March 20,
2006, the step-up would still occur because 5% of the Contract Value is
greater than the Annual Income Amount.
Benefits Under Lifetime Five
.. If your Contract Value is equal to zero, and the cumulative withdrawals in
the current contract year are greater than the Annual Withdrawal Amount,
Lifetime Five will terminate. To the extent that your Contract Value was
reduced to zero as a result of cumulative withdrawals that are equal to or
less than the Annual Income Amount and amounts are still payable under both
the Life Income Benefit and the Withdrawal Benefit, you will be given the
choice of receiving the payments under the Life Income Benefit or under the
Withdrawal Benefit. Once you make this election we will make an additional
payment for that contract year equal to either the remaining Annual Income
Amount or Annual Withdrawal Amount for the contract year, if any, depending
on the option you choose. In subsequent contract years we make payments
that equal either the Annual Income Amount or the Annual Withdrawal Amount.
You will not be able to change the option after your election and no
further purchase payments will be accepted under your contract. If you do
not make an election, we will pay you annually under the Life Income
Benefit. To the extent that cumulative withdrawals in the current contract
year that reduced your Contract Value to zero are more than the Annual
Income Amount but less than or equal to the Annual Withdrawal Amount and
amounts are still payable under the Withdrawal Benefit, you will receive
the payments under the Withdrawal Benefit. In the year of a withdrawal that
reduced your Contract Value to zero, we will make an additional payment to
equal any remaining Annual Withdrawal Amount and make payments equal to the
Annual Withdrawal Amount in each subsequent year (until the Protected
Withdrawal Value is depleted). Once your Contract Value equals zero no
further purchase payments will be accepted under your contract.
.. If annuity payments are to begin under the terms of your contract or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent contract years or any remaining Protected
Withdrawal Value, you can elect one of the following three options:
1. apply your Contract Value to any annuity option available;
2. request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We make
such annuity payments until the annuitant's death; or
3. request that, as of the date annuity payments are to begin, we pay out
any remaining Protected Withdrawal Value as annuity payments. Each year
such annuity payments will equal the Annual Withdrawal Amount or the
remaining Protected Withdrawal Value if less. We make such annuity
payments until the earlier of the annuitant's death or the date the
Protected Withdrawal Value is depleted.
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5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT? continued
We must receive your request in a form acceptable to us at the Prudential
Annuity Service Center.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a single life fixed annuity with
five payments certain using the greater of the annuity rates then currently
available or the annuity rates guaranteed in your contract. The amount that
will be applied to provide such annuity payments will be the greater of:
1. the present value of future Annual Income Amount payments. Such present
value will be calculated using the greater of the single life fixed
annuity rates then currently available or the single life fixed annuity
rates guaranteed in your contract; and
2. the Contract Value.
If no withdrawal was ever taken, we will determine a Protected Withdrawal
Value and calculate an Annual Income Amount and an Annual Withdrawal Amount as
if you made your first withdrawal on the date the annuity payments are to
begin.
Other Important Considerations
.. Withdrawals under Lifetime Five are subject to all of the terms and
conditions of the contract, including any withdrawal charges.
.. Withdrawals made while Lifetime Five is in effect will be treated, for tax
purposes, in the same way as any other withdrawals under the contract.
Lifetime Five does not directly affect the Contract Value or surrender
value, but any withdrawal will decrease the Contract Value by the amount of
the withdrawal (plus any applicable withdrawal charges). If you surrender
your contract, you will receive the current Contract Value, not the
Protected Withdrawal Value.
.. You can make withdrawals from your contract while your Contract Value is
greater than zero without purchasing Lifetime Five. Lifetime Five provides
a guarantee that if your Contract Value declines due to market performance,
you will be able to receive your Protected Withdrawal Value or Annual
Income Amount in the form of periodic benefit payments.
Election of Lifetime Five
Lifetime Five can be elected at the time you purchase your contract, or after
the contract date. Elections of Lifetime Five are subject to our eligibility
rules and restrictions. The contract owner's Contract Value as of the date of
election will be used as the basis to calculate the initial Protected
Withdrawal Value, the initial Annual Withdrawal Amount, and the initial Annual
Income Amount.
Termination of Lifetime Five
Lifetime Five terminates automatically when your Protected Withdrawal Value
and Annual Income Amount reach zero. You may terminate Lifetime Five at any
time by notifying us. If you terminate Lifetime Five, any guarantee provided
by the benefit will terminate as of the date the termination is effective.
Lifetime Five terminates:
.. upon your surrender of the contract,
.. upon the death of the annuitant (but your surviving spouse may elect a new
Lifetime Five benefit if your spouse elects the Spousal Continuance Option
and your spouse would then be eligible to elect the benefit as if he/she
were a new purchaser),
.. upon a change in ownership of the contract that changes the tax
identification number of the contract owner, or
.. upon your election to begin receiving annuity payments.
We cease imposing the charge for Lifetime Five upon the earliest to occur of
(i) your election to terminate the benefit, (ii) our receipt of appropriate
proof of the death of the owner (or annuitant, for entity owned contracts),
(iii) the annuity date, (iv) automatic termination of the benefit due to an
impermissible change of owner or annuitant, or (v) a withdrawal that causes
the benefit to terminate.
While you may terminate Lifetime Five at any time, we may not terminate the
benefit other than in the circumstances listed above. However, we may stop
offering Lifetime Five for new elections or re-elections at any time in the
future.
Currently, if you terminate Lifetime Five, you will only be permitted to
re-elect the benefit or elect the Spousal Lifetime Five Income Benefit on any
anniversary of the contract date that is at least 90 calendar days from the
date the benefit was last terminated.
If you elected Lifetime Five at the time you purchased your contract and prior
to March 20, 2006, and you terminate Lifetime Five, there will be no waiting
period before you can re-elect the benefit or elect Spousal Lifetime Five.
However, once you choose to re-elect/elect, the waiting period described above
will apply to subsequent re-elections. If you elected Lifetime Five after the
time you purchased your contract, but prior to March 20, 2006, and you
terminate Lifetime Five, you must wait until the contract anniversary
following your cancellation before you can re-elect the benefit or elect
Spousal Lifetime Five. Once you choose to
56
re-elect/elect, the waiting period described above will apply to subsequent
re-elections. We reserve the right to limit the re-election/ election
frequency in the future. Before making any such change to the
re-election/election frequency, we will provide prior notice to contract
owners who have an effective Lifetime Five Income Benefit.
Additional Tax Considerations for Qualified Contracts
If you purchase an annuity contract as an investment vehicle for "qualified"
investments, including an IRA, the minimum distribution rules under the Code
require that you begin receiving periodic amounts from your annuity contract
beginning after age 70 1/2. The amount required under the Code may exceed the
Annual Withdrawal Amount and the Annual Income Amount, which will cause us to
increase the Annual Income Amount and the Annual Withdrawal Amount in any
contract year that required minimum distributions due from your contract are
greater than such amounts. Any such payments will reduce your Protected
Withdrawal Value. In addition, the amount and duration of payments under the
contract payment and death benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as required minimum distribution provisions under the tax law.
SPOUSAL LIFETIME FIVE INCOME BENEFIT
Spousal Lifetime Five must be elected based on two Designated Lives, as
described below. Each Designated Life must be at least 55 years old when the
benefit is elected. Spousal Lifetime Five is not available if you elect any
other optional living or death benefit. As long as your Spousal Lifetime Five
Income Benefit is in effect, you must allocate your Contract Value in
accordance with the then permitted and available option(s). Owners electing
this benefit currently must allocate contract value to one or more of the
following asset allocation portfolios of the Advanced Series Trust (we reserve
the right to change these required portfolios on a prospective basis): AST
Capital Growth Asset Allocation Portfolio, AST Balanced Asset Allocation
Portfolio, AST Conservative Asset Allocation Portfolio, AST Preservation Asset
Allocation Portfolio, AST Advanced Strategies Portfolio, AST First Trust
Balanced Target Portfolio, AST First Trust Capital Appreciation Target
Portfolio, AST T. Rowe Price Asset Allocation Portfolio, AST American Century
Strategic Allocation Portfolio, or AST UBS Dynamic Alpha Portfolio. Currently,
if you elect Spousal Lifetime Five and subsequently terminate the benefit,
there will be a restriction on your ability to re-elect Spousal Lifetime Five
and Lifetime Five. We reserve the right to further limit the election
frequency in the future. Before making any such change to the election
frequency, we will provide prior notice to contract owners who have an
effective Spousal Lifetime Five Income Benefit.
We offer a benefit that guarantees until the later death of two natural
persons that are each other's spouses at the time of election of Spousal
Lifetime Five and at the first death of one of them (the "Designated Lives",
each a "Designated Life") the ability to withdraw an annual amount (Spousal
Life Income Benefit) equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of market performance
on the Contract Value, subject to our rules regarding the timing and amount of
withdrawals. The Spousal Life Income Benefit may remain in effect even if the
Contract Value is zero. Spousal Lifetime Five may be appropriate if you intend
to make periodic withdrawals from your annuity, wish to ensure that market
performance will not affect your ability to receive annual payments and you
wish either spouse to be able to continue the Spousal Life Income Benefit
after the death of the first. You are not required to make withdrawals as part
of the benefit -- the guarantees are not lost if you withdraw less than the
maximum allowable amount each year under the rules of the benefit.
Key Feature--Protected Withdrawal Value.
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Spousal Life Income Benefit. The initial Protected
Withdrawal Value is determined as of the date you make your first withdrawal
under your contract following your election of Spousal Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of:
(A)the Contract Value on the date you elect Spousal Lifetime Five, plus any
additional Purchase Payments (and any Credits), each growing at 5% per year
from the date of your election of the benefit, or application of the
Purchase Payment to your contract, as applicable, until the date of your
first withdrawal or the 10th anniversary of the benefit effective date, if
earlier;
(B)the Contract Value on the date of the first withdrawal from your contract,
prior to the withdrawal;
(C)the highest Contract Value on each contract anniversary, plus subsequent
Purchase Payments (plus any Credits) prior to the first withdrawal or the
10th anniversary of the benefit effective date, if earlier.
With respect to A and C above, after the 10th anniversary of the benefit
effective date, each value is increased by the amount of any subsequent
Purchase Payments (plus any Credits).
.. If you elect Spousal Lifetime Five at the time you purchase your contract,
the Contract Value will be your initial purchase payment (plus any credits).
.. For existing contract owners who are electing the Spousal Lifetime Five
Benefit, the Contract Value on the date of your election of Spousal
Lifetime Five will be used to determine the initial Protected Withdrawal
Value.
Annual Income Amount Under the Spousal Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under Spousal Lifetime Five, if your cumulative withdrawals
in a contract year are less than or equal to the Annual Income Amount, they
will not reduce your Annual
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5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT? continued
Income Amount in subsequent contract years, but any such withdrawals will
reduce the Annual Income Amount on a dollar-for-dollar basis in that contract
year. If your cumulative withdrawals are in excess of the Annual Income Amount
("Excess Income"), your Annual Income Amount in subsequent years will be
reduced (except with regard to required minimum distributions) by the result
of the ratio of the Excess Income to the Contract Value immediately prior to
such withdrawal (see examples of this calculation below). Reductions include
the actual amount of the withdrawal, including any withdrawal charges that may
apply.
You may elect to step-up your Annual Income Amount if, due to positive market
performance, 5% of your Contract Value is greater than the Annual Income
Amount. You are eligible to step-up the Annual Income Amount on or after the
1st anniversary of the first withdrawal under Spousal Lifetime Five. The
Annual Income Amount can be stepped up again on or after the 1/st/ anniversary
of the preceding step-up. If you elect to step-up the Annual Income Amount,
and on the date you elect to step-up, the charges under Spousal Lifetime Five
have changed for new purchasers, you may be subject to the new charge at the
time of such step-up. When you elect a step-up, your Annual Income Amount
increases to equal 5% of your Contract Value after the step-up. Your Annual
Income Amount also increases if you make additional Purchase Payments. The
amount of the increase is equal to 5% of any additional Purchase Payments. Any
increase will be added to your Annual Income Amount beginning on the day that
the step-up is effective or the Purchase Payment is made. A determination of
whether you have exceeded your Annual Income Amount is made at the time of
each withdrawal; therefore a subsequent increase in the Annual Income Amount
will not offset the effect of a withdrawal that exceeded the Annual Income
Amount at the time the withdrawal was made.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force. If you elect this feature, the first
Auto Step-Up opportunity will occur on the 1st Contract Anniversary that is at
least one year after the later of (1) the date of the first withdrawal under
Spousal Lifetime Five or (2) the most recent step-up. At this time, your
Annual Income Amount will be stepped-up if 5% of your Contract Value is
greater than the Annual Income Amount by any amount. If 5% of the Contract
Value does not exceed the Annual Income Amount, then an Auto Step-Up
opportunity will occur on each successive contract anniversary until a step-up
occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on
the 1st Contract Anniversary that is at least 1 year after the most recent
step-up. If, on the date that we implement an Auto Step-Up to your Annual
Income Amount, the charge for Spousal Lifetime Five has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Subject to our rules and restrictions, you will still be permitted to manually
step-up the Annual Income Amount even if you elect the Auto Step-Up feature.
Spousal Lifetime Five does not affect your ability to make withdrawals under
your contract or limit your ability to request withdrawals that exceed the
Annual Income Amount. Under Spousal Lifetime Five, if your cumulative
withdrawals in a contract year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent contract
years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that contract year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount
under Spousal Lifetime Five Income Benefit in any contract year, you cannot
carry-over the unused portion of the Annual Income Amount to subsequent
contract years.
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Annual Income Amount assume: 1.) the contract date and the
effective date of Spousal Lifetime Five are February 1, 2005; 2.) an initial
purchase payment of $250,000; 3.) the Contract Value on February 1, 2006 is
equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the
Contract Value is equal to $263,000; and 5.) the Contract Value on February 1,
2010 is equal to $280,000. The values set forth here are purely hypothetical,
and do not reflect the charge for the Spousal Lifetime Five Income Benefit.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05(393/365) = $263,484
(b)Contract value on March 1, 2006 (the date of the first withdrawal) =
$263,000
(c)Contract value on February 1, 2006 (the first contract anniversary) =
$265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit
(5% of $265,000).
Example 1. Dollar-for-dollar Reduction
If $10,000 was withdrawn (less than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current contract year = $13,250 -
$10,000 = $3,250
.. Annual Income Amount for future contract years remains at $13,250
58
Example 2. Dollar-for-dollar and Proportional Reductions
If $15,000 was withdrawn (more than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current contract year = $0
.. Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future contract years.
.. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $1,750 / ($263,000 - $13,250) X
$13,250 = $93
.. Annual Income Amount for future contract years = $13,250 - $93 = $13,157
Example 3. Step-up of the Annual Income Amount
If a step-up of the Annual Income Amount is requested on February 1, 2010 or
the Auto Step-Up feature was elected, the step-up would occur because 5% of
the Contract Value, which is $14,000 (5% of $280,000), is greater than the
Annual Income Amount of $13,250. The new Annual Income Amount will be equal to
$14,000.
Benefits Under Spousal Lifetime Five
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount and amounts are still payable under the Spousal Life Income Benefit,
we will make an additional payment for that contract year equal to the
remaining Annual Income Amount for the contract year, if any. Thus, in that
scenario, the remaining Annual Income Amount would be payable even though
your Contract Value was reduced to zero. In subsequent contract years we
make payments that equal the Annual Income Amount as described above. No
further purchase payments will be accepted under your contract. We will
make payments until the first of the Designated Lives to die, and will
continue to make payments until the death of the second Designated Life as
long as the Designated Lives were spouses at the time of the first death.
To the extent that cumulative withdrawals in the current contract year that
reduced your Contract Value to zero are more than the Annual Income Amount,
the Spousal Life Income Benefit terminates and no additional payments will
be made.
.. If annuity payments are to begin under the terms of your contract or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent contract years, you can elect one of the following
two options:
1. apply your Contract Value to any annuity option available; or
2. request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and will
continue to make payments until the death of the second Designated Life
as long as the Designated Lives were spouses at the time of the first
death.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with five payments certain using the same
basis that is used to calculate the greater of the annuity rates then
currently available or the annuity rates guaranteed in your contract. The
amount that will be applied to provide such annuity payments will be the
greater of:
1. the present value of future Annual Income Amount payments. Such present
value will be calculated using the same basis that is used to calculate
the single life fixed annuity rates guaranteed in your contract; and
2. the Contract Value.
.. If no withdrawal was ever taken, we will determine an initial Protected
Withdrawal Value and calculate an Annual Income Amount as if you made your
first withdrawal on the date the annuity payments are to begin.
Other Important Considerations
.. Withdrawals under Spousal Lifetime Five are subject to all of the terms and
conditions of the contract, including any withdrawal charges.
.. Withdrawals made while Spousal Lifetime Five is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the
contract. Spousal Lifetime Five does not directly affect the Contract Value
or surrender value, but any withdrawal will decrease the Contract Value by
the amount of the withdrawal (plus any applicable withdrawal charges). If
you surrender your contract, you will receive the current surrender value.
.. You can make withdrawals from your contract while your Contract Value is
greater than zero without purchasing Spousal Lifetime Five. Spousal
Lifetime Five provides a guarantee that if your Contract Value declines due
to market performance, you will be able to receive your Annual Income
Amount in the form of periodic benefit payments.
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5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT? continued
.. In general, you must allocate your Contract Value in accordance with the
then-available option(s) that we may prescribe, in order to elect and
maintain Spousal Lifetime Five. If, subsequent to your election of the
benefit, we change our requirements for how Contract Value must be
allocated under the benefit, that new requirement will apply only to new
elections of the benefit, and will not compel you to re-allocate your
Contract Value in accordance with our newly-adopted requirements. All
subsequent transfers and purchase payments will be subject to the new
investment limitations.
.. There may be circumstances where you will continue to be charged the full
amount for Spousal Lifetime Five even when the benefit is only providing a
guarantee of income based on one life with no survivorship.
.. In order for the surviving Designated Life to continue Spousal Lifetime
Five upon the death of an owner, the Designated Life must elect to assume
ownership of the contract under the Spousal Continuation Option.
Election of and Designations of Spousal Lifetime Five
Spousal Lifetime Five can only be elected based on two Designated Lives.
Designated Lives must be natural persons who are each other's spouses at the
time of election of the benefit and at the death of the first of the
Designated Lives to die. Currently, the benefit may only be elected where the
contract owner, annuitant and beneficiary designations are as follows:
.. One contract owner, where the annuitant and the contract owner are the same
person and the beneficiary is the contract owner's spouse. The contract
owner/annuitant and the beneficiary each must be at least 55 years old at
the time of election; or
.. Co-contract owners, where the contract owners are each other's spouses. The
beneficiary designation must be the surviving spouse. The first named
contract owner must be the annuitant. Both contract owners must each be 55
years old at the time of election.
.. One contract owner, where the owner is a custodial account established to
hold retirement assets for the benefit of the annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the annuitant is the co-annuitant.
Both the annuitant and co-annuitant must each be at least 55 years old at
the time of election. When the contract is set up in this manner, in order
for Spousal Lifetime Five to be continued after the death of the first
designated life (the annuitant), the custodian must have elected to
continue the contract, with the second designated life (the co-annuitant)
named as annuitant.
No ownership changes or annuitant changes will be permitted once this benefit
is elected. However, if the contract is co-owned, the contract owner that is
not the annuitant may be removed without affecting the benefit.
Spousal Lifetime Five can be elected at the time that you purchase your
contract. We also offer existing contract owners the option to elect Spousal
Lifetime Five after the contract date of their contract, subject to our
eligibility rules and restrictions. Your Contract Value as of the date of
election will be used as a basis to calculate the initial Protected Withdrawal
Value and the Annual Income Amount.
Currently, if you terminate Spousal Lifetime Five, you will only be permitted
to re-elect the benefit or elect the Lifetime Five Income Benefit on any
anniversary of the contract date that is at least 90 calendar days from the
date the benefit was last terminated.
We reserve the right to further limit the election frequency in the future.
Before making any such change to the election frequency, we will provide prior
notice to contract owners who have an effective Spousal Lifetime Five Income
Benefit.
Termination of Spousal Lifetime Five
Spousal Lifetime Five terminates automatically when your Annual Income Amount
equals zero. You may terminate Spousal Lifetime Five at any time by notifying
us. If you terminate Spousal Lifetime Five, any guarantee provided by the
benefit will terminate as of the date the termination is effective and certain
restrictions on re-election of the benefit will apply as described above. We
reserve the right to further limit the frequency election in the future.
Spousal Lifetime Five terminates upon your surrender of the contract, upon the
first Designated Life to die if the contract is not continued, upon the second
Designated Life to die or upon your election to begin receiving annuity
payments.
The charge for Spousal Lifetime Five will no longer be deducted from your
Contract Value upon termination of the benefit.
Additional Tax Considerations
If you purchase an annuity contract as an investment vehicle for "qualified"
investments, including an IRA, the minimum distribution rules under the Code
require that you begin receiving periodic amounts from your contract beginning
after age 70 1/2. Roth IRAs are not subject to these rules during the contract
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
contract year that required minimum distributions due from your contract are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distribution under the tax law.
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6: WHAT IS THE INCOME APPRECIATOR BENEFIT?
INCOME APPRECIATOR BENEFIT
The Income Appreciator Benefit (IAB) is an optional, supplemental income
benefit that provides an additional income amount during the accumulation
period or upon annuitization. The Income Appreciator Benefit is designed to
provide you with additional funds that can be used to help defray the impact
taxes may have on distributions from your contract. IAB may be suitable for
you in other circumstances as well, which you can discuss with your registered
representative. Because individual circumstances vary, you should consult with
a qualified tax advisor to determine whether it would be appropriate for you
to elect the Income Appreciator Benefit.
If you want the Income Appreciator Benefit, you generally must elect it when
you make your initial purchase payment. Once you elect the Income Appreciator
Benefit, you may not later revoke it.
.. The annuitant must be 75 or younger in order for you to elect the Income
Appreciator Benefit.
.. If you choose the Income Appreciator Benefit, we will impose an annual
charge equal to 0.25% of your Contract Value. See Section 8, "What Are The
Expenses Associated With The Strategic Partners Plus 3 Contract?"
Activation of the Income Appreciator Benefit
YOU CAN ACTIVATE THE INCOME APPRECIATOR BENEFIT AT ANY TIME AFTER IT HAS BEEN
IN FORCE FOR SEVEN YEARS. To activate the Income Appreciator Benefit, you must
send us a written request in good order.
Once activated, you can receive the Income Appreciator Benefit:
.. (IAB OPTION 1) at annuitization when determining an annuity payment;
.. (IAB OPTION 2) during the accumulation phase through the IAB automatic
withdrawal payment program; or
.. (IAB OPTION 3) during the accumulation phase as an Income Appreciator
Benefit credit to your contract over a 10-year period.
Income Appreciator Benefit payments are treated as earnings and may be subject
to tax upon withdrawal. See Section 10, "What Are The Tax Considerations
Associated With The Strategic Partners Plus 3 Contract?"
If you do not activate the benefit prior to the maximum annuitization age you
may lose all or part of the IAB.
CALCULATION OF THE INCOME APPRECIATOR BENEFIT
We will calculate the Income Appreciator Benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the
annuity date). We do this by multiplying the current earnings in the contract
by the applicable Income Appreciator Benefit percentage based on the number of
years the Income Appreciator Benefit has been in force. For purposes of
calculating the Income Appreciator Benefit:
.. earnings are calculated as the difference between the Contract Value and
the sum of all purchase payments;
.. earnings do not include (1) any amount added to the Contract Value as a
result of the Spousal Continuance Option, or (2) if we were to permit you
to elect the Income Appreciator Benefit after the contract date, any
earnings accrued under the contract prior to that election;
.. withdrawals reduce earnings first, then purchase payments, on a
dollar-for-dollar basis;
.. the table below shows the Income Appreciator Benefit percentages
corresponding to the number of years the Income Appreciator Benefit has
been in force.
IAB Option 1 - Income Appreciator Benefit At Annuitization
Under this option, if you choose to activate the Income Appreciator Benefit at
annuitization, we will calculate the Income Appreciator Benefit amount on the
annuity date and add it to the adjusted Contract Value for purposes of
determining the amount available for annuitization. You may apply this amount
to any annuity or settlement option over the lifetime of the annuitant, joint
annuitants, or a period certain of at least 15 years (but not to exceed life
expectancy).
UPON ANNUITIZATION, YOU MAY LOSE ALL OR A PORTION OF THE INCOME APPRECIATOR
BENEFIT IF YOU CHOOSE AN ANNUITY SETTLEMENT OPTION OTHER THAN ANY LIFETIME
PAYOUT OPTION OR PERIOD CERTAIN OPTION FOR AT LEAST 15 YEARS. IN SUCH
INSTANCES, WE WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR
THIS BENEFIT.
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6: WHAT IS THE INCOME APPRECIATOR BENEFIT? continued
Effect of Income Appreciator Benefit on Guaranteed Minimum Income Benefit
If you exercise the Guaranteed Minimum Income Benefit feature and an Income
Appreciator Benefit amount remains payable under your contract, the value we
use to calculate the annuity payout amount will be the greater of:
1. the adjusted Contract Value plus the remaining Income Appreciator Benefit
amount, calculated at current IAB annuitization rates; or
2. the GMIB protected value plus the remaining Income Appreciator Benefit
amount, calculated using the GMIB guaranteed annuity purchase rates shown
in the contract.
If you exercise the Guaranteed Minimum Income Benefit feature and activate the
Income Appreciator Benefit at the same time, you must choose among the
Guaranteed Minimum Income Benefit annuity payout options available at the time.
Terminating the Income Appreciator Benefit
The Income Appreciator Benefit will terminate on the earliest of:
.. the date you make a total withdrawal from the contract;
.. the date a death benefit is payable if the contract is not continued by the
surviving spouse under the Spousal Continuance Option;
.. the date the Income Appreciator Benefit amount is reduced to zero
(generally ten years after activation) under IAB Options 2 and 3;
.. the date of annuitization; or
.. the date the contract terminates.
Upon termination of the Income Appreciator Benefit, we cease imposing the
associated charge.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
You may choose IAB Option 1 at annuitization, but you may instead choose IAB
Options 2 or 3 during the accumulation phase of your contract. Income
Appreciator Benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good order. Under IAB Options 2 and 3, you can
choose to have the Income Appreciator Benefit amounts paid or credited
monthly, quarterly, semi-annually, or annually.
IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER THE ANNUITY DATE AND YOU CHOOSE AN ANNUITY SETTLEMENT
OPTION OTHER THAN ANY LIFETIME PAYOUT OPTION OR PERIOD CERTAIN OPTION OF AT
LEAST 15 YEARS OR YOU MAKE A FULL WITHDRAWAL, YOU MAY LOSE ALL OR ANY
REMAINING PORTION OF THE INCOME APPRECIATOR BENEFIT. IN SUCH INSTANCES, WE
WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
IAB OPTION 2 - Income Appreciator Benefit Automatic Withdrawal Payment Program
Under this option, you elect to receive the Income Appreciator Benefit during
the accumulation phase. When you activate the benefit, a 10-year Income
Appreciator Benefit automatic withdrawal payment program begins. We will pay
you the Income Appreciator Benefit amount in equal installments over a 10-year
payment period. You may combine this Income Appreciator Benefit amount with an
automated withdrawal amount from your Contract Value, in which case each
combined payment must be at least $100.
The maximum automated withdrawal payment amount that you may receive from your
Contract Value under this Income Appreciator Benefit program in any contract
year during the 10-year period may not exceed 10% of the Contract Value as of
the date you activate the Income Appreciator Benefit.
Once we calculate the Income Appreciator Benefit, the amount will not be
affected by changes in Contract Value due to the investment performance of any
allocation option. Withdrawal charges may apply to automatic withdrawal
payment amounts, but not to amounts attributable to the Income Appreciator
Benefit.
After the ten-year payment period has ended, if the remaining Contract Value
is $2,000 or more, the contract will continue. If the remaining Contract Value
is less than $2,000 after the end of the 10-year payment period, we will pay
you the remaining Contract Value and the contract will terminate. If the
Contract Value falls below the minimum amount required to keep the contract in
force due solely to investment results before the end of the 10-year payment
period, we will continue to pay the Income Appreciator Benefit amount for the
remainder of the 10-year payment period.
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Discontinuing the Income Appreciator Benefit Automatic Withdrawal Payment
Program Under IAB Option 2
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 and activate IAB Option 3 at any time after payments have begun and
before the last payment is made. We will add the remaining Income Appreciator
Benefit amount to the Contract Value at the same frequency as your initial
election until the end of the 10-year payment period. We will treat any Income
Appreciator Benefit amount added to the Contract Value as additional earnings.
Unless you direct us otherwise, we will allocate these additions to the
variable investment options, fixed interest rate options, or the market value
adjustment option in the same proportions as your most recent purchase payment
allocation percentages.
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 before the last payment is made and elect an annuity or settlement
option. We will add the balance of the Income Appreciator Benefit amount for
the 10-year payment period to the Contract Value in a lump sum before
determining the adjusted Contract Value. The adjusted Contract Value may be
applied to any annuity or settlement option that is paid over the lifetime of
the annuitant, joint annuitants, or a period certain of at least 15 years (but
not to exceed life expectancy).
IAB Option 3 - Income Appreciator Benefit Credit to Contract Value
Under this option, you can activate the Income Appreciator Benefit and receive
the benefit as credits to your Contract Value over a 10-year payment period.
We will allocate these Income Appreciator Benefit credits to the variable
investment options, the fixed interest rate options, or the market value
adjustment option in the same manner as your current allocation, unless you
direct us otherwise. We will waive the $1,000 minimum requirement for the
market value adjustment option. We will calculate the Income Appreciator
Benefit amount on the date we receive your written request in good order. Once
we have calculated the Income Appreciator Benefit, the Income Appreciator
Benefit credit will not be affected by changes in Contract Value due to the
investment performance of any allocation option.
Before we add the last Income Appreciator Benefit credit to your Contract
Value, you may switch to IAB Option 2 and receive the remainder of the Income
Appreciator Benefit as payments to you (instead of credits to the Contract
Value) under the Income Appreciator Benefit program for the remainder of the
10-year payment period.
You can also request that any remaining payments in the 10-year payment period
be applied to an annuity or settlement option that is paid over the lifetime
of the annuitants, joint annuitants, or a period certain of at least 15 years
(but not to exceed life expectancy).
Excess Withdrawals
During the 10 year period under IAB options 2 or 3, an "excess withdrawal"
occurs when any amount is withdrawn from your Contract Value in a contract
year that exceeds the sum of (1) 10% of the Contract Value as of the date the
Income Appreciator Benefit was activated plus (2) earnings since the Income
Appreciator Benefit was activated that have not been previously withdrawn.
We will deduct the excess withdrawal on a proportional basis from the
remaining Income Appreciator Benefit amount. We will then calculate and apply
a new reduced Income Appreciator Benefit amount.
Withdrawals you make in a contract year that do not exceed the sum of (1) 10%
of the Contract Value as of the date the Income Appreciator Benefit was
activated plus (2) earnings since the Income Appreciator Benefit was activated
that have not been previously withdrawn do not reduce the remaining Income
Appreciator Benefit amount. Additionally, if the amount withdrawn in any year
is less than the excess withdrawal threshold, the difference between the
amount withdrawn and the threshold can be carried over to subsequent years on
a cumulative basis and withdrawn without causing a reduction to the Income
Appreciator Benefit amount.
Effect of Total Withdrawal on Income Appreciator Benefit
We will not make Income Appreciator Benefit payments after the date you make a
total withdrawal of the contract surrender value.
7: HOW CAN I PURCHASE A STRATEGIC PARTNERS PLUS 3 CONTRACT?
PURCHASE PAYMENTS
The initial purchase payment is the amount of money you give us to purchase
the contract. Unless we agree otherwise, and subject to our rules, the minimum
initial purchase payment is $10,000. You must get our prior approval for any
initial and additional purchase payment of $1,000,000 or more, unless we are
prohibited under applicable state law from insisting on such prior approval.
With some restrictions, you can make additional purchase payments by means
other than electronic fund transfer of no less than $500 at any time during
the accumulation phase. However, we impose a minimum of $100 with respect to
additional purchase payments made through electronic fund transfers.
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7: HOW CAN I PURCHASE A STRATEGIC PARTNERS PLUS 3 CONTRACT? continued
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. Certain
age limits apply to certain features and benefits described herein. No
subsequent purchase payments may be made on or after the earliest of the
86/th/ birthday of:
.. the owner,
.. the joint owner,
.. the annuitant, or
.. the co-annuitant.
Currently, the maximum aggregate purchase payments you may make is $7 million.
We limit the maximum total purchase payments in any contract year other than
the first to $2 million absent our prior approval.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your invested purchase payment
among the variable or fixed interest rate investment options, or the market
value adjustment option based on the percentages you choose. The percentage of
your allocation to a particular investment option can range in whole
percentages from 0% to 100%.
When you make an additional purchase payment, it will be allocated in the same
way as your most recent purchase payment, unless you tell us otherwise.
Allocations to the DCA Fixed Rate Option must be no less than $2,000 and,
allocations to the market value adjustment option must be no less than $1,000.
You may change your allocation of future invested purchase payments at any
time. Contact the Prudential Annuity Service Center for details.
We generally will credit the initial purchase payment to your contract within
two business days from the day on which we receive your payment in good order
at the Prudential Annuity Service Center. If, however, your first payment is
made without enough information for us to set up your contract, we may need to
contact you to obtain the required information. If we are not able to obtain
this information within five business days, we will within that five business
day period either return your purchase payment or obtain your consent to
continue holding it until we receive the necessary information. We will
generally credit each subsequent purchase payment as of the business day we
receive it in good order at the Prudential Annuity Service Center. Our
business day generally closes at 4:00 p.m. Eastern time. Our business day may
close earlier, for example if regular trading on the New York Stock Exchange
closes early. Subsequent purchase payments received in good order after the
close of the business day will be credited on the following business day. With
respect to both your initial Purchase Payment and any subsequent Purchase
Payment that is pending investment in our Separate Account, we may hold the
amount temporarily in our general account and may earn interest on such
amount. You will not be credited with interest during that period.
At our discretion, we may give initial and subsequent purchase payments (as
well as withdrawals and transfers) received in good order by certain
broker/dealers prior to the close of a business day the same treatment as they
would have received had they been received at the same time at the Prudential
Annuity Service Center. For more detail, talk to your registered
representative.
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.
CREDITS
If you purchase the Contract With Credit, we will add a credit amount to your
Contract Value with each purchase payment you make. The credit amount is
allocated to the variable or fixed interest rate investment options or the
market value adjustment option in the same percentages as the purchase payment.
The bonus credit that we pay with respect to any purchase payment depends on
(i) the age of the older of the owner or joint owner on the date on which the
purchase payment is made and (ii) the amount of the purchase payment.
Specifically,
.. if the elder owner is 80 or younger on the date that the purchase payment
is made, then we will add a bonus credit to the purchase payment equal to
4% if the purchase payment is less than $250,000; 5% if the purchase
payment is equal to or greater than $250,000 but less than $1 million; or
6% if the purchase payment is $1 million or greater; and
.. if the older owner is aged 81-85 on the date that the purchase payment is
made, then we will add a bonus credit equal to 3% of the amount of the
purchase payment.
Under the Contract With Credit, if the owner returns the contract during the
free look period, we will recapture the bonus credits. If we pay a death
benefit under the contract, we have a contractual right to take back any
credit we applied within one year of the date of death.
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CALCULATING CONTRACT VALUE
The value of the variable portion of your contract will go up or down
depending on the investment performance of the variable investment options you
choose. To determine the value of your contract allocated to the variable
investment options, we use a unit of measure called an accumulation unit. An
accumulation unit works like a share of a mutual fund.
Every day we determine the value of an accumulation unit for each of the
variable investment options. We do this by:
1) adding up the total amount of money allocated to a specific investment
option,
2) subtracting from that amount insurance charges and any other applicable
charges such as for taxes, and
3) dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment to a variable investment option, we credit
your contract with accumulation units of the subaccount or subaccounts for the
investment options you choose. We determine the number of accumulation units
credited to your contract by dividing the amount of the purchase payment, plus
(if you have purchased the Contract With Credit) any applicable credit,
allocated to a variable investment option by the unit price of the
accumulation unit for that variable investment option. We calculate the unit
price for each investment option after the New York Stock Exchange closes each
day and then credit your contract. The value of the accumulation units can
increase, decrease, or remain the same from day to day.
We cannot guarantee that your Contract Value will increase or that it will not
fall below the amount of your total purchase payments.
8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS PLUS 3
CONTRACT?
There are charges and other expenses associated with the contract that reduce
the return on your investment. These charges and expenses are described below.
The charges under the contracts are designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits
under the contracts. They are also designed, in the aggregate, to compensate
us for the risks of loss we assume pursuant to the contracts. If, as we
expect, the charges that we collect from the contracts exceed our total costs
in connection with the contracts, we will earn a profit. Otherwise, we will
incur a loss. The rates of certain of our charges have been set with reference
to estimates of the amount of specific types of expenses or risks that we will
incur. In most cases, this prospectus identifies such expenses or risks in the
name of the charge; however, the fact that any charge bears the name of, or is
designed primarily to defray a particular expense or risk does not mean that
the amount we collect from that charge will never be more than the amount of
such expense or risk. Nor does it mean that we may not also be compensated for
such expense or risk out of any other charges we are permitted to deduct by
the terms of the contract.
INSURANCE AND ADMINISTRATIVE CHARGES
If you choose an optional benefit, the insurance and administrative cost
includes a charge to cover our assumption of the associated risk. The
mortality risk portion of the charge is for assuming the risk that the
annuitant(s) will live longer than expected based on our life expectancy
tables. When this happens, we pay a greater number of annuity payments. We
also incur the risk that the death benefit amount exceeds the Contract Value.
The expense risk portion of the charge is for assuming the risk that the
current charges will be insufficient in the future to cover the cost of
administering the contract. The administrative expense portion of the charge
compensates us for the expenses associated with the administration of the
contract. This includes preparing and issuing the contract; establishing and
maintaining contract records; preparation of confirmations and annual reports;
personnel costs; legal and accounting fees; filing fees; and systems costs.
We calculate the insurance and administrative charge based on the average
daily value of all assets allocated to the variable investment options. These
charges are not assessed against amounts allocated to the fixed interest rate
options. The amount of the charge depends on the death benefit (or other)
option that you choose.
The death benefit charge is equal to:
.. 1.40% on an annual basis if you choose the base death benefit, or
.. 1.65% on an annual basis if you choose the step-up Guaranteed Minimum Death
Benefit option (i.e., 0.25% in addition to the base death benefit charge).
We impose an additional insurance and administrative charge of 0.10% annually
(of Contract Value attributable to the variable investment options) for the
Contract With Credit.
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8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS PLUS 3
CONTRACT? continued
We impose an additional charge of 0.60% annually if you choose the Lifetime
Five Income Benefit. We impose an additional charge of 0.75% annually if you
choose the Spousal Lifetime Five Income Benefit. The 0.60% and 0.75% charges
are in addition to the charge we impose for the applicable death benefit, and
are deducted daily based on the Contract Value in the variable investment
options. Upon any reset of the amounts guaranteed under these benefits, we
reserve the right to adjust the charge to that being imposed at that time for
new elections of the benefits.
If the charges under the contract are not sufficient to cover our expenses,
then we will bear the loss. We do, however, expect to profit from these
charges. Any profits made from these charges may be used by us to pay for the
costs of distributing the contracts. If you choose the Contract With Credit,
we will also use any profits from this charge to recoup our costs of providing
the credit. The charges that we discuss in this section are assessed against
the assets of the separate account. Certain of these charges are part of the
base annuity and other charges are assessed only if any available optional
benefit is selected. If a fixed interest rate option is available under your
contract, the interest rate that we credit to that option may be reduced by an
amount that corresponds to the asset-based charges to which you are subject
under the variable investment options.
WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. The amount and duration
of the withdrawal charge depends on whether you choose the Contract With
Credit or the Contract Without Credit. The withdrawal charge varies with the
number of contract anniversaries that have elapsed since each purchase payment
being withdrawn was made. Specifically, we maintain an "age" for each purchase
payment you have made by keeping track of how many contract anniversaries have
passed since the purchase payment was made.
The withdrawal charge is the percentage, shown below, of the amount withdrawn.
If a withdrawal is effective on the day before a contract anniversary, the
withdrawal charge percentage as of the next following contract anniversary
will apply.
If you request a withdrawal, we will deduct an amount from the Contract Value
that is sufficient to pay the withdrawal charge, and provide you with the
amount requested.
If you request a full withdrawal, we will provide you with the full amount of
the Contract Value after making deductions for charges.
Each contract year, you may withdraw a specified amount of your Contract Value
without incurring a withdrawal charge. We determine the "charge-free" amount
available to you in a given contract year on the contract anniversary that
begins that year. In calculating the charge-free amount, we divide purchase
payments into two categories -- payments that are subject to a withdrawal
charge and those that are not. We determine the charge-free amount based only
on purchase payments that are subject to a withdrawal charge. The charge-free
amount in a given contract year is equal to 10% of the sum of all the purchase
payments subject to the withdrawal charge that you have made as of the
applicable contract anniversary. During the first contract year, the
charge-free amount is equal to 10% of the initial purchase payment.
When you make a withdrawal (including a withdrawal under the optional Lifetime
Five Income Benefit), we will deduct the amount of the withdrawal first from
the available charge-free amount. Any excess amount will then be deducted from
purchase
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payments in excess of the charge-free amount and subject to applicable
withdrawal charges. Once you have withdrawn all purchase payments, additional
withdrawals will come from any earnings. We do not impose withdrawal charges
on earnings.
If a withdrawal or transfer is taken from a market value adjustment guarantee
period, prior to the expiration of the rate guarantee period, we will make a
market value adjustment to the withdrawal amount. We will then apply a
withdrawal charge to the adjusted amount.
If you choose the Contract With Credit and make a withdrawal that is subject
to a withdrawal charge, we may use part of that withdrawal charge to recoup
our costs of providing the credit. However, we do not impose any withdrawal
charge on your withdrawal of a credit amount.
Withdrawal charges will never be greater than permitted by applicable law.
Minimum Distribution Requirements
If a withdrawal is taken from a tax qualified contract under the minimum
distribution option in order to satisfy an Internal Revenue Service mandatory
distribution requirement only with respect to that contract's account balance,
we will waive withdrawal charges. See Section 10, "What Are The Tax
Considerations Associated With The Strategic Partners Plus 3 Contract?"
CONTRACT MAINTENANCE CHARGE
On each contract anniversary during the accumulation phase, if your Contract
Value is less than $75,000, we will deduct the lesser of $30 or 2% of your
Contract Value, for administrative expenses. We may raise the level of the
Contract Value at which we waive this fee. The charge will be deducted
proportionately from each of the contract's investment options. This same
charge will also be deducted when you surrender your contract if your Contract
Value is less than $75,000.
GUARANTEED MINIMUM INCOME BENEFIT CHARGE
We will impose an additional charge if you choose the Guaranteed Minimum
Income Benefit. FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2004, we will deduct a
charge equal to 0.50% per year of the average GMIB protected value for the
period the charge applies. FOR ALL OTHER CONTRACTS, this is an annual charge
equal to 0.45% of the average GMIB protected value for the period the charge
applies. We deduct the charge from your Contract Value on each of the
following events:
.. each contract anniversary,
.. when you begin the income phase of the contract,
.. upon a full withdrawal, and
.. upon a partial withdrawal if the remaining Contract Value would not be
enough to cover the then applicable Guaranteed Minimum Income Benefit
charge.
If we impose this fee other than on a contract anniversary, then we will
pro-rate it based on the portion of the contract year that has elapsed since
the full annual fee was most recently deducted.
Because the charge is calculated based on the average GMIB protected value, it
does not increase or decrease based on changes to the annuity's Contract Value
due to market performance. If the GMIB protected value increases, the dollar
amount of the annual charge will increase, while a decrease in the GMIB
protected value will decrease the dollar amount of the charge.
The charge is deducted annually in arrears each contract year on the contract
anniversary. We deduct the amount of the charge pro-rata from the Contract
Value allocated to the variable investment options. If you surrender your
contract, begin receiving annuity payments under the GMIB or any other annuity
payout option we make available during a contract year, or the GMIB
terminates, we will deduct the charge for the portion of the contract year
since the prior contract anniversary (or the contract date if in the first
contract year). Upon a full withdrawal or if the Contract Value remaining
after a partial withdrawal is not enough to cover the applicable Guaranteed
Minimum Income Benefit charge, we will deduct the charge from the amount we
pay you.
THE FACT THAT WE MAY IMPOSE THE CHARGE UPON A FULL OR PARTIAL WITHDRAWAL DOES
NOT IMPAIR YOUR RIGHT TO MAKE A WITHDRAWAL AT THE TIME OF YOUR CHOOSING.
We will not impose the Guaranteed Minimum Income Benefit charge after the
income phase begins.
INCOME APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the Income Appreciator
Benefit. This is an annual charge equal to 0.25% of your Contract Value. The
Income Appreciator Benefit charge is calculated:
.. on each contract anniversary,
.. on the annuity date,
.. upon the death of the sole owner or the first-to-die of the owner or joint
owner prior to the annuity date,
.. upon a full or partial withdrawal, and
.. upon a subsequent purchase payment.
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8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS PLUS 3
CONTRACT? continued
The fee is based on the Contract Value at the time of the calculation, and is
prorated based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted.
Although the Income Appreciator Benefit charge may be calculated more often,
it is deducted only:
.. on each contract anniversary,
.. on the annuity date,
.. upon the death of the sole owner or first to die of the owner or joint
owner prior to the annuity date,
.. upon a full withdrawal, and
.. upon a partial withdrawal if the Contract Value remaining after such
partial withdrawal is not enough to cover the then-applicable Income
Appreciator Benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
The Income Appreciator Benefit charge is deducted from each investment option
in the same proportion that the amount allocated to the investment option
bears to the total Contract Value. No market value adjustment will apply to
the portion of the charge deducted from the Market Value Adjustment Option.
Upon a full withdrawal, or if the Contract Value remaining after a partial
withdrawal is not enough to cover the then-applicable Income Appreciator
Benefit charge, the charge is deducted from the amount paid. The payment of
the Income Appreciator Benefit charge will be deemed to be made from earnings
for purposes of calculating other charges. THE FACT THAT WE MAY IMPOSE THE
CHARGE UPON A FULL OR PARTIAL WITHDRAWAL DOES NOT IMPAIR YOUR RIGHT TO MAKE A
WITHDRAWAL AT THE TIME OF YOUR CHOOSING.
We do not assess this charge upon election of IAB Option 1, the completion of
IAB Option 2 or 3, and upon annuitization. However, we do assess the IAB
charge during the 10-year payment period contemplated by IAB Options 2 and 3.
Moreover, you should realize that amounts credited to your Contract Value
under IAB Option 3 increase the Contract Value, and because the IAB fee is a
percentage of your Contract Value, the IAB fee may increase as a consequence
of those additions.
BENEFICIARY CONTINUATION OPTION CHARGES
If your beneficiary takes the death benefit under the beneficiary continuation
option, we deduct a Settlement Service Charge. The charge is assessed daily
against the average assets allocated to the variable investment options, and
is equal to an annual charge of 1.00%. In addition, the beneficiary will incur
an annual maintenance fee equal to the lesser of $30 or 2% of Contract Value
if the Contract Value is less than $25,000 at the time the fee is assessed.
The fee will not apply if it is assessed 30 days prior to a surrender request.
Finally, transfers in excess of 20 per year will incur a $10 transfer fee.
TAXES ATTRIBUTABLE TO PREMIUM
There may be federal, state and premium based taxes applicable to your
purchase payment. We are responsible for the payment of these taxes and may
make a deduction from the value of the contract to pay some or all of these
taxes. New York does not currently charge premium taxes on annuities. It is
our current practice not to deduct a charge for the federal tax associated
with deferred acquisition costs paid by us that are based on premium received.
However, we reserve the right to charge the contract owner in the future for
any such tax associated with deferred acquisition costs and any federal, state
or local income, excise, business or any other type of tax measured by the
amount of premium received by us.
TRANSFER FEE
You can make 12 free transfers every contract year. We measure a contract year
from the date we issue your contract (contract date). If you make more than 12
transfers in a contract year (excluding Dollar Cost Averaging and
Auto-Rebalancing), we will deduct a transfer fee of $25 for each additional
transfer. We have the right to increase this fee up to a maximum of $30 per
transfer, but we have no current plans to do so. We will deduct the transfer
fee pro-rata from the investment options from which the transfer is made. The
transfer fee is deducted before the market value adjustment, if any, is
calculated. There is a different transfer fee under the beneficiary
continuation option.
COMPANY TAXES
We pay company income taxes on the taxable corporate earnings created by this
separate account product. While we may consider company income taxes when
pricing our products, we do not currently include such income taxes in the tax
charges you pay under the contract. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
In calculating our corporate income tax liability, we derive certain corporate
income tax benefits associated with the investment of company assets,
including separate account assets, which are treated as company assets under
applicable income tax law. These benefits reduce our overall corporate income
tax liability. Under current law, such benefits may include foreign tax
credits and
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corporate dividend received deductions. We do not pass these tax benefits
through to holders of the separate account annuity contracts because (i) the
contract owners are not the owners of the assets generating these benefits
under applicable income tax law and (ii) we do not currently include company
income taxes in the tax charges you pay under the contract. We reserve the
right to change these tax practices.
UNDERLYING MUTUAL FUND FEES
When you allocate a purchase payment or a transfer to the variable investment
options, we in turn invest in shares of a corresponding underlying mutual
fund. Those funds charge fees that are in addition to the contract-related
fees described in this section. For 2006, the fees of these funds ranged from
0.37% to 1.19% annually. For certain funds, expenses are reduced pursuant to
expense waivers and comparable arrangements. In general, these expense waivers
and comparable arrangements are not guaranteed, and may be terminated at any
time. For additional information about these fund fees, please consult the
prospectuses for the funds.
9: HOW CAN I ACCESS MY MONEY?
You can Access Your Money by:
.. MAKING A WITHDRAWAL (EITHER PARTIAL OR FULL); OR
.. CHOOSING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
When you make a full withdrawal, you will receive the value of your contract
minus any applicable charges and fees. We will calculate the value of your
contract and charges, if any, as of the date we receive your request in good
order at the Prudential Annuity Service Center.
Unless you tell us otherwise, any partial withdrawal and related withdrawal
charges will be taken proportionately from all of the investment options you
have selected. The minimum Contract Value that must remain in order to keep
your contract in force after a withdrawal is $2,000. If you request a
withdrawal amount that would reduce the Contract Value below this minimum, we
will withdraw the maximum amount available that, with the withdrawal charge,
would not reduce the Contract Value below such minimum.
With respect to the variable investment options, we will generally pay the
withdrawal amount, less any required tax withholding, within seven days after
we receive a withdrawal request in good order. We will deduct applicable
charges, if any, from the assets in your contract.
With respect to the market value adjustment option, you may specify the
guarantee period from which you would like to make a withdrawal. If you
indicate that the withdrawal is to originate from the market value adjustment
option, but you do not specify which guarantee period is to be involved, then
we will take the withdrawal from the guarantee period that has the least time
remaining until its maturity date. If you indicate that you wish to make a
withdrawal, but do not specify the investment options to be involved, then we
will take the withdrawal from your Contract Value on a pro rata basis from
each investment option that you have. In that situation, we will aggregate the
Contract Value in each of the guarantee periods that you have within the
market value adjustment option for purposes of making that pro rata
calculation. The portion of the withdrawal associated with the market value
adjustment option then will be taken from the guarantee periods with the least
amount of time remaining until the maturity date, irrespective of the original
length of the guarantee period. You should be aware that a withdrawal may
avoid a withdrawal charge based on the charge-free amount that we allow, yet
still be subject to a market value adjustment.
Income Taxes, Tax Penalties, and Certain Restrictions also may Apply to any
Withdrawal you make. For a more Complete Explanation, See Section 10.
AUTOMATED WITHDRAWALS
We offer an automated withdrawal feature. This feature enables you to receive
periodic withdrawals in monthly, quarterly, semiannual, or annual intervals.
We will process your withdrawals at the end of the business day at the
intervals you specify. We will continue at these intervals until you tell us
otherwise. You can make withdrawals from any designated investment option or
proportionally from all investment options (other than a guarantee period
within the market value adjustment option). The minimum automated withdrawal
amount you can make is generally $100. An assignment of the contract
terminates any automated withdrawal program that you had in effect.
Income Taxes, Tax Penalties, Withdrawal Charges, and Certain Restrictions may
Apply to Automated Withdrawals. For a more Complete Explanation, See Section
10.
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9: HOW CAN I ACCESS MY MONEY? continued
SUSPENSION OF PAYMENTS OR TRANSFERS
The SEC may require us to suspend or postpone payments made in connection with
withdrawals or transfers for any period when:
.. The New York Stock Exchange is closed (other than customary weekend and
holiday closings);
.. Trading on the New York Stock Exchange is restricted;
.. An emergency exists, as determined by the SEC, during which sales and
redemptions of shares of the underlying mutual funds are not feasible or we
cannot reasonably value the accumulation units; or
.. The SEC, by order, permits suspension or postponement of payments for the
protection of owners.
We expect to pay the amount of any withdrawal or process any transfer made
from the fixed interest rate options promptly upon request.
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
PLUS 3 CONTRACT?
The tax considerations associated with the Strategic Partners Plus 3 contract
vary depending on whether the contract is (i) owned by an individual and not
associated with a tax-favored retirement plan (including contracts held by a
non-natural person, such as a trust, acting as an agent for a natural person),
or (ii) held under a tax-favored retirement plan. We discuss the tax
considerations for these categories of contracts below. The discussion is
general in nature and describes only federal income tax law (not state or
other tax laws). It is based on current law and interpretations, which may
change. The discussion includes a description of certain spousal rights under
the contract and under tax-qualified plans. Our administration of such spousal
rights and related tax reporting accords with our understanding of the Defense
of Marriage Act (which defines a "marriage" as a legal union between a man and
a woman and a "spouse" as a person of the opposite sex). The information
provided is not intended as tax advice. You should consult with a qualified
tax advisor for complete information and advice. References to purchase
payments below relate to your cost basis in your contract. Generally, your
cost basis in a contract not associated with a tax-favored retirement plan is
the amount you pay into your contract, or into annuities exchanged for your
contract, on an after-tax basis less any withdrawals of such payments.
This contract may also be purchased as a non-qualified annuity (i.e., a
contract not held under a tax-favored retirement plan) by a trust or custodial
IRA 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.
Charges for investment advisory fees that are taken from the contract are
treated as a partial withdrawal from the contract and will be reported as such
to the contract owner.
It is possible that the Internal Revenue Service (IRS) would assert that some
or all of the charges for the optional benefits under the contract such as the
Guaranteed Minimum Death Benefit, should be treated for federal income tax
purposes as a partial withdrawal from the contract. If this were the case, the
charge for this benefit could be deemed a withdrawal and treated as taxable to
the extent there are earnings in the contract. Additionally, for owners under
age 59 1/2, the taxable income attributable to the charge for the benefit
could be subject to a tax penalty.
If the IRS determines that the charges for one or more benefits under the
contract are taxable withdrawals, then the sole or surviving owner will be
provided with a notice from us describing available alternatives regarding
these benefits.
Taxes on Withdrawals and Surrender
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income,
rather than as return of purchase payments, until all gain has been withdrawn.
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 withdrawals from the
contract while you are alive even if the withdrawal is paid to someone else.
Withdrawals under any of the enhanced living benefit options or as a
systematic payment are taxed under these rules.
70
If you assign or pledge all or part of your contract as collateral for a loan,
the part assigned generally will be treated as a withdrawal. Also, if you
elect any interest payment option that we may offer, that election will be
treated, for tax purposes, as surrendering your contract.
If you transfer your contract for less than full consideration, such as by
gift, you will trigger tax on any gain in the contract. This rule does not
apply if you transfer the contract to your spouse or under most circumstances
if you transfer the contract incident to divorce.
Taxes on Annuity Payments
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your purchase payments (less any amounts previously
received tax-free) and the denominator of which is the total expected payments
under the contract.
After the full amount of your purchase payments have been recovered tax-free,
the full amount of the annuity payments will be taxable. If annuity payments
stop due to the death of the annuitant before the full amount of your purchase
payments have been recovered, a tax deduction may be allowed for the
unrecovered amount.
Tax Penalty on Withdrawals and Annuity Payments
Any taxable amount you receive under your contract may be subject to a 10% tax
penalty. Amounts are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled;
.. the amount paid or received is in the form of substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty.); or
.. the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
Special Rules in Relation to Tax-Free Exchanges under Section 1035
Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits
certain tax-free exchanges of a life insurance, annuity or endowment contract
for an annuity. If the annuity is purchased through a tax-free exchange of a
life insurance, annuity or endowment contract that was purchased prior to
August 14, 1982, then any purchase payments made to the original contract
prior to August 14, 1982 will be treated as made to the new contract prior to
that date. (See "Federal Tax Status" in the Statement of Additional
Information.)
Partial surrenders may be treated in the same way as tax-free 1035 exchanges
of entire contracts, therefore avoiding current taxation of gains in the
contract as well as the 10% tax penalty of pre-age 59 1/2 withdrawals. The IRS
has reserved the right to treat transactions it considers abusive as
ineligible for this favorable partial 1035 exchange treatment. We do not know
what transactions may be considered abusive. For example we do not know how
the IRS may view early withdrawals or annuitizations after a partial exchange.
In addition, it is unclear how the IRS will treat a partial exchange from a
life insurance, endowment, or annuity contract into an immediate annuity. As
of the date of this prospectus, we will accept a partial 1035 exchange from a
non-qualified annuity into an immediate annuity as a "tax-free" exchange for
future tax reporting purposes, except to the extent that we, as a reporting
and withholding agent, believe that we would be expected to deem the
transaction to be abusive. However, some insurance companies may not recognize
these partial surrenders as tax-free exchanges and may report them as taxable
distributions to the extent of any gain distributed as well as subjecting the
taxable portion of the distribution to the 10% tax penalty. We strongly urge
you to discuss any transaction of this type with your tax advisor before
proceeding with the transaction.
Taxes Payable by Beneficiaries
The death benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the death
benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary. Choosing any option other than a lump sum death
benefit may defer taxes. Certain minimum distribution requirements apply upon
your death, as discussed further below.
Tax consequences to the beneficiary vary among the death benefit payment
options.
.. 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).
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10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
PLUS 3 CONTRACT? continued
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).
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.
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.
Annuity Qualification
Diversification And Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
variable investment options of the annuity contract must be diversified,
according to certain rules under the Internal Revenue Code. Each portfolio is
required to diversify its investments each quarter so that no more than 55% of
the value of its assets is represented by any one investment, no more than 70%
is represented by any two investments, no more than 80% is represented by any
three investments, and no more than 90% is represented by any four
investments. Generally, securities of a single issuer are treated as one
investment and obligations of each U.S. Government agency and instrumentality
(such as the Government National Mortgage Association) are treated as issued
by separate issuers. In addition, any security issued, guaranteed or insured
(to the extent so guaranteed or insured) by the United States or an
instrumentality of the U.S. will be treated as a security issued by the U.S.
Government or its instrumentality, where applicable. We believe the portfolios
underlying the variable investment options of the Contract meet these
diversification requirements. An additional requirement for qualification for
the tax treatment described above is that we, and not you as the contract
owner, must have sufficient control over the underlying assets to be treated
as the owner of the underlying assets for tax purposes. While we also believe
these investor control rules will be met, the Treasury Department may
promulgate guidelines under which a variable annuity will not be treated as an
annuity for tax purposes if persons with ownership rights have excessive
control over the investments underlying such variable annuity. It is unclear
whether such guidelines, if in fact promulgated, would have retroactive
effect. It is also unclear what effect, if any, such guidelines may have on
transfers between the investment options offered pursuant to this prospectus.
72
REQUIRED DISTRIBUTIONS UPON YOUR DEATH FOR CONTRACTS OWNED BY INDIVIDUALS (NOT
ASSOCIATED WITH TAX-FAVORED PLANS) Upon your death, certain distributions must
be made under the contract. The required distributions depend on whether you
die before you start taking annuity payments under the contract or after you
start taking annuity payments under the contract.
If you die on or after the annuity date, the remaining portion of the interest
in the contract must be distributed at least as rapidly as under the method of
distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within five years after the date of death or as periodic
payments over a period not extending beyond the life or life expectancy of
such 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, that portion of the contract may be continued with your
spouse as the owner.
Additional Information
You should refer to the Statement of Additional Information if:
.. Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
.. You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
CONTRACTS HELD BY TAX-FAVORED PLANS
The following discussion covers annuity contracts held under tax-favored
retirement plans.
Currently, the contract may be purchased for use in connection with individual
retirement accounts and annuities (IRAs) which are subject to Sections 408(a)
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.
YOU SHOULD BE AWARE THAT TAX FAVORED PLANS SUCH AS IRAS GENERALLY PROVIDE TAX
DEFERRAL REGARDLESS WHETHER THEY INVEST IN ANNUITY CONTRACTS. THIS MEANS THAT
WHEN A TAX FAVORED PLAN INVESTS IN AN ANNUITY CONTRACT, IT GENERALLY DOES NOT
RESULT IN ANY ADDITIONAL TAX DEFERRAL BENEFITS.
Types of Tax Favored Plans
IRAs. If you buy a contract for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement," attached to this
prospectus, contains information about eligibility, contribution limits, tax
particulars, and other IRA information. In addition to this information (some
of which is summarized below), the IRS requires that you have a "free look"
after making an initial contribution to the contract. During this time, you
can cancel the contract by notifying us in writing, and we will refund all of
the purchase payments under the contract (or, if provided by applicable state
law, the amount your contract is worth, if greater), less any applicable
federal and state income tax withholding.
Contributions Limits/Rollovers. Because of the way the contract is designed,
you may only purchase a contract for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan or transfer from another IRA, or if
you are age 50 or older and by making a single contribution consisting of your
IRA contributions and catch-up contributions attributable to the prior year
and the current year during the period from January 1 to April 15 of the
current year. You must make a minimum initial payment of $10,000 to purchase a
contract. This minimum is greater than the maximum amount of any annual
contribution allowed by law you may make to an IRA. For 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;
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10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
PLUS 3 CONTRACT? continued
.. You cannot sell, assign or pledge the contract, other than to Pruco Life of
New Jersey;
.. The annual contribution you pay cannot be greater than the maximum amount
allowed by law, including catch-up contributions if applicable (which does
not include any rollover amounts);
.. The date on which 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 $10,000 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, or another Roth
IRA, or if you are age 50 or older and by making a single contribution
consisting of your Roth IRA contributions and catch-up contributions
attributable to the prior year and the current year during the period from
January 1 to April 15 of the current year. 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 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. 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 Distributions 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% tax penalty on the amount of any minimum
distribution not made in a timely manner.
Effective in 2006, in accordance with recent changes in laws and regulations,
required minimum distributions will be calculated based on the sum of the
Contract Value and the actuarial value of any additional death benefits and
benefits from optional riders that you have purchased under the contract. As a
result, the required minimum distributions may be larger than if the
calculation were based on the Contract Value only, which may in turn result in
an earlier (but not before the required beginning date)
74
distribution of amounts under the contract and an increased amount of taxable
income distributed to the contract owner, and a reduction of death benefits
and the benefits of any optional riders.
You can use the minimum distribution option to satisfy the IRS 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 by 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 distribution must begin under the Code, the death
benefit must be paid out within five years from the date of death. For
contract 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 investments"
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.
Penalty for Early Withdrawals
You may owe a 10% tax penalty on the taxable part of distributions received
from an IRA or Roth IRA before you attain age 59 1/2.
Amounts are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled; or
.. the amount paid or received is in the form of substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty.)
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
Withholding
Unless you elect otherwise, we will withhold federal income tax from the
taxable portion of such distribution at an appropriate percentage. The rate of
withholding on annuity payments where no mandatory withholding is required is
determined on the basis of
75
10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
PLUS 3 CONTRACT? continued
the withholding certificate that you file with us. If you do not file a
certificate, we will automatically withhold federal taxes on the following
basis:
.. For any annuity payments not subject to mandatory withholding, you will
have taxes withheld by us as if you are a married individual, with three
exemptions; and
.. For all other distributions, we will withhold at a 10% rate.
We will provide you with forms and instructions concerning the right to elect
that no amount be withheld from payments in the ordinary course. However, you
should know that, in any event, you are liable for payment of federal income
taxes on the taxable portion of the distributions, and you should consult with
your tax advisor to find out more information on your potential liability if
you fail to pay such taxes.
ERISA Disclosure/Requirements
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevent a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from
receiving any benefit from any party dealing with the plan, as a result of the
sale of the contract. Administrative exemptions under ERISA generally permit
the sale of insurance/annuity products to plans, provided that certain
information is disclosed to the person purchasing the contract. This
information has to do primarily with the fees, charges, discounts and other
costs related to the contract, as well as any commissions paid to any agent
selling the contract.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under Section 8, "What Are The Expenses Associated
With The Strategic Partners Plus 3 Contract?"
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract" in Section 11.
Additional Information
For additional information about federal tax law requirements applicable to
tax favored plans, see the "IRA Disclosure Statement," attached to this
prospectus.
11: OTHER INFORMATION
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey) is a
stock life insurance company which was organized on September 17, 1982 under
the laws of the State of New Jersey. It is licensed to sell life insurance and
annuities in New Jersey and New York, and accordingly is subject to the laws
of each of those states.
Pruco Life of New Jersey is an indirect wholly-owned subsidiary of The
Prudential Insurance Company of America (Prudential), a New Jersey stock life
insurance company doing business since 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 of New
Jersey's ultimate parent, Prudential Financial exercises significant influence
over the operations and capital structure of Pruco Life of New Jersey and
Prudential. However, neither Prudential Financial, Prudential, nor any other
related company has any legal responsibility to pay amounts that Pruco Life of
New Jersey may owe under the contract.
Pruco Life of New Jersey publishes annual and quarterly reports that are filed
with the SEC. These reports contain financial information about Pruco Life of
New Jersey that is annually audited by independent accountants. Pruco Life of
New Jersey's annual report for the year ended December 31, 2006, together with
subsequent periodic reports that Pruco Life of New Jersey files with the SEC,
are incorporated by reference into this prospectus. You can obtain copies, at
no cost, of any and all of this information, including the Pruco Life of New
Jersey annual report that is not ordinarily mailed to contract owners, the
more current reports and any subsequently filed documents at no cost by
contacting us at the address or telephone number listed on the cover. The SEC
file number for Pruco Life of New Jersey is 811-07975. You may read and copy
any filings made by Pruco Life of New Jersey with the SEC at the SEC's Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. 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.
76
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life of New Jersey Flexible
Premium Variable Annuity Account (separate account), to hold the assets that
are associated with the variable annuity contracts. The separate account was
established under New Jersey law on May 20, 1996, and is registered with the
SEC under the Investment Company Act of 1940 as a unit investment trust, which
is a type of investment company. The assets of the separate account are held
in the name of Pruco Life of New Jersey and legally belong to us. These assets
are kept separate from all of our other assets and may not be charged with
liabilities arising out of any other business we may conduct. More detailed
information about Pruco Life of New Jersey, including its audited financial
statements, is provided in the SAI.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC (PIMS), a wholly-owned
subsidiary of Prudential Financial, Inc., is the distributor and principal
underwriter of the securities offered through this prospectus. PIMS acts as
the distributor of a number of annuity contracts and life insurance products
we offer.
PIMS's principal business address is 100 Mulberry Street, Newark, New Jersey
07102-4077. PIMS is registered as a broker/dealer under the Securities
Exchange Act of 1934 (Exchange Act) and is a member of the National
Association of Securities Dealers, Inc. (NASD).
The contract is offered on a continuous basis. PIMS enters into distribution
agreements with broker/dealers who are registered under the Exchange Act and
with entities that may offer the contract but are exempt from registration
(firms). Applications for the contract are solicited by registered
representatives of those firms. Such representatives will also be our
appointed insurance agents under state insurance law. In addition,
PIMS may offer the contract directly to potential purchasers.
Commissions are paid to firms on sales of the contract according to one or
more schedules. The individual representative will receive a portion of the
compensation, depending on the practice of his or her firm. Commissions are
generally based on a percentage of purchase payments made, up to a maximum of
8%. Alternative compensation schedules are available that provide a lower
initial commission plus ongoing annual compensation based on all or a portion
of Contract Value. We may also provide compensation to the distributing firm
for providing ongoing service to you in relation to the contract. Commissions
and other compensation paid in relation to the contract do not result in any
additional charge to you or to the separate account.
In addition, in an effort to promote the sale of our products (which may
include the placement of Pruco Life of New Jersey and/or the contract on a
preferred or recommended company or product list and/or access to the firm's
registered representatives), we or PIMS may enter into compensation
arrangements with certain broker/dealer firms with respect to certain or all
registered representatives of such firms under which such firms may receive
separate compensation or reimbursement for, among other things, training of
sales personnel and/or marketing and/or administrative services and/or other
services they provide to us or our affiliates. These services may include, but
are not limited to: educating customers of the firm on the contract's
features; conducting due diligence and analysis; providing office access,
operations and systems support; holding seminars intended to educate
registered representatives and make them more knowledgeable about the
contract; providing a dedicated marketing coordinator; providing priority
sales desk support; and providing expedited marketing compliance approval to
PIMS. Further information about the firms that are part of these compensation
arrangements appears in the Statement of Additional Information which is
available without charge upon request.
To the extent permitted by NASD rules and other applicable laws and
regulations, PIMS may pay or allow other promotional incentives or payments in
the form of cash or non-cash compensation. These arrangements may not be
offered to all firms and the terms of such arrangements may differ between
firms.
You should note that firms and individual registered representatives and
branch managers within some firms participating in one of these compensation
arrangements might receive greater compensation for selling the contract than
for selling a different contract that is not eligible for these compensation
arrangements. While compensation is generally taken into account as an expense
in considering the charges applicable to a contract product, any such
compensation will be paid by us or PIMS and will not result in any additional
charge to you. Overall compensation paid to the distributing firm does not
exceed, based on actuarial assumptions, 8.5% of the total purchase payments
made. Your registered representative can provide you with more information
about the compensation arrangements that apply upon the sale of the contract.
On July 1, 2003, Prudential Financial combined its retail securities brokerage
and clearing operations with those of Wachovia Corporation ("Wachovia") and
formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a
joint venture headquartered in Richmond, Virginia. PFI has a 38% ownership
interest in the joint venture, while Wachovia owns the remaining 62%. Wachovia
and Wachovia Securities are key distribution partners for certain products of
Prudential Financial affiliates, including mutual funds and individual
annuities that are distributed through their financial advisors, bank channel
and independent
77
11: OTHER INFORMATION continued
channel. In addition, Prudential Financial is a service provider to the
managed account platform and certain wrap-fee programs offered by Wachovia
Securities. The Strategic Partners Plus and Strategic Partners Plus 3 variable
annuities are sold through Wachovia Securities.
LITIGATION
Pruco Life of New Jersey is subject to legal and regulatory actions in the
ordinary course of its businesses, which may include class action lawsuits.
Pending legal and regulatory actions include proceedings relating to aspects
of the businesses and operations that are specific to Pruco Life of New Jersey
and that are typical of the businesses in which Pruco Life of New Jersey
operates. Class action and individual lawsuits may involve a variety of issues
and/or allegations, which include sales practices, underwriting practices,
claims payment and procedures, premium charges, policy servicing and breach of
fiduciary duties to customers. Pruco Life of New Jersey 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.
Pruco Life of New Jersey'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
the Pruco Life of New Jersey in a particular quarterly or annual period could
be materially affected by an ultimate unfavorable resolution of litigation and
regulatory matters, 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 the Pruco Life of New Jersey's financial position.
ASSIGNMENT
In general, you can assign the contract at any time during your lifetime. If
you do so, we will reset the death benefit to equal the Contract Value on the
date the assignment occurs. For details, see Section 4, "What Is The Death
Benefit?" We will not be bound by the assignment until we receive written
notice. We will not be liable for any payment or other action we take in
accordance with the contract if that action occurs before we receive notice of
the assignment. An assignment, like any other change in ownership, may trigger
a taxable event. If you assign the contract, that assignment will result in
the termination of any automated withdrawal program that had been in effect.
If the new owner wants to re-institute an automated withdrawal program, then
he/she needs to submit the forms that we require, in good order.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
FINANCIAL STATEMENTS
The financial statements of the separate account and Pruco Life of New Jersey,
the co-issuer of the Strategic Partners Plus 3 contract, are included in the
Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
.. Company
.. Experts
.. Principal Underwriter
.. Payments Made to Promote Sale of Our Products
.. Allocation of Initial Purchase Payment
.. Determination of Accumulation Unit Values
.. Federal Tax Status
.. Financial Statements
.. Separate Account Financial Information
.. Company Financial Information
HOUSEHOLDING
To reduce costs, we now send only a single copy of prospectuses and
shareholder reports to each consenting household, in lieu of sending a copy to
each contract owner that resides in the household. If you are a member of such
a household, you should be aware that you can revoke your consent to
householding at any time, and begin to receive your own copy of prospectuses
and shareholder reports, by calling (877) 778-5008.
78
MARKET-VALUE ADJUSTMENT FORMULA
The general formula under which Pruco Life of New Jersey calculates the market
value adjustment applicable to a full or partial surrender, annuitization, or
settlement under Strategic Partners Plus 3 is set forth below. The market
value adjustment is expressed as a multiplier factor. That is, the Contract
Value after the market value adjustment ("MVA"), but before any withdrawal
charge, is as follows: Contract Value (after MVA) = Contract Value (before
MVA) X (1 + MVA). The MVA itself is calculated as follows:
The MVA formula with respect to contracts issued in New York is what is
depicted above. The formula uses an interpolated rate "J" as the current
credited interest rate. Specifically, "J" is the interpolated current credited
interest rate offered on new money at the time of withdrawal, annuitization,
or settlement. The interpolated value is calculated using the following
formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of
the current guarantee period.
Market Value Adjustment Example
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
.. Suppose a contract owner made an invested purchase payment of $10,000 on
July 1, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. At the time, the
Contract Value will have accumulated to $11,127.11. The number of whole
years remaining in the guarantee period is 3.
.. On May 1, 2007 the interest rate declared by Pruco Life of New Jersey for a
guarantee period of 3 years (the number of whole years remaining) is 4%,
and for a guarantee period of 4 years (the number of whole years remaining
plus 1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the power
of (38/12) -1 = 0.04871
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04871 = $542.00
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $542.00 = $11,669.11
79
11: OTHER INFORMATION continued
The MVA may not always be positive. Here is an example where it is negative.
.. Suppose a contract owner made an invested purchase payment of $10,000 on
July 1, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. At the time, the
Contract Value will have accumulated to $11,127.11. The number of whole
years remaining in the guarantee period is 3.
.. On May 1, 2007 the interest rate declared by Pruco Life of New Jersey for a
guarantee period of 3 years (the number of whole years remaining) is 7%,
and for a guarantee period of 4 years (the number of whole years remaining
plus 1) is 8%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the power
of (38/12) -1 = -0.04126
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04126) = -$459.10
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$459.10) = $10,668.10
80
APPENDIX A - ACCUMULATION UNIT VALUES
As we have indicated throughout this prospectus, the Strategic Partners
Annuity One 3 Variable Annuity is a contract that allows you to select or
decline any of several features that carries with it a specific asset-based
charge. We maintain a unique unit value corresponding to each combination of
such contract features. Here we depict the historical unit values
corresponding to the contract features bearing the highest and lowest
combinations of asset-based charges. The remaining unit values appear in the
Statement of Additional Information, which you may obtain free of charge, by
calling (888) PRU-2888 or by writing to us at the Prudential Annuity Service
Center, P.O. Box 7960, Philadelphia, PA 19176. As discussed in the prospectus,
if you select certain optional benefits (e.g., Lifetime Five), we limit the
investment options to which you may allocate your Contract Value. In certain
of these accumulation unit value tables, we set forth accumulation unit values
that assume election of one or more of such optional benefits and allocation
of Contract Value to portfolios that currently are not permitted as part of
such optional benefits. Such unit values are set forth for general reference
purposes only, and are not intended to indicate that such portfolios may be
acquired along with those optional benefits.
(BASE DEATH BENEFIT 1.40)
A-1
A-2
A-3
A-4
A-5
* As applicable, date that portfolio was first offered in the product and/or
this charge combination first appeared.
(Contract w Credit, GMDB Step Up, Lifetime Five 2.35)
A-6
A-7
A-8
A-9
* As applicable, date that portfolio was first offered in the product and/or
this charge combination first appeared.
A-10
APPENDIX B - SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
Within the Strategic Partners/SM/ family of annuities, we offer several
different deferred variable annuity products. These annuities are issued by
Pruco Life Insurance Company of New Jersey. Not all of these annuities may be
available to you due to state approval or broker-dealer offerings. You can
verify which of these annuities is available to you by asking your registered
representative, or by calling us at (888) PRU-2888. For comprehensive
information about each of these annuities, please consult the prospectus for
the annuity.
Each annuity has different features and benefits that may be appropriate for
you, based on your individual financial situation and how you intend to use
the annuity.
The different features and benefits may include variations on your ability to
access funds in your annuity without the imposition of a withdrawal charge as
well as different ongoing fees and charges you pay while your contract remains
in force. Additionally, differences may exist in various optional benefits
such as guaranteed living benefits or death benefit protection.
Among the factors you should consider when choosing which annuity product may
be most appropriate for your individual needs are the following:
.. Your age;
.. The amount of your investment and any planned future deposits into the
annuity;
.. How long you intend to hold the annuity (also referred to as investment
time horizon);
.. Your desire to make withdrawals from the annuity;
.. Your investment return objectives;
.. The effect of optional benefits that may be elected; and
.. Your desire to minimize costs and/or maximize return associated with the
annuity.
The following chart sets forth the prominent features of each Strategic
Partners variable annuity. The availability of optional features, such as
those noted in the chart, may increase the cost of the contract. Therefore,
you should carefully consider which features you plan to use when selecting
your annuity.
In addition to the chart, we set out below certain hypothetical illustrations
that reflect the Contract Value and surrender value of each variable annuity
over a variety of holding periods. These charts are meant to reflect how your
annuities can grow or decrease depending on market conditions and the
comparable value of each of the annuities (which reflects the charges
associated with the annuities) under the assumptions noted. In comparing the
values within the illustrations, a number of distinctions are evident. To
fully appreciate these distinctions, we encourage you to speak to your
registered representative and to read the prospectuses. However, we do point
out the following noteworthy items:
.. Strategic Partners Advisor, because it has no sales charge, offers the
highest surrender value during the first few years. However, unlike the
Strategic Partners Annuity One 3/Plus 3 contracts, Strategic Partners
Advisor offers few optional benefits.
.. Strategic Partners Select, as part of its standard insurance and
administrative expense, offers a guaranteed minimum death benefit equal to
the greater of the Contract Value or a step-up value. In contrast, you
incur an additional charge if you opt for an enhanced death benefit under
the other annuities.
.. Strategic Partners Annuity One 3 / Plus 3 comes in both a bonus version and
a non-bonus version, each of which offers several optional insurance
features. A bonus is added to your purchase payments under the bonus
version, although the withdrawal charges under the bonus version are higher
than those under the non-bonus version. Although the non-bonus version
offers no bonus, it is accompanied by fixed interest rate options and a
market value adjustment option that may provide higher interest rates than
such options accompanying the bonus version.
STRATEGIC PARTNERS ANNUITY PRODUCT COMPARISON. Below is a summary of Strategic
Partners variable annuity products. You should consider the investment
objectives, risks, charges and expenses of an investment in any contract
carefully before investing. Each product prospectus as well as the underlying
portfolio prospectuses contains this and other information about the variable
annuities and underlying investment options. Your registered representative
can provide you with prospectuses for one or more of these variable annuities
and the underlying portfolios and can help you decide upon the product that
would be most advantageous for you given your individual needs. Please read
the prospectuses carefully before investing.
B-1
1 Withdrawals of taxable amounts will be subject to income tax, and prior to
age 59 1/2, may be subject to a 10% federal income tax penalty.
2 May offer lower interest rates for the fixed rate options than the interest
rates offered in the contracts without credit.
B-2
3 For more information on these benefits, refer to section 4, "What Is The
Death Benefit?" in the Prospectus.
4 For more information on these benefits, refer to section 3, "What Kind of
Payments Will I Receive During The Income Phase?"; section 5, "What Is The
LifeTime Five(SM) Income Benefit?"; (discussing Lifetime Five and Spousal
Lifetime Five) and section 6, "What Is The Income Appreciator Benefit?" in
the Prospectus.
HYPOTHETICAL ILLUSTRATION
The following examples outline the value of each annuity as well as the amount
that would be available to an investor as a result of full surrender at the
end of each of the contract years specified. The values shown below are based
on the following assumptions:
.. An initial investment of $100,000 is made into each contract earning a
gross rate of return of 0% and 6% respectively.
.. No subsequent deposits or withdrawals are made to/from the contract.
.. The hypothetical gross rates of return are reduced by the arithmetic
average of the fees and expenses of the underlying portfolios and the
charges that are deducted from the contract at the Separate Account level
as follows:
-- 0.97% average of all fund expenses are computed by adding Portfolio
management fees, 12b-1 fees and other expenses of all of the underlying
portfolios and then dividing by the number of portfolios. For purposes
of the illustrations, we do not reflect any expense reimbursements or
expense waivers that might apply and are described in the prospectus fee
table. Please note that because the SP Aggressive Growth Asset
Allocation Portfolio, the SP Balanced Asset Allocation Portfolio, the SP
Conservative Asset Allocation Portfolio, and the SP Growth Asset
Allocation Portfolio generally were closed to investors in 2005, the
fees for such portfolios are not reflected in the above-mentioned
average.
-- The Separate Account level charges include the Insurance Charge and
Administration Charge (as applicable).
The Contract Value assumes no surrender while the Surrender Value assumes a
100% surrender two days prior to the contract anniversary, therefore
reflecting the withdrawal charge applicable to that contract year. Note that a
withdrawal on the contract anniversary, or the day before the contract
anniversary, would be subject to the withdrawal charge applicable to the next
contract year, which usually is lower. The values that you actually experience
under a contract will be different from what is depicted here if any of the
assumptions we make here differ from your circumstances, however the relative
values for each product reflected below will remain the same. We will provide
you with a personalized illustration upon request.
B-3
0% GROSS RETURN
Assumptions:
1. $100,000 initial investment.
2. As of December 31, 2006, the average fund expenses =0.97%.
3. No optional death benefit(s) and/or optional living benefit(s) were elected.
4. These reductions result in hypothetical net rates of return as follows:
Strategic Partners Advisor -2.33%; Strategic Partners Select -2.44%;
Strategic Partners Annuity One 3/Plus 3 Non-Bonus -2.33%; Strategic
Partners Annuity One 3/Plus 3 Bonus -2.42 %.
5. The illustration above illustrates 100% invested into the variable
sub-accounts. Investments into the fixed rate accounts, as noted above, may
receive a higher rate of interest in one product over another causing
Contract Values to differ in relation to one another.
6. Surrender Value assumes surrender 2 days prior to policy anniversary.
B-4
6% GROSS RETURN
Assumptions:
1. $100,000 initial investment.
2. As of December 31, 2006, the average fund expenses =0.97%.
3. No optional death benefit(s) and/or optional living benefit(s) were elected.
4. These reductions result in hypothetical net rates of return as follows:
Strategic Partners Advisor 3.53%; Strategic Partners Select 3.41%;
Strategic Partners Annuity One 3/Plus 3 Non-Bonus 3.53%; Strategic Partners
Annuity One 3/Plus 3 Bonus 3.43%.
5. The illustration above illustrates 100% invested into the variable
sub-accounts. Investments into the fixed rate accounts, as noted above, may
receive a higher rate of interest in one product over another causing
Contract Values to differ in relation to one another.
6. Surrender Value assumes surrender 2 days prior to policy anniversary.
B-5
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS
FURTHER DETAILS ABOUT THE PRUCO LIFE OF NEW JERSEY ANNUITY
DESCRIBED IN PROSPECTUS P2401NY (05/2007).
------------------------
(print your name)
------------------------
(address)
------------------------
(city/state/zip code)
MAILING ADDRESS:
PRUDENTIAL ANNUITY SERVICE CENTER
P.O. Box 7960
Philadelphia, PA 19176
[LOGO]
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102-3777
P2401NY
PRSRT STD
U.S. POSTAGE
PAID
LANCASTER, PA
PERMIT NO. 1793
STRATEGIC PARTNERS/SM/ ANNUITY ONE 3 VARIABLE ANNUITY
Prospectus: May 1, 2007
------------------------
This Prospectus describes an individual variable annuity contract offered by
Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey) and the
Pruco Life of New Jersey Flexible Premium Annuity Account. Pruco Life of New
Jersey offers several different annuities which your representative may be
authorized to offer to you. Each annuity has different features and benefits
that may be appropriate for you based on your financial situation, your age
and how you intend to use the annuity. Please note that selling broker-dealer
firms through which the contract is sold may decline to make available to
their customers certain of the optional features and investment options
offered generally under the contract. Alternatively, such firms may restrict
the availability of the optional benefits that they do make available to their
customers (e.g., by imposing a lower maximum issue age for certain optional
benefits than what is prescribed generally under the contract). Please speak
to your registered representative for further details. The different features
and benefits include variations in death benefit protection and the ability to
access your annuity's contract value. The fees and charges under the annuity
contract and the compensation paid to your representative may also be
different among each annuity. If you are purchasing the contract as a
replacement for existing variable annuity or variable life coverage, you
should consider, among other things, any surrender or penalty charges you may
incur when replacing your existing coverage. Pruco Life of New Jersey is an
indirect wholly-owned subsidiary of the Prudential Insurance Company of
America.
THE FUNDS
Strategic Partners Annuity One 3 offers a wide variety of investment choices,
including variable investment options that invest in underlying mutual funds.
Currently, portfolios of the following underlying mutual funds are being
offered: The Prudential Series Fund, Advanced Series Trust (formerly named
American Skandia Trust), Gartmore Variable Insurance Trust, and Janus Aspen
Series (see next page for list of portfolios currently offered).
You may choose between two basic versions of Strategic Partners Annuity One 3.
One version, the Contract With Credit, provides for a bonus credit that we add
to each purchase payment you make. If you choose this version of Strategic
Partners Annuity One 3, some charges and expenses may be higher than if you
choose the version without the credit. Those higher charges could exceed the
amount of the credit under some circumstances, particularly if you withdraw
purchase payments within a few years of making those purchase payments.
PLEASE READ THIS PROSPECTUS
Please read this prospectus before purchasing a Strategic Partners Annuity One
3 variable annuity contract, and keep it for future reference. The current
prospectuses for the underlying mutual funds contain important information
about the mutual funds. When you invest in a variable investment option that
is funded by a mutual fund, you should read the mutual fund prospectus and
keep it for future reference. The Risk Factors section relating to the market
value adjustment option appears in the Summary.
TO LEARN MORE ABOUT STRATEGIC PARTNERS ANNUITY ONE 3
To learn more about the Strategic Partners Annuity One 3 variable annuity, you
can request a copy of the Statement of Additional Information (SAI) dated
May 1, 2007. The SAI has been filed with the Securities and Exchange
Commission (SEC) and is legally a part of this prospectus. Pruco Life of New
Jersey also files other reports with the SEC. All of these filings can be
reviewed and copied at the SEC's offices, and can also be obtained from the
SEC's Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549.
(See SEC file numbers 333-49230 and 333-103473.) You may obtain information on
the operation of the Public Reference Room by calling the SEC at
(202) 551-8090. The SEC maintains a Web site (http://www.sec.gov) that
contains the Strategic Partners Annuity One 3 SAI, material incorporated by
reference, and other information regarding registrants that file
electronically with the SEC. The Table of Contents of the SAI is set forth in
Section 11 of this prospectus.
For a free copy of the SAI, call us at (888) PRU-2888, or write to us at
Prudential Annuity Service Center, P.O. Box 7960, Philadelphia, PA 19176.
- --------------------------------------------------------------------------------
THE SEC HAS NOT DETERMINED THAT THIS CONTRACT IS A GOOD INVESTMENT, NOR HAS
THE SEC DETERMINED THAT THIS PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A
CRIMINAL OFFENSE TO STATE OTHERWISE. INVESTMENT IN A VARIABLE ANNUITY CONTRACT
IS SUBJECT TO RISK, INCLUDING THE POSSIBLE LOSS OF YOUR MONEY. AN INVESTMENT
IN STRATEGIC PARTNERS ANNUITY ONE 3 IS NOT A BANK DEPOSIT AND IS NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
STRATEGIC PARTNERS/SM/ IS A SERVICE MARK OF THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA. ORD01182NY
- --------------------------------------------------------------------------------
INVESTMENT OPTIONS
The Prudential Series Fund
Jennison Portfolio
Prudential Equity Portfolio
Prudential Global Portfolio
Prudential Money Market Portfolio
Prudential Stock Index Portfolio
Prudential Value Portfolio
SP Aggressive Growth Asset Allocation Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Growth Asset Allocation Portfolio
SP AIM Core Equity Portfolio
SP Davis Value Portfolio
SP International Growth Portfolio
SP International Value Portfolio
SP Mid Cap Growth Portfolio
SP PIMCO High Yield Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP Small-Cap Growth Portfolio
SP Small Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio
SP T. Rowe Price Large-Cap Growth Portfolio
Advanced Series Trust
AST Advanced Strategies Portfolio
AST Aggressive Asset Allocation Portfolio
AST AllianceBernstein Core Value Portfolio
AST AllianceBernstein Growth & Income Portfolio
AST AllianceBernstein Managed Index 500 Portfolio
AST American Century Income & Growth Portfolio
AST American Century Strategic Allocation Portfolio
AST Balanced Asset Allocation Portfolio
AST Capital Growth Asset Allocation Portfolio
AST Cohen & Steers Realty Portfolio
AST Conservative Asset Allocation Portfolio
AST DeAM Large-Cap Value Portfolio
AST DeAM Small-Cap Value Portfolio
AST Federated Aggressive Growth Portfolio
AST First Trust Balanced Target Portfolio
AST First Trust Capital Appreciation Target Portfolio
AST Goldman Sachs Concentrated Growth Portfolio
AST Goldman Sachs Mid-Cap Growth Portfolio
AST High Yield Portfolio
AST JPMorgan International Equity Portfolio
AST Large-Cap Value Portfolio
AST Lord Abbett Bond-Debenture Portfolio
AST Marsico Capital Growth Portfolio
AST MFS Global Equity Portfolio
AST MFS Growth Portfolio
AST Mid-Cap Value Portfolio
AST Neuberger Berman Mid-Cap Growth Portfolio
AST Neuberger Berman Mid-Cap Value Portfolio
AST Neuberger Berman Small-Cap Growth Portfolio
AST PIMCO Limited Maturity Bond Portfolio
AST Preservation Asset Allocation Portfolio
AST Small-Cap Value Portfolio
AST T. Rowe Price Asset Allocation Portfolio
AST T. Rowe Price Global Bond Portfolio
AST T. Rowe Price Natural Resources Portfolio
AST UBS Dynamic Alpha Portfolio
Gartmore Variable Insurance Trust
GVIT Developing Markets Fund
Janus Aspen Series
Large Cap Growth Portfolio -- Service Shares
CONTENTS
3
4
PART I SUMMARY
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STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS
5
GLOSSARY
We have tried to make this prospectus as easy to read and understand as
possible. By the nature of the contract, however, certain technical words or
terms are unavoidable. We have identified the following as some of these words
or terms.
Accumulation Phase
The period that begins with the contract date (which we define below) and ends
when you start receiving income payments, or earlier if the contract is
terminated through a full withdrawal or payment of a death benefit.
Adjusted Contract Value
When you begin receiving income payments, the value of your contract adjusted
for any market value adjustment minus any charge we impose for premium taxes
and withdrawal charges.
Annual Income Amount
Under the terms of the Lifetime Five Income Benefit, an amount that you can
withdraw each year as long as the annuitant lives. Under the Spousal Lifetime
Five Income Benefit, the annual income amount is paid until the later death of
two natural persons who are each other's spouses at the time of election and
at the first death of one of them.
Annual Withdrawal Amount
Under the terms of the Lifetime Five Income Benefit, an amount that you can
withdraw each year as long as there is Protected Withdrawal Value remaining.
The Annual Withdrawal Amount is set initially to equal 7% of the initial
Protected Withdrawal Value, but will be adjusted to reflect subsequent
purchase payments, withdrawals, and any step-up.
Annuitant
The person whose life determines the amount of income payments that we will
make. Except as indicated below, 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.
Generally, if an annuity is owned by an entity and the entity has named a
co-annuitant, the co-annuitant will become the annuitant upon the death of the
annuitant, and no death benefit is payable. Unless we agree otherwise, the
contract is eligible to have a co-annuitant designation only if the entity
that owns the contract is (1) a plan described in Internal Revenue Code
Section 72(s)(5)(A)(i) (or any successor Code section thereto); (2) an entity
described in Code Section 72(u)(1) (or any successor Code section thereto); or
(3) a custodial account established pursuant to the provisions in Code
Section 408(a) (or any successor Code section thereto) ("Custodial Account").
Where the contract is held by a Custodial Account, the co-annuitant will not
automatically become the annuitant upon the death of the annuitant. Upon the
death of the annuitant, the Custodial Account will have the choice, subject to
our rules, to either elect to receive the death benefit or elect to continue
the contract. If the Custodial Account continues the contract, then the
Contract Value as of the date of due proof of death of the annuitant will
reflect the amount that would have been payable had a death benefit been paid.
Annuity Date
The date when income payments are scheduled to begin. You must have our
permission to change the annuity date. If the co-annuitant becomes the
annuitant due to the death of the annuitant, and the co-annuitant is older
than the annuitant, then the annuity date will be based on the age of the
co-annuitant, provided that the contract's requirements for changing the
annuity date are met (e.g., the co-annuitant cannot be older than a specified
age). If the co-annuitant is younger than the annuitant, then the annuity date
will remain unchanged.
Beneficiary
The person(s) or entity you have chosen to receive a death benefit.
Business Day
A day on which the New York Stock Exchange is open for business. Our business
day generally ends at 4:00 p.m. Eastern time.
Co-Annuitant
The person shown on the contract data pages who becomes the annuitant (if
eligible) upon the death of the annuitant if the contract's requirements for
changing the annuity date are met. No co-annuitant may be designated if the
owner is a non-natural person.
6
Contract Date
The date we accept your initial purchase payment and all necessary paperwork
in good order at the Prudential Annuity Service Center. Contract anniversaries
are measured from the contract date. A contract year starts on the contract
date or on a contract anniversary.
Contract Owner, Owner, or You
The person entitled to the ownership rights under the contract.
Contract Value
This is the total value of your contract, equal to the sum of the values of
your investment in each investment option you have chosen. Your Contract Value
will go up or down based on the performance of the investment options you
choose.
Contract With Credit
A version of the annuity contract that provides for a bonus credit with each
purchase payment that you make and has higher withdrawal charges and insurance
and administrative costs, and may provide lower interest rates for fixed rate
options than the Contract Without Credit.
Contract Without Credit
A version of the annuity contract that does not provide a credit and has lower
withdrawal charges and insurance and administrative costs than the Contract
With Credit.
Credit
If you choose the Contract With Credit, this is the bonus amount that we
allocate to your account each time you make a purchase payment. The amount of
the credit is a percentage of the purchase payment. Bonus credits generally
are not recaptured once the free look period expires. Our reference in the
preceding sentence to "generally are not recaptured" refers to the fact that
we have the contractual right to deduct, from the death benefit we pay, the
amount of any credit corresponding to a purchase payment made within one year
of death.
Death Benefit
If a death benefit is payable, the beneficiary you designate will receive, at
a minimum, the total invested purchase payments, reduced proportionally by
withdrawals, or a potentially greater amount related to market appreciation.
The Guaranteed Minimum Death Benefit is available for an additional charge.
See Section 4, "What Is The Death Benefit?"
Designated Life
For purposes of the Spousal Lifetime Five Income Benefit, a Designated Life
refers to each of two natural persons who are each other's spouses at the time
of election of the Spousal Lifetime Five Income Benefit and at the first death
of one of them.
Dollar Cost Averaging Fixed Rate Option (DCA Fixed Rate Option)
An investment option that offers a fixed rate of interest for a selected
period during which periodic transfers are automatically made to selected
variable investment options or to the one-year fixed interest rate option.
Excess Income/Excess Withdrawal
Under the Lifetime Five Income Benefit and Spousal Lifetime Five Income
Benefit, Excess Income refers to cumulative withdrawals that exceed the Annual
Income Amount. Under the Lifetime Five Income Benefit, Excess Withdrawal
refers to cumulative withdrawals that exceed the Annual Withdrawal Amount.
Fixed Interest Rate Options
Investment options that offer a fixed rate of interest for either a one-year
period (fixed rate option) or a selected period during which periodic
transfers are made to selected variable investment options or to the one-year
fixed rate option.
Good Order
An instruction received at the Prudential Annuity Service Center, utilizing
such forms, signatures and dating as we require, which is sufficiently clear
that we do not need to exercise any discretion to follow such instructions.
Guarantee Period
A period of time during which your invested purchase payment in the market
value adjustment option earns interest at the declared rate. We may offer one
or more guarantee periods.
7
GLOSSARY continued
Guaranteed Minimum Death Benefit (GMDB)
An optional feature available for an additional charge that guarantees that
the death benefit that the beneficiary receives will be no less than a certain
GMDB protected value.
GMDB Protected Value
The amount guaranteed under the Guaranteed Minimum Death Benefit, which equals
the GMDB step-up value. The GMDB protected value will be subject to certain
age restrictions and time durations, however, it will still increase by
subsequent invested purchase payments and reduce proportionally by withdrawals.
GMDB Step-Up
We use the GMDB step-up value to compute the GMDB protected value of the
Guaranteed Minimum Death Benefit. Generally speaking, the GMDB step-up
establishes a "high water mark" of protected value that we would pay upon
death, even if the Contract Value has declined. For example, if the GMDB
step-up were set at $100,000 on a contract anniversary, and the Contract Value
subsequently declined to $80,000 on the date of death, the GMDB step-up value
would nonetheless remain $100,000 (assuming no additional purchase payments or
withdrawals).
Guaranteed Minimum Income Benefit (GMIB)
An optional feature available for an additional charge that guarantees that
the income payments you receive during the income phase will be no less than a
certain GMIB protected value applied to the GMIB guaranteed annuity purchase
rates.
GMIB Protected Value
We use the GMIB protected value to calculate annuity payments should you
annuitize under the Guaranteed Minimum Income Benefit. The value is calculated
daily and is equal to the GMIB roll-up, until the GMIB roll-up either reaches
its cap or if we stop applying the annual interest rate based on the age of
the annuitant, number of contract anniversaries or number of years since last
GMIB reset. At such point, the GMIB protected value will be increased by any
subsequent invested purchase payments, and any withdrawals will proportionally
reduce the GMIB protected value. The GMIB protected value is not available as
a cash surrender benefit or a death benefit, nor is it used to calculate the
cash surrender value or death benefit.
GMIB Reset
You may elect to "step-up" or "reset" your GMIB protected value if your
Contract Value is greater than the current GMIB protected value. Upon exercise
of the reset provision, your GMIB protected value will be reset to equal your
current Contract Value. You are limited to two resets over the life of your
contract, provided that certain annuitant age requirements are met.
GMIB Roll-Up
We will use the GMIB roll-up value to compute the GMIB protected value of the
Guaranteed Minimum Income Benefit. The GMIB roll-up is equal to the invested
purchase payments (after a reset, the Contract Value at the time of the reset)
compounded daily at an effective annual interest rate starting on the date
each invested purchase payment is made, subject to a cap, and reduced
proportionally by withdrawals.
Income Appreciator Benefit (IAB)
An optional feature that may be available for an additional charge that
provides a supplemental living benefit based on earnings under the contract.
IAB Automatic Withdrawal Payment Program
A series of payments consisting of a portion of your Contract Value and Income
Appreciator Benefit paid to you in equal installments over a 10 year period,
which you may choose, if you elect to receive the Income Appreciator Benefit
during the accumulation phase.
IAB Credit
An amount we add to your Contract Value that is credited in equal installments
over a 10 year period, which you may choose, if you elect to receive the
Income Appreciator Benefit during the accumulation phase.
Income Options
Options under the contract that define the frequency and duration of income
payments. In your contract, we also refer to these as payout or annuity
options.
8
Income Phase
The period during which you receive income payments under the contract.
Invested Purchase Payments
Your purchase payments (which we define below) less any deduction we make for
any tax charge.
Joint Owner
The person named as the joint owner, who shares ownership rights with the
owner as defined in the contract. A joint owner must be a natural person.
Lifetime Five Income Benefit
An optional feature available for an additional charge that guarantees your
ability to withdraw amounts equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on your Contract Value, subject to our rules regarding the
timing and amount of withdrawals. There are two options - one is designed to
provide an annual withdrawal amount for life and the other is designed to
provide a greater annual withdrawal amount (than the first option) as long as
there is Protected Withdrawal Value. We also offer a variant of the Lifetime
Five Income Benefit to certain spousal owners - see "Spousal Lifetime Five
Income Benefit."
Market Value Adjustment
An adjustment to your Contract Value or withdrawal proceeds that is based on
the relationship between interest you are currently earning within the market
value adjustment option and prevailing interest rates. This adjustment may be
positive or negative.
Market Value Adjustment Option
Under the Contract Without Credit, this investment option may offer various
guarantee periods and pays a fixed rate of interest with respect to each
guarantee period. We impose a market value adjustment on withdrawals or
transfers that you make from this option prior to the end of its guarantee
period.
Net Purchase Payments
Your total purchase payments less any withdrawals you have made.
Proportional Withdrawals
A method that involves calculating the percentage of your Contract Value that
each prior withdrawal represented when withdrawn. In general, proportional
withdrawals result in a reduction to the applicable benefit value by reducing
such value in the same proportion as the Contract Value was reduced by the
withdrawal as of the date the withdrawal occurred.
Protected Withdrawal Value
Under the Lifetime Five Income Benefit, we guarantee an amount that you can
withdraw each year until those annual withdrawals, when added together, reach
an aggregate limit. We call that aggregate limit the Protected Withdrawal
Value. Purchase payments and withdrawals you make will result in an adjustment
to the Protected Withdrawal Value. In addition, you may elect to step-up your
Protected Withdrawal Value under certain circumstances. Under the Spousal
Lifetime Five Income Benefit, Protected Withdrawal Value refers to a value
that is used to determine the Annual Income Amount. The initial Protected
Withdrawal Value is equal to the greatest of three specified amounts. (See
"Initial Protected Withdrawal Value" within the section describing the Spousal
Lifetime Five Income Benefit.)
Prudential Annuity Service Center
For general correspondence: P.O. Box 7960, Philadelphia, PA 19176. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19025. The telephone number is
(888) PRU-2888. Prudential's Web site is www.prudential.com.
Purchase Payments
The amount of money you pay us to purchase the contract. Generally, you can
make additional purchase payments at any time during the accumulation phase.
Separate Account
Purchase payments allocated to the variable investment options are held by us
in a separate account called the Pruco Life of New Jersey Flexible Premium
Variable Annuity Account. The separate account is set apart from all of the
general assets of Pruco Life of New Jersey.
Spousal Lifetime Five Income Benefit
An optional feature available for an additional charge that guarantees the
ability to withdraw amounts equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on the Contract
9
GLOSSARY continued
Value, subject to our rules regarding the timing and amount of withdrawals.
Under the Spousal Lifetime Five Income Benefit, an annual income amount is
paid until the later death of two natural persons who are each other's spouses
at the time of election and at the first death of one of them.
Statement of Additional Information
A document containing certain additional information about the Strategic
Partners Annuity One 3 variable annuity. We have filed the Statement of
Additional Information with the Securities and Exchange Commission and it is
legally a part of this prospectus. To learn how to obtain a copy of the
Statement of Additional Information, see the front cover of this prospectus.
Tax Deferral
This is a way to increase your assets without currently being taxed.
Generally, you do not pay taxes on your contract earnings until you take money
out of your contract. You should be aware that tax favored plans (such as
IRAs) already provide tax deferral regardless of whether they invest in
annuity contracts. See Section 10, "What Are The Tax Considerations Associated
With The Strategic Partners Annuity One 3 Contract?"
Variable Investment Option
When you choose a variable investment option, we purchase shares of the
underlying mutual fund that are held as an investment for that option. We hold
these shares in the separate account. The division of the separate account of
Pruco Life of New Jersey that invests in a particular mutual fund is referred
to in your contract as a subaccount.
10
SUMMARY FOR SECTIONS 1-11
For a more complete discussion of the following topics, see the corresponding
section in
Part II of the prospectus.
SECTION 1
What Is The Strategic Partners Annuity One 3 Variable Annuity?
The Strategic Partners Annuity One 3 variable annuity is a contract between
you, the owner, and us, the insurance company, Pruco Life Insurance Company of
New Jersey (Pruco Life of New Jersey, we or us). The contract allows you to
invest on a tax-deferred basis in variable investment options, fixed interest
rate options, and the market value adjustment option. The contract is intended
for retirement savings or other long-term investment purposes and provides for
a death benefit.
There are two basic versions of the Strategic Partners Annuity One 3 variable
annuity.
Contract With Credit.
.. provides for a bonus credit that we add to each purchase payment that you
make,
.. has higher withdrawal charges and insurance and administrative costs than
the Contract Without Credit,
.. may provide lower interest rates for fixed interest rate options than the
Contract Without Credit, and
.. does not offer the market value adjustment option.
Contract Without Credit.
.. does not provide a credit,
.. has lower withdrawal charges and insurance and administrative costs than
the Contract With Credit.
.. may provide higher interest rates for fixed interest rate options than the
Contract With Credit, and
.. offers the market value adjustment option.
The variable investment options available under the contract offer the
opportunity for a favorable return. However, this is NOT guaranteed. It is
possible, due to market changes, that your investments may decrease in value,
including an investment in the Prudential Money Market Portfolio variable
investment option.
The fixed interest rate options offer a guaranteed interest rate. While your
money is allocated to one of these options, your principal amount will not
decrease and we guarantee that your money will earn at least a minimum
interest rate annually.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed
and the interest amount that your money will earn is guaranteed by us to be at
least the minimum interest rate dictated by applicable state law.
You may make up to 12 free transfers each contract year among the investment
options. Certain restrictions apply to transfers involving the fixed interest
rate options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase.
.. During the accumulation phase, any earnings grow on a tax-deferred basis
and are generally only taxed as income when you make a withdrawal.
.. The income phase starts when you begin receiving regular payments from your
contract.
The amount of money you are able to accumulate in your contract during the
accumulation phase will help determine the amount you will receive during the
income phase. Other factors will affect the amount of your payments, such as
age, gender, and the payout option you select.
The contract offers a choice of income and death benefit options, which may
also be available to you.
We may amend the contract as permitted by law. For example, we may add new
features to the contract. Subject to applicable law, we determine whether or
not to make such contract amendments available to contracts that already have
been issued.
If you change your mind about owning Strategic Partners Annuity One 3, you may
cancel your contract within 10 days after receiving it (or whatever period is
required by applicable law). This time period is referred to as the "Free
Look" period.
11
SUMMARY FOR SECTIONS 1-11 continued
SECTION 2
What Investment Options Can I Choose?
You can invest your money in several variable investment options. The variable
investment options are classified according to their investment style, and a
brief description of each portfolio's investment objective and key policies is
set forth in Section 2, to assist you in determining which portfolios may be
of interest to you.
Depending upon market conditions, you may earn or lose money in any of these
options. The value of your contract will fluctuate depending upon the
performance of the underlying mutual fund portfolios used by the variable
investment options that you choose. Past performance is not a guarantee of
future results.
You may also invest your money in fixed interest rate options or in a market
value adjustment option.
SECTION 3
What Kind Of Payments Will I Receive During The Income Phase? (Annuitization)
If you want to receive regular income from your annuity, you can choose one of
several options, including guaranteed payments for the annuitant's lifetime.
Generally, once you begin receiving regular payments, you cannot change your
payment plan.
For an additional fee, you may also choose, if it is available under your
contract, the Guaranteed Minimum Income Benefit (GMIB). The Guaranteed Minimum
Income Benefit provides that once the income period begins, your income
payments will be no less than a value that is based on a certain "GMIB
protected value" applied to the GMIB guaranteed annuity purchase rates. See
Section 3, "What Kind Of Payments Will I Receive During The Income Phase?"
The Lifetime Five Income Benefit, the Spousal Lifetime Five Income Benefit
(discussed in Section 5) and the Income Appreciator Benefit (discussed in
Section 6) each may provide an additional amount upon which your annuity
payments are based.
SECTION 4
What Is The Death Benefit?
In general, if the sole owner or first to die of the owner or joint owner dies
before the income phase of the contract begins, the person(s) or entity that
you have chosen as your beneficiary will receive, at a minimum, the greater of
(i) the Contract Value, (ii) either the base death benefit or, for a higher
insurance and administrative cost, a potentially larger Guaranteed Minimum
Death Benefit (GMDB).
The base death benefit equals the total invested purchase payments reduced
proportionally by withdrawals. The Guaranteed Minimum Death Benefit is equal
to the "GMDB protected value" of the highest value of the contract on any
contract anniversary, which we call the "GMDB step-up value".
On the date we receive proof of death in good order, in lieu of paying a death
benefit, we will allow the surviving spouse to continue the contract by
exercising the Spousal Continuance Option, if the conditions that we describe,
in Section 4, are met.
SECTION 5
What Is The Lifetime Five/SM/ Income Benefit?
The Lifetime Five Income Benefit is an optional feature that guarantees your
ability to withdraw an amount equal to a percentage of an initial principal
value (called the "Protected Withdrawal Value"), regardless of the impact of
market performance on your Contract Value, subject to our rules regarding the
timing and amounts of withdrawals. There are two options - one is designed to
provide an annual withdrawal amount for life (the "Life Income Benefit"), and
the other is designed to provide a greater annual withdrawal amount (than the
first option), as long as there is Protected Withdrawal Value (adjusted, as
described in Section 5) (the "Withdrawal Benefit"). The annuitant must be at
least 45 years old when the Lifetime Five Income Benefit is elected.
The charge for the Lifetime Five Income Benefit is a daily fee equal on an
annual basis to 0.60% of the Contract Value allocated to the variable
investment options. This charge is in addition to the charge for the
applicable death benefit.
In addition to the Lifetime Five Income Benefit, we offer a benefit called the
Spousal Lifetime Five Income Benefit. The Spousal Lifetime Five Income benefit
is similar to the Lifetime Five Income Benefit, except that it is offered only
to those who are each other's spouses at the time the benefit is elected, and
the benefit offers only a Life Income Benefit (not the Withdrawal Benefit).
The charge for the Spousal Lifetime Five Income Benefit is a daily fee equal
on an annual basis to 0.75% of the Contract Value allocated to the variable
investment options. The charge is in addition to the charge for the applicable
death benefit.
12
SECTION 6
What Is The Income Appreciator Benefit?
The Income Appreciator Benefit is an optional benefit, available for an
additional charge, that provides an additional income amount during the
accumulation period or upon annuitization. The Income Appreciator Benefit is
designed to provide you with additional funds that can be used to help defray
the impact taxes may have on distributions from your contract. You can
activate this benefit in one of three ways, as described in Section 6. Note,
however, that the annuitization options within this benefit are limited.
SECTION 7
How Can I Purchase A Strategic Partners Annuity One 3 Contract?
You can purchase this contract, unless we agree otherwise and subject to our
rules, with a minimum initial purchase payment of $10,000. You must get our
prior approval for any initial and additional purchase payment of $1,000,000
or more, unless we are prohibited under applicable state law from insisting on
such prior approval. Generally, you can make additional purchase payments of
$500 ($100 if made through electronic funds transfer) or more at any time
during the accumulation phase of the contract. Your representative can help
you fill out the proper forms. The Contract With Credit provides for the
allocation of a credit with each purchase payment.
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. In
addition, certain age limits apply to certain features and benefits described
herein.
SECTION 8
What Are The Expenses Associated With The Strategic Partners Annuity One 3
Contract?
The contract has insurance features and investment features, both of which
have related costs and charges.
.. Each year (or upon full surrender) we deduct a contract maintenance charge
if your Contract Value is less than $75,000. This charge is currently equal
to the lesser of $30 or 2% of your Contract Value. We do not impose the
contract maintenance charge if your Contract Value is $75,000 or more.
.. For insurance and administrative costs, we also deduct a daily charge based
on the average daily value of all assets allocated to the variable
investment options, depending on the death benefit (or other) option that
you choose. The daily cost is equivalent to an annual charge as follows:
-- 1.40% if you choose the base death benefit,
-- 1.65% if you choose the step-up Guaranteed Minimum Death Benefit option
(i.e., 0.25% in addition to the base death benefit charge),
-- 0.60% if you choose the Lifetime Five Income Benefit. This charge is in
addition to the charge for the applicable death benefit (1.50% maximum
charge), or
-- 0.75% if you choose the Spousal Lifetime Five Income Benefit (1.50%
maximum charge). This charge is in addition to the charge for the
applicable death benefit.
.. We impose an additional insurance and administrative charge of 0.10%
annually for the Contract With Credit.
.. We will deduct an additional charge if you choose the Guaranteed Minimum
Income Benefit. We deduct this annual charge from your Contract Value on
the contract anniversary and upon certain other events. The charge for this
benefit is equal to 0.50% for contracts sold on or after May 1, 2004 (0.45%
for all other contracts), of the average GMIB protected value (1.00%
maximum charge).
.. We will deduct an additional charge if you choose the Income Appreciator
Benefit. We deduct this charge from your Contract Value on the contract
anniversary and upon certain other events. The charge for this benefit is
based on an annual rate of 0.25% of your Contract Value.
.. There are also expenses associated with the mutual funds. For 2006, the
fees of these funds ranged from 0.37% to 1.19% annually. For certain funds,
expenses are reduced pursuant to expense waivers and comparable
arrangements. In general, these expense waivers and comparable arrangements
are not guaranteed, and may be terminated at any time.
.. If you withdraw money less than seven contract anniversaries after making a
purchase payment, then you may have to pay a withdrawal charge on all or
part of the withdrawal. This charge ranges from 1-7% for the Contract
Without Credit and 5-8% for the Contract With Credit.
For more information, including details about other possible charges under the
contract, see "Summary Of Contract Expenses" and Section 8, "What Are The
Expenses Associated With The Strategic Partners Annuity One 3 Contract?"
13
SUMMARY FOR SECTIONS 1-11 continued
SECTION 9
How Can I Access My Money?
You may withdraw money at any time during the accumulation phase. You may,
however, be subject to income tax and, if you make a withdrawal prior to age
59 1/2, an additional tax penalty as well. For the Contract Without Credit, if
you withdraw money less than seven contract anniversaries after making a
purchase payment, we may impose a withdrawal charge ranging from 1-7%. For the
Contract With Credit, we may impose a withdrawal charge ranging from 5-8%.
Under the market value adjustment option, you will be subject to a market
value adjustment if you make a withdrawal or transfer from the option prior to
the end of a guarantee period.
We offer optional living benefits, called the Lifetime Five Income Benefit,
and the Spousal Lifetime Five Income Benefit under which we guarantee that
certain amounts will be available to you for withdrawal, regardless of
market-related declines in your Contract Value. You need not participate in
these benefits in order to withdraw some or all of your money. You also may
access your Income Appreciator Benefit through withdrawals.
SECTION 10
What Are The Tax Considerations Associated With The Strategic Partners Annuity
One 3 Contract?
Your earnings are generally not taxed until withdrawn. If you withdraw money
during the accumulation phase, the tax laws treat the withdrawal as a
withdrawal of earnings, which are taxed as ordinary income. If you are younger
than age 59 1/2 when you take money out, you may be charged a 10% federal tax
penalty on the earnings in addition to ordinary taxation. A portion of the
payments you receive during the income phase is considered a partial return of
your original investment and therefore will not be taxable as income.
Generally, all amounts withdrawn from an Individual Retirement Annuity (IRA)
contract (excluding Roth IRAs) are taxable and subject to the 10% penalty if
withdrawn prior to age 59 1/2.
SECTION 11
Other Information
This contract is issued by Pruco Life Insurance Company of New Jersey (Pruco
Life of New Jersey), an indirect subsidiary of The Prudential Insurance
Company of America, and sold by registered representatives of affiliated and
unaffiliated broker/dealers.
RISK FACTORS
There are various risks associated with an investment in the Market Value
Adjustment Option that we summarize below.
Issuer Risk. The Market Value Adjustment Option, fixed interest rate options,
and the contract's other insurance features are available under a contract
issued by Pruco Life of New Jersey, and thus backed by the financial strength
of that company. If Pruco Life of New Jersey were to experience significant
financial adversity, it is possible that Pruco Life of New Jersey's ability to
pay interest and principal under the Market Value Adjustment Option and fixed
interest rate options and to fulfill its insurance guarantees could be
impaired.
Risks Related to Changing Interest Rates. You do not participate directly in
the investment experience of the bonds and other instruments that Pruco Life
of New Jersey holds to support the Market Value Adjustment Option.
Nonetheless, the market value adjustment formula reflects the effect that
prevailing interest rates have on those bonds and other instruments. If you
need to withdraw your money prior to the end of a guarantee period and during
a period in which prevailing interest rates have risen above their level when
you made your purchase, you will experience a "negative" market value
adjustment. When we impose this market value adjustment, it could result in
the loss of both the interest you have earned and a portion of your purchase
payments. Thus, before you commit to a particular guarantee period, you should
consider carefully whether you have the ability to remain invested throughout
the guarantee period. In addition, we cannot, of course, assure you that the
Market Value Adjustment Option will perform better than another investment
that you might have made.
Risks Related to the Withdrawal Charge. We may impose withdrawal charges on
amounts withdrawn from the Market Value Adjustment Option. If you anticipate
needing to withdraw your money prior to the end of a guarantee period, you
should be prepared to pay the withdrawal charge that we will impose.
14
SUMMARY OF CONTRACT EXPENSES
The purpose of this summary is to help you to understand the costs you will
pay for Strategic Partners Annuity One 3. The following tables describe the
fees and expenses that you will pay when buying, owning, and surrendering the
contract. The first table describes the fees and expenses that you will pay at
the time that you buy the contract, surrender the contract, or transfer cash
value between investment options.
For more detailed information, including additional information about current
and maximum charges, see Section 8, "What Are The Expenses Associated With The
Strategic Partners Annuity One 3 Contract?" The individual fund prospectuses
contain detailed expense information about the underlying mutual funds.
1 Each contract year, you may withdraw a specified amount of your Contract
Value without incurring a withdrawal charge. We will waive the withdrawal
charge if we pay a death benefit or under certain other circumstances. See
"Withdrawal Charge" in Section 8.
2 Currently, we charge $25 for each transfer after the twelfth in a contract
year. As shown in the table, we can increase that charge up to a maximum of
$30, but have no current intention to do so. We will not charge you for
transfers made in connection with Dollar Cost Averaging and
Auto-Rebalancing or transfers from the market value adjustment option at
the end of a guarantee period, and do not count them toward the limit of 12
free transfers per year.
15
The next table describes the fees and expenses that you will pay periodically
during the time that you own the contract, not including underlying mutual
fund fees and expenses.
3 Currently, we waive this fee if your Contract Value is greater than or
equal to $75,000. If your Contract Value is less than $75,000, we currently
charge the lesser of $30 or 2% of your Contract Value. This is a single fee
that we assess (a) annually or (b) upon full withdrawal made on a date
other than a contract anniversary.
4 We reserve the right to increase the charge for this benefit up to the
1.50% maximum upon a step-up or for a new election of such benefit.
However, we have no intention of increasing the charge to the maximum level.
5 We impose this charge only if you choose the Guaranteed Minimum Income
Benefit. This charge is equal to 0.50% for contracts sold on or after
May 1, 2004 (0.45% for all other contracts), of the average GMIB protected
value, which is calculated daily and generally is equal to the GMIB roll-up
value. The fee is withdrawn from each variable investment option in the
same proportion as the Contract Value allocated to that variable investment
option represents to the total Contract Value in all variable investment
options. Subject to certain age or duration restrictions, the roll-up value
is the total of all invested purchase payments (after a reset, the Contract
Value at the time of the reset) compounded daily at an effective annual
rate of 5%, subject to a cap of 200% of all invested purchase payments.
Withdrawals reduce both the roll-up value and the 200% cap. When the GMIB
roll-up is increasing at an effective annual interest rate of 5%, the
reduction is equal to the amount of the withdrawal for the first 5% of the
roll-up value, calculated as of the latest contract anniversary (or
contract date). The amount of the withdrawal in excess of 5% of the roll-up
value further reduces the roll-up value and 200% cap proportionally to the
additional reduction in Contract Value after the first 5% withdrawal
occurs. We assess this fee each contract anniversary and when you begin the
income phase of your contract. We also assess this fee if you make a full
withdrawal, but prorate the fee based on the portion of the contract year
that has elapsed since the full annual fee was most recently deducted. If
you make a partial withdrawal, we will assess the prorated fee if the
remaining Contract Value after the withdrawal would be less than the amount
of the prorated fee; otherwise we will not assess the fee at that time. We
reserve the right to increase the charge to the maximum indicated upon any
reset of the benefit or any new election of the benefit.
6 We impose this charge only if you choose the Income Appreciator Benefit.
The charge for this benefit is based on an annual rate of 0.25% of your
Contract Value. The Income Appreciator Benefit charge is calculated: on
each contract anniversary, on the annuity date, upon the death of the sole
owner or first to die of the owner or joint owner prior to the annuity
date, upon a full or partial withdrawal, and upon a subsequent purchase
payment. The fee is based on the Contract Value at the time of the
calculation, and is prorated based on the portion of the contract year
since the date that the charge was last deducted. Although it may be
calculated more often, it is deducted only: on each contract anniversary,
on the annuity date, upon the death of the sole owner or first to die of
the owner or joint owner prior to the annuity date, upon a full withdrawal,
and upon a partial withdrawal if the Contract Value remaining after such
partial withdrawal is not enough to cover the then-applicable charge. With
respect to full and partial withdrawals, we prorate the fee based on the
portion of the contract year that has elapsed since the full annual fee was
most recently deducted. We reserve the right to calculate and deduct the
fee more frequently than annually, such as quarterly.
7 The other Insurance and Administrative Expense Charges do not apply if you
are a beneficiary under the Beneficiary Continuation Option. Instead, the
Settlement Service Charge set forth here applies, if your beneficiary
elects the Beneficiary Continuation Option.
16
SUMMARY OF CONTRACT EXPENSES continued
Total Annual Mutual Fund Operating Expenses
The next item shows the minimum and maximum total operating expenses (expenses
that are deducted from underlying mutual fund assets, including management
fees, distribution and/or service (12b-1) fees, and other expenses) charged by
the underlying mutual funds that you may pay periodically during the time that
you own the contract. More detail concerning each underlying mutual fund's
fees and expenses is contained below and in the prospectus for each underlying
mutual fund. The minimum and maximum total operating expenses depicted below
are based on historical fund expenses for the year ended December 31, 2006.
Fund expenses are not fixed or guaranteed by the Strategic Partners Annuity
One 3 contract, and may vary from year to year.
* See "Summary of Contract Expenses" - Underlying Mutual Fund Portfolio
Annual Expenses for more detail on the expenses of the underlying mutual
funds.
17
1. Each Asset Allocation Portfolio invests in shares of other Portfolios of
the Fund and the Advanced Series Trust (the Acquired Portfolios). In
addition, each Portfolio may invest otherwise uninvested cash in the Dryden
Core Investment Fund (Money Market and/or Short-Term Bond Series).
Investors in an Asset Allocation Portfolio or other Portfolio indirectly
bear the fees and expenses of the Acquired Portfolios and/or Dryden Core
Investment Fund. The expenses shown in the column "Acquired Portfolio Fees
and Expenses" represent a weighted average of the expense ratios of the
Acquired Portfolios and/or Dryden Core Investment Fund, in which the Asset
Allocation Portfolios or other Portfolios invested during the year ended
December 31, 2006. The Asset Allocation Portfolios do not pay any
transaction fees when they purchase and redeem shares of the Acquired
Portfolios.
Where "Acquired Portfolio Fees and Expenses" are less than 0.01%, such
expenses are included in the column titled "Other Expenses." This may cause
the Total Annual Portfolio Operating Expenses to differ from those set
forth in the Financial Highlights tables of the respective Portfolios.
Effective March 1, 2007, each of the Asset Allocation Portfolios became
responsible for the payment of its own "Other Expenses," including, without
limitation, custodian fees, legal fees, trustee fees and audit fees, in
accordance with the terms of the management agreement. Prior to that time,
Prudential Investments LLC or an affiliate paid the "other expenses" of the
Asset Allocation Portfolios. The table reflects an annualized estimate of
the "Other Expenses" of the Asset Allocation Portfolios for the year ended
December 31, 2006 had the current arrangement been in place during that
year.
2. Prudential Investments LLC has voluntarily agreed to waive a portion of its
management fee and/or limit total expenses (expressed as an annual
percentage of average daily net assets) for certain Portfolios of the Fund.
These arrangements, which are set forth as follows, may be discontinued or
otherwise modified at any time. Equity Portfolio: 0.75%; Jennison
Portfolio: 0.75%; Money Market Portfolio: 0.75%; Stock Index Portfolio:
0.75%; Value Portfolio: 0.75%; SP AIM Core Equity Portfolio: 1.00%; SP
International Value Portfolio: 1.00%; SP International Growth Portfolio:
1.24%; SP Mid Cap Growth Portfolio: 1.00%; SP PIMCO High Yield Portfolio:
0.82%; SP PIMCO Total Return Portfolio: 0.76%; SP Small Cap Growth
Portfolio: 1.15%; SP Small Cap Value Portfolio: 1.05%; SP T. Rowe Price
Large Cap Growth Portfolio: 1.06%.
3. As noted above, shares of the Portfolios generally are purchased through
variable insurance products. Many of the Portfolios and/or their investment
advisers and/or distributors have entered into arrangements with us as the
issuer of each Annuity under which they compensate us for providing ongoing
services in lieu of the Trust providing such services. Amounts paid by a
Portfolio under those arrangements are included under "Other Expenses." For
more information see the prospectus for each underlying portfolio and
Variable Investment Options in this section.
4. The Portfolio's contractual management fee rate is as follows: 0.35% for
average net assets up to $4 billion, and 0.30% for average net assets in
excess of $4 billion.
5. Effective November 13, 2006, Marsico Capital Management, LLC was added as a
Sub-advisor to the Portfolio. Prior to November 13, 2006, William Blair &
Company, LLC served as the sole Sub-advisor of the Portfolio, then named
the "SP William Blair International Growth Portfolio."
6. Effective November 13, 2006, Thornburg Investment Management, Inc. was
added as a Sub-advisor to the Portfolio. Prior to November 13, 2006,
Thornburg Investment Management, Inc. served as the sole Sub-advisor of the
Portfolio, then named the "SP LSV International Value Portfolio."
7. The AST Aggressive Asset Allocation, the AST Balanced Asset Allocation, the
AST Capital Growth Asset Allocation, the AST Conservative Asset Allocation
and the AST Preservation Asset Allocation Portfolios (the "Dynamic Asset
Allocation Portfolios") each invest in other investment companies (the
Acquired Portfolios). For example, each Dynamic Asset Allocation Portfolio
invests in shares of other Portfolios of the Advanced Series Trust, and
some Portfolios invest in other funds, including the Dryden Core Investment
Fund. Investors in a Portfolio indirectly bear the fees and expenses of the
Acquired Portfolios. The expenses shown in the column "Acquired Portfolio
Fees and Expenses" represent a weighted average of the expense ratios of
the Acquired Portfolios in which each Dynamic Asset Allocation Portfolio
invested during the year ended December 31, 2006. The Dynamic Asset
Allocation Portfolios do not pay any transaction fees when they purchase or
redeem shares of the Acquired Portfolios. Where "Acquired Portfolio Fees
and Expenses" are less than 0.01%, such expenses are included in the column
titled "Other Expenses." This may cause the Total Annual Portfolio
Operating Expenses to differ from those set forth in the Financial
Highlights tables in the prospectus for the Portfolios.
18
8. The total actual operating expenses for certain of the Portfolios listed
above for the year ended December 31, 2006 were less than the amounts shown
in the table above, due to fee waivers, reimbursement of expenses, and
expense offset arrangements ("Arrangements"). These Arrangements are
voluntary and may be terminated at any time. In addition, the Arrangements
may be modified periodically. For more information regarding the
Arrangements, please see the Prospectus and Statement of Additional
Information for the Portfolios.
9. Effective May 1, 2007, Neuberger Berman Management, Inc. became Sub-advisor
to the Portfolio. Prior to May 1, 2007, Deutsche Asset Management, Inc.
served as Sub-advisor of the Portfolio, then named the "AST DeAM Small-Cap
Growth Portfolio."
10.Prior to May 1, 2007 the Portfolio was named the "AST American Century
Strategic Balanced Portfolio."
11.Prior to May 1, 2007 the Portfolio was named the "AST Global Allocation
Portfolio." Expenses shown are the annualized estimated operating expense
for AST UBS Dynamic Alpha Portfolio effective May 1, 2007. Operating
expenses for the AST Global Allocation Portfolio based upon the year ended
December 31, 2006 would be as follows: Shareholder Fees (fees paid directly
from your investment) - None; Management Fees - .10%; Distribution (12b-1)
Fees - None; Other Expenses - .09%; Acquired Portfolio Fees & Expenses -
.88%; Total Annual Portfolio Operating Expenses - 1.07%.
12.Effective June 16, 2006, Goldman Sachs Asset Management L.P. no longer
serves as a Co-Sub-advisor to the Portfolio.
13.Effective January 1, 2006, the management fee was lowered by 0.10% to the
base fee described above. Beginning January 1, 2007, the management fee may
be adjusted, on a quarterly basis, upward or downward depending on the
Fund's performance relative to its benchmark, the MSCI Emerging Markets
Free Index. As a result, beginning January 1, 2007, if the management fee
were calculated taking into account the current base fee (as stated in the
table above) and the maximum performance fee adjustment of 0.10% (+/-), the
management fee could range from 0.95% at its lowest to 1.15% at its highest.
EXPENSE EXAMPLES
These examples are intended to help you compare the cost of investing in the
contract with the cost of investing in other variable annuity contracts. These
costs include contract owner transaction expenses, contract fees, separate
account annual expenses, and underlying mutual fund fees and expenses.
The examples assume that you invest $10,000 in the contract for the time
periods indicated. The examples also assume that your investment has a 5%
return each year and assume the maximum fees and expenses of any of the mutual
funds, which do not reflect any expense reimbursements or waivers. Although
your actual costs may be higher or lower, based on these assumptions, your
costs would be as indicated in the tables that follow.
Example 1a: Contract With Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You
Withdraw All Your Assets
This example assumes that:
.. You invest $10,000 in the Contract With Credit,
.. You choose the Step-Up Guaranteed Minimum Death Benefit,
.. You choose the Guaranteed Minimum Income Benefit (for contracts sold on or
after May 1, 2004),
.. You choose the Income Appreciator Benefit,
.. You allocate all of your assets to the variable investment option having
the maximum total operating expenses,*
.. The investment has a 5% return each year,
.. The mutual fund's total operating expenses remain the same each year,
.. For each Separate Account charge, we deduct the current charge rather than
any maximum charge, and
.. You withdraw all your assets at the end of the indicated period.
* Note: Not all portfolios offered are available if you elect certain
optional benefits.
Example 1b: Contract With Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the
indicated period.
Example 2a: Contract With Credit: Base Death Benefit, and You Withdraw All
Your Assets
This example assumes that:
.. You invest $10,000 in the Contract With Credit,
.. You do not choose any optional insurance benefit,
.. You allocate all of your assets to the variable investment option having
the maximum total operating expenses,*
.. The investment has a 5% return each year,
.. The mutual fund's total operating expenses remain the same each year,
.. For each Separate Account charge, we deduct the current charge rather than
any maximum charge, and
.. You withdraw all your assets at the end of the indicated period.
* Note: Not all portfolios offered are available if you elect certain
optional benefits.
Example 2b: Contract With Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the
indicated period.
19
EXPENSE EXAMPLES continued
Example 3a: Contract Without Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You
Withdraw All Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you invest in the Contract Without Credit.
Example 3b: Contract Without Credit: Step-Up Guaranteed Minimum Death Benefit,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit, and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 1b except that it
assumes that you invest in the Contract Without Credit.
Example 4a: Contract Without Credit: Base Death Benefit; and You Withdraw All
Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you invest in the Contract Without Credit.
Example 4b: Contract Without Credit: Base Death Benefit; and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 2b except that it
assumes that you invest in the Contract Without Credit.
Notes for Expense Examples:
These Examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
Note that withdrawal charges (which are reflected in Examples 1a, 2a, 3a and
4a) are assessed in connection with some annuity options, but not others.
The values shown in the 10 year column are the same for Example 1a and 1b, 2a
and 2b, 3a and 3b, and 4a and 4b. This is because if 10 years have elapsed
since your last purchase payment, we would no longer deduct withdrawal charges
when you make a withdrawal.
The examples use an average contract maintenance charge, which we calculated
based on our general estimate of the total contract fees we expect to collect
in 2007. Your actual fees will vary based on the amount of your contract and
your specific allocation among the investment options.
A table of accumulation unit values appears in Appendix A to this prospectus.
Contract With Credit: Step-up Guaranteed Minimum Death Benefit Option,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit
Contract With Credit: Base Death Benefit
20
Contract Without Credit: Step-up Guaranteed Minimum Death Benefit Option,
Guaranteed Minimum Income Benefit, Income Appreciator Benefit
Contract Without Credit: Base Death Benefit
21
PART II SECTIONS 1-11
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STRATEGIC PARTNERS ANNUITY ONE 3 PROSPECTUS
22
1: WHAT IS THE STRATEGIC PARTNERS ANNUITY ONE 3 VARIABLE ANNUITY?
The Strategic Partners Annuity One 3 Variable Annuity is a contract between
you, the owner, and US, Pruco Life Insurance Company of New Jersey (Pruco Life
of New Jersey, we or us).
Under our contract, in exchange for your payment to us, we promise to pay you
a guaranteed income stream that can begin any time on or after the first
contract anniversary. Your annuity is in the accumulation phase until you
decide to begin receiving annuity payments. The date you begin receiving
annuity payments is the annuity date. On the annuity date, your contract
switches to the income phase.
This annuity contract benefits from tax deferral when it is sold outside a
tax-favored plan (generally called a non-qualified annuity). 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. In other words, you need not purchase this contract to gain the
preferential tax treatment provided by your retirement plan. Therefore, before
purchasing an annuity in a tax-favored plan, you should consider whether its
features and benefits beyond tax deferral, including the death benefit and
income benefits, meet your needs and goals. You should consider the relative
features, benefits and costs of this annuity compared with any other
investment that you may use in connection with your retirement plan or
arrangement.
There are two basic versions of Strategic Partners Annuity One 3 variable
annuity.
Contract With Credit.
.. provides for a bonus credit that we add to each purchase payment that you
make,
.. has higher withdrawal charges and insurance and administrative costs than
the Contract Without Credit,
.. may provide a lower interest rate for the fixed interest rate options than
the Contract Without Credit, and
.. does not offer the market value adjustment option.
Contract Without Credit.
.. does not provide a credit,
.. has lower withdrawal charges and insurance and administrative costs than
the Contract With Credit,
.. may provide a higher interest rate for the fixed interest rate options than
the Contract With Credit, and
.. offers the Market Value Adjustment Option.
Unless we state otherwise, when we use the word contract, it applies to both
versions.
In replacing another annuity you may own, please consider all charges
associated with that annuity. Credits applicable to bonus products, such as
the Contract With Credit, should not be viewed as an offset of any surrender
charge that applies to another annuity contract you may currently own.
Because of the higher withdrawal charges, if you choose the Contract With
Credit and you withdraw a purchase payment, depending upon the performance of
the investment options you choose, you may be worse off than if you had chosen
the Contract Without Credit. We do not recommend purchase of either version of
Strategic Partners Annuity One 3 if you anticipate having to withdraw a
significant amount of your purchase payments within a few years of making
those purchase payments.
Strategic Partners Annuity One 3 is a variable annuity contract. During the
accumulation phase, you can allocate your assets among the variable investment
options, guaranteed fixed interest rate options and a market value adjustment
option. The market value adjustment option is only available in the Contract
Without Credit. If you select variable investment options, the amount of money
you are able to accumulate in your contract during the accumulation phase
depends upon the investment performance of the underlying mutual fund(s)
associated with that variable investment option.
Because the underlying mutual funds' portfolios fluctuate in value depending
upon market conditions, your Contract Value can either increase or decrease.
This is important, since the amount of the annuity payments you receive during
the income phase depends upon the value of your contract at the time you begin
receiving payments.
As the owner of the contract, you have all of the decision-making rights under
the contract. You will also be the annuitant unless you designate someone
else. The annuitant is the person whose life is used to determine how much and
how long (if applicable) the annuity payments will continue once the annuity
phase begins. On or after the annuity date, the annuitant may not be changed.
23
1: WHAT IS THE STRATEGIC PARTNERS ANNUITY ONE 3 VARIABLE ANNUITY? continued
The beneficiary is the person(s) or entity you designate to receive any death
benefit. You may change the beneficiary any time prior to the annuity date by
making a written request to us.
SHORT TERM CANCELLATION RIGHT OR "FREE LOOK"
If you change your mind about owning Strategic Partners Annuity One 3, you may
cancel your contract within 10 days after receiving it (or whatever period is
required by applicable law). You can request a refund by returning the
contract either to the representative who sold it to you, or to the Prudential
Annuity Service Center at the address shown on the first page of this
prospectus. You will receive a refund equal to your Contract Value (plus the
amount of any fees or other charges) as of the date you surrendered your
contract.
If you have purchased the Contract With Credit, we will deduct any credit we
had added to your Contract Value.
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE?
The contract gives you the choice of allocating your purchase payments to any
of the variable investment options, fixed interest rate options, and a market
value adjustment option.
The variable investment options invest in underlying mutual funds managed by
leading investment advisers. These underlying mutual funds may sell their
shares to both variable annuity and variable life separate accounts of
different insurance companies, which could create the kinds of risk that are
described in more detail in the current prospectus for the underlying mutual
fund. The current prospectuses for the underlying mutual funds also contain
other important information about the mutual funds. When you invest in a
variable investment option that is funded by a mutual fund, you should read
the mutual fund prospectus and keep it for future reference. The mutual fund
options that you select are your choice. We do not recommend or endorse any
particular underlying mutual fund.
VARIABLE INVESTMENT OPTIONS
The following chart classifies each of the portfolios based on our assessment
of their investment style (as of the date of this prospectus). The chart also
provides a description of each portfolio's investment objective and a short,
summary description of their key policies to assist you in determining which
portfolios may be of interest to you. What appears in the chart below is
merely a summary - please consult the portfolio's prospectus for a
comprehensive discussion of the portfolio's investment policies. There is no
guarantee that any portfolio will meet its investment objective. The name of
the adviser/subadviser for each portfolio appears next to the description.
The Jennison Portfolio, Prudential Equity Portfolio, Prudential Global
Portfolio, Prudential Money Market Portfolio, Prudential Stock Index
Portfolio, Prudential Value Portfolio, and each "SP" Portfolio of the
Prudential Series Fund, are managed by an indirect wholly-owned subsidiary of
Prudential Financial, Inc. called Prudential Investments LLC (PI) under a
"manager-of-managers" approach.
Under the manager-of-managers approach, PI has the ability to assign
subadvisers to manage specific portions of a portfolio, and the portion
managed by a subadviser may vary from 0% to 100% of the portfolio's assets.
The subadvisers that manage some or all of a Prudential Series Fund portfolio
are listed on the following chart.
The portfolios of the Advanced Series Trust are co-managed by PI and AST
Investment Services, Inc. also under a manager-of-managers approach. AST
Investment Services, Inc. is an indirect, wholly-owned subsidiary of
Prudential Financial, Inc. Under the agreement through which Prudential
Financial, Inc. acquired American Skandia Life Assurance Corporation and
certain of its affiliates in May 2003, Prudential Financial may not use the
"American Skandia" name in any context after May 1, 2008. Therefore,
Prudential Financial has begun a "rebranding" project that involves renaming
certain American Skandia legal entities. As pertinent to this annuity: 1)
American Skandia Investment Services, Inc. has been renamed AST Investment
Services, Inc. and 2) American Skandia Trust has been renamed Advanced Series
Trust. These name changes will not impact the manner in which customers do
business with Prudential.
The portfolios of the American Skandia Trust are co-managed by PI and American
Skandia Investment Services, Incorporated, also under a "manager-of-managers"
approach. American Skandia Investment Services, Incorporated is an indirect,
wholly-owned subsidiary of Prudential Financial, Inc.
A fund or portfolio may have a similar name or an investment objective and
investment policies resembling those of a mutual fund managed by the same
investment adviser that is sold directly to the public. Despite such
similarities, there can be no assurance that the investment performance of any
such fund or portfolio will resemble that of the publicly available mutual
fund.
Pruco Life of New Jersey has entered into agreements with certain underlying
portfolios and/or the investment adviser or distributor of such portfolios.
Pruco Life of New Jersey may provide administrative and support services to
such portfolios
24
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
pursuant to the terms of these agreements and under which it receives a fee of
up to 0.55% annually (as of May 1, 2007) of the average assets allocated to
the portfolio under the contract. These agreements, including the fees paid
and services provided, can vary for each underlying mutual fund whose
portfolios are offered as sub-accounts.
In addition, an investment adviser, sub-adviser or distributor of the
underlying portfolios may also compensate us by providing reimbursement,
defraying the costs of, or paying directly for, among other things, marketing
and/or administrative services and/or other services they provide in
connection with the contract. These services may include, but are not limited
to: sponsoring or co-sponsoring various promotional, educational or marketing
meetings and seminars attended by distributors, wholesalers, and/or broker
dealer firms' registered representatives, and creating marketing material
discussing the contract, available options, and underlying portfolios. The
amounts paid depend on the nature of the meetings, the number of meetings
attended by the adviser, sub-adviser, or distributor, the number of
participants and attendees at the meetings, the costs expected to be incurred,
and the level of the adviser's, sub-adviser's or distributor's participation.
These payments or reimbursements may not be offered by all advisers,
sub-advisers, or distributors, and the amounts of such payments may vary
between and among each adviser, sub-adviser, and distributor depending on
their respective participation. During 2006, with regard to amounts that were
paid under these kinds of arrangements, the amounts ranged from approximately
$53 to approximately $190,514. These amounts may have been paid to one or more
Prudential-affiliated insurers issuing individual variable annuities.
As detailed in the Prudential Series Fund prospectus, although the Prudential
Money Market Portfolio is designed to be a stable investment option, it is
possible to lose money in that portfolio. For example, when prevailing
short-term interest rates are very low, the yield on the Prudential Money
Market Portfolio may be so low that, when separate account and contract
charges are deducted, you experience a negative return.
Upon the introduction of the Advanced Series Trust Asset Allocation Portfolios
on December 5, 2005, we ceased offering the Prudential Series Fund Asset
Allocation Portfolios to new purchasers and to existing contract owners who
had not previously invested in those Portfolios. However, a contract owner who
had Contract Value allocated to a Prudential Series Fund Asset Allocation
Portfolio prior to December 5, 2005 may continue to allocate purchase payments
to that Portfolio after that date. In addition, after December 5, 2005, we
ceased offering the Prudential Series Fund SP Large Cap Value Portfolio to new
purchasers and to existing contract owners who had not previously invested in
that Portfolio. However, a contract owner who had Contract Value allocated to
the SP Large Cap Value Portfolio prior to December 5, 2005 may continue to
allocate purchase payments to that Portfolio after that date.
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
PRUDENTIAL SERIES FUND
-----------------------------------------------------------------
LARGE Jennison Portfolio: seeks long-term Jennison
CAP growth of capital. The Portfolio Associates LLC
GROWTH invests primarily in equity
securities of major, established
corporations that the subadviser
believes offer above-average growth
prospects. The Portfolio may invest
up to 30% of its total assets in
foreign securities. Stocks are
selected on a company-by-company
basis using fundamental analysis.
Normally 65% of the Portfolio's total
assets are invested in common stocks
and preferred stocks of companies
with capitalization in excess of $1
billion.
-----------------------------------------------------------------
LARGE Equity Portfolio: seeks long-term Jennison
CAP growth of capital. The Portfolio Associates LLC;
BLEND invests at least 80% of its net ClearBridge
assets plus borrowings for investment Advisors, LLC
purposes in common stocks of major
established corporations as well as
smaller companies that the Sub
advisers believe offer attractive
prospects of appreciation. In the
Jennison portion, over a full market
cycle, the subadviser seeks to
outperform the S&P 500 Index by
investing in a portfolio with
earnings growth greater than the
index at valuations comparable to
that of the index.
-----------------------------------------------------------------
INTER Global Portfolio: seeks long-term LSV Asset
NATIONAL growth of capital. The Portfolio Management/
EQUITY invests primarily in common stocks Marsico Capital
(and their equivalents) of foreign Management, LLC/
and U.S. companies. Each Sub-adviser T. Rowe Price
for the Portfolio generally will use Associates, Inc./
either a "growth" approach or a William Blair &
"value" approach in selecting either Company, LLC
foreign or U.S. common stocks.
-----------------------------------------------------------------
25
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
----------------------------------------------------------------
FIXED Money Market Portfolio: seeks maximum Prudential
INCOME current income consistent with the Investment
stability of capital and the Management, Inc.
maintenance of liquidity. The
Portfolio invests in high-quality
short-term money market instruments
issued by the U.S. Government or its
agencies, as well as by corporations
and banks, both domestic and foreign.
The Portfolio will invest only in
instruments that mature in thirteen
months or less, and which are
denominated in U.S. dollars.
----------------------------------------------------------------
LARGE Value Portfolio: seeks long-term Jennison
CAP growth of capital through Associates LLC
VALUE appreciation and income. The
Portfolio invests primarily in common
stocks that the subadviser believes
are undervalued - those stocks that
are trading below their underlying
asset value, cash generating ability
and overall earnings and earnings
growth. There is a risk that "value"
stocks can perform differently from
the market as a whole and other types
of stocks and can continue to be
undervalued by the markets for long
periods of time. Normally at least
65% of the Portfolio's total assets
is invested in the common stock and
convertible securities of companies
that the subadviser believes will
provide investment returns above
those of the Russell 1000(R) Value
Index. Most of the investments will
be securities of large capitalization
companies. The Portfolio may invest
up to 25% of its total assets in real
estate investment trusts (REITs) and
up to 30% of its total assets in
foreign securities.
----------------------------------------------------------------
ASSET SP Aggressive Growth Asset Allocation Prudential
ALLOCA- Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), and the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST) (the
Underlying Portfolios). Under normal
circumstances, the Portfolio
generally will focus on equity
Underlying Portfolios but will also
invest in fixed-income Underlying
Portfolios.
----------------------------------------------------------------
ASSET SP Balanced Asset Allocation Prudential
ALLOCA- Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), and the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST) (the
Underlying Portfolios). The Portfolio
will invest in equity and
fixed-income Underlying Portfolios.
----------------------------------------------------------------
ASSET SP Conservative Asset Allocation Prudential
ALLOCA- Portfolio: seeks to obtain the Investments LLC
TION/ highest potential total return
BALANCED consistent with the specified level
of risk tolerance. The Portfolio may
invest in any other Portfolio of the
Fund (other than another SP Asset
Allocation Portfolio), and the AST
Marsico Capital Growth Portfolio of
Advanced Series Trust (AST) (the
Underlying Portfolios). Under normal
circumstances, the Portfolio
generally will focus on fixed-income
Underlying Portfolios but will also
invest in equity Underlying
Portfolios.
----------------------------------------------------------------
ASSET SP Growth Asset Allocation Portfolio: Prudential
ALLOCA- seeks to obtain the highest potential Investments LLC
TION/ total return consistent with the
BALANCED specified level of risk tolerance.
The Portfolio may invest in any other
Portfolio of the Fund (other than
another SP Asset Allocation
Portfolio), and the AST Marsico
Capital Growth Portfolio of Advanced
Series Trust (AST) (the Underlying
Portfolios). Under normal
circumstances, the Portfolio
generally will focus on equity
Underlying Portfolios but will also
invest in fixed-income Underlying
Portfolios.
----------------------------------------------------------------
LARGE SP AIM Core Equity Portfolio: seeks A I M Capital
CAP long-term growth of capital. The Management, Inc.
BLEND Portfolio normally invests at least
80% of investable assets in equity
securities, including convertible
securities of established companies
that have long-term above-average
growth in earnings and growth
companies that the subadviser
believes have the potential for
above-average growth in earnings.
----------------------------------------------------------------
26
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
LARGE SP Davis Value Portfolio: seeks Davis Selected
CAP growth of capital. The Portfolio Advisers, L.P.
VALUE invests primarily in common stocks of
U.S. companies with market
capitalizations within the market
capitalization range of the Russell
1000 Value Index. It may also invest
in stocks of foreign companies and
U.S. companies with smaller
capitalizations. The subadviser
attempts to select common stocks of
businesses that possess
characteristics that the subadviser
believe foster the creation of
long-term value, such as proven
management, a durable franchise and
business model, and sustainable
competitive advantages. The
subadviser aims to invest in such
businesses when they are trading at a
discount to their intrinsic worth.
There is a risk that "value" stocks
can perform differently from the
market as a whole and other types of
stocks and can continue to be
undervalued by the markets for long
periods of time.
------------------------------------------------------------------
INTER SP International Value Portfolio LSV Asset
NATIONAL (formerly SP LSV International Value Management,
EQUITY Portfolio): seeks capital growth. The Thornburg
Portfolio normally invests at least Investment
65% of the Portfolio's investable Management, Inc.
assets (net assets plus borrowings
made for investment purposes) in the
equity securities of companies in
developed countries outside the
United States that are represented in
the MSCI EAFE Index.
------------------------------------------------------------------
MID CAP SP Mid Cap Growth Portfolio: seeks Calamos Advisors
GROWTH long-term growth of capital. The LLC
Portfolio normally invests at least
80% of investable assets in common
stocks and related securities, such
as preferred stocks, convertible
securities and depositary receipts
for those securities. These
securities typically are of medium
market capitalizations, which the
subadviser believes have
above-average growth potential. The
Portfolio generally defines medium
market capitalization companies as
those companies with market
capitalizations within the market
capitalization range of the Russell
Mid Cap Growth Index. The Portfolio's
investments may include securities
listed on a securities exchange or
traded in the over-the-counter
markets. The subadviser uses a
bottom-up and top-down analysis in
managing the Portfolio. This means
that securities are selected based
upon fundamental analysis, as well as
a top-down approach to
diversification by industry and
company, and by paying attention to
macro-level investment themes. The
Portfolio may invest in foreign
securities (including emerging
markets securities).
------------------------------------------------------------------
FIXED SP PIMCO High Yield Portfolio: seeks Pacific Investment
INCOME to maximize total return consistent Management
with preservation of capital and Company LLC
prudent investment management. The (PIMCO)
Portfolio will invest in a
diversified portfolio of fixed-income
investment instruments of varying
maturities. The average portfolio
duration of the Portfolio generally
will vary within a two- to six-year
time frame based on the Sub-advisor's
forecast for interest rates.
------------------------------------------------------------------
FIXED SP PIMCO Total Return Portfolio: Pacific Investment
INCOME seeks to maximize total return Management
consistent with preservation of Company LLC
capital and prudent investment (PIMCO)
management. The Portfolio will invest
in a diversified portfolio of
fixed-income investment instruments
of varying maturities. The average
portfolio duration of the Portfolio
generally will vary within a three-
to six-year time frame based on the
Sub-advisor's forecast for interest
rates.
------------------------------------------------------------------
MID CAP SP Prudential U.S. Emerging Growth Jennison
GROWTH Portfolio: seeks long-term capital Associates LLC
appreciation. The Portfolio normally
invests at least 80% of investable
assets in equity securities of small
and medium sized U.S. companies that
the subadviser believes have the
potential for above-average earnings
growth. The subadviser seeks to
invest in companies that it believes
are poised to benefit from an
acceleration of growth or an
inflection point in a company's
growth rate that is not currently
reflected in the stock price. The
team uses a research-intensive
approach based on internally
generated fundamental research.
------------------------------------------------------------------
SMALL SP Small Cap Growth Portfolio: seeks Eagle Asset
CAP long-term capital growth. The Management/
GROWTH Portfolio pursues its objective by Neuberger Berman
primarily investing in the common Management, Inc.
stocks of small-capitalization
companies, which is defined as a
company with a market capitalization,
at the time of purchase, no larger
than the largest capitalized company
included in the Russell 2000 Index
during the most recent 11-month
period (based on month-end data) plus
the most recent data during the
current month.
------------------------------------------------------------------
27
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
SMALL SP Small-Cap Value Portfolio: seeks Goldman Sachs
CAP long-term capital growth. The Asset
VALUE Portfolio normally invests at least Management, L.P.;
80% its net assets plus borrowings ClearBridge
for investment purposes in the equity Advisors, LLC
securities of small capitalization
companies. The Portfolio focuses on
equity securities that are believed
to be undervalued in the marketplace.
-----------------------------------------------------------------
LARGE SP Strategic Partners Focused Growth AllianceBernstein
CAP Portfolio: seeks long-term growth of L.P.; Jennison
GROWTH capital. The Portfolio normally Associates LLC
invests at least 65% of total assets
in equity-related securities of U.S.
companies that the subadvisers
believe to have strong capital
appreciation potential. The
Portfolio's strategy is to combine
the efforts of two subadvisers and to
invest in the favorite stock
selection ideas of three portfolio
managers (two of whom invest as a
team). Each investment Sub-adviser to
the Portfolio utilizes a growth
style: Jennison selects approximately
20 securities and AllianceBernstein
selects approximately 30 securities.
The portfolio managers build a
portfolio with stocks in which they
have the highest confidence and may
invest more than 5% of the
Portfolio's assets in any one issuer.
The Portfolio is nondiversified,
meaning it can invest a relatively
high percentage of its assets in a
small number of issuers. Investing in
a nondiversified portfolio,
particularly a portfolio investing in
approximately 50 equity-related
securities, involves greater risk
than investing in a diversified
portfolio because a loss resulting
from the decline in the value of one
security may represent a greater
portion of the total assets of a
nondiversified portfolio.
-----------------------------------------------------------------
LARGE Stock Index Portfolio: seeks Quantitative
CAP investment results that generally Management
BLEND correspond to the performance of Associates LLC
publicly-traded common stocks. With
the price and yield performance of
the Standard & Poor's 500 Composite
Stock Price Index (S&P 500) as the
benchmark, the Portfolio normally
invests at least 80% of investable
assets in S&P 500 stocks. The S&P 500
represents more than 70% of the total
market value of all publicly-traded
common stocks and is widely viewed as
representative of publicly-traded
common stocks as a whole. The
Portfolio is not "managed" in the
traditional sense of using market and
economic analyses to select stocks.
Rather, the portfolio manager
purchases stocks in proportion to
their weighting in the S&P 500.
-----------------------------------------------------------------
LARGE SP T. Rowe Price Large-Cap Growth T. Rowe Price
CAP Portfolio: seeks long-term capital Associates, Inc.
GROWTH growth. Under normal circumstances,
the Portfolio invests at least 80% of
its net assets plus borrowings for
investment purposes in the equity
securities of large-cap companies.
The Sub-adviser generally looks for
companies with an above-average rate
of earnings and cash flow growth and
a lucrative niche in the economy that
gives them the ability to sustain
earnings momentum even during times
of slow economic growth.
-----------------------------------------------------------------
INTER- SP International Growth Portfolio Marsico Capital
NATIONAL (formerly, SP William Blair Management, LLC;
EQUITY International Growth Portfolio): William Blair &
seeks long-term capital appreciation. Company, LLC.
The Portfolio invests primarily in
equity-related securities of foreign
issuers. The Portfolio invests
primarily in the common stock of
large and medium-sized foreign
companies, although it may also
invest in companies of all sizes.
Under normal circumstances, the
Portfolio invests at least 65% of its
total assets in common stock of
foreign companies operating or based
in at least five different countries,
which may include countries with
emerging markets. The Portfolio looks
primarily for stocks of companies
whose earnings are growing at a
faster rate than other companies or
which offer attractive growth
potential.
-----------------------------------------------------------------
28
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
ADVANCED SERIES TRUST
-----------------------------------------------------------------
ASSET AST Advanced Strategies Portfolio: LSV Asset
ALLOCA seeks a high level of absolute Management;
TION/ return. The Portfolio invests Marsico Capital
BALANCED primarily in a diversified portfolio Management,
of equity and fixed income securities LLC; Pacific
across different investment Investment
categories and investment managers. Management
The Portfolio pursues a combination Company LLC
of traditional and non-traditional (PIMCO);
investment strategies. T. Rowe Price
Associates, Inc.;
William Blair &
Company, L.L.C.
-----------------------------------------------------------------
ASSET AST Aggressive Asset Allocation AST
ALLOCA Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 92.5% to 100% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 0% to 7.5% of its net
assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
-----------------------------------------------------------------
LARGE AST AllianceBernstein Core Value AllianceBernstein
CAP Portfolio: seeks long-term capital L.P.
VALUE growth by investing primarily in
common stocks. The Sub-advisor
expects that the majority of the
Portfolio's assets will be invested
in the common stocks of large
companies that appear to be
undervalued. Among other things, the
Portfolio seeks to identify
compelling buying opportunities
created when companies are
undervalued on the basis of investor
reactions to near-term problems or
circumstances even though their
long-term prospects remain sound. The
Sub-advisor seeks to identify
individual companies with earnings
growth potential that may not be
recognized by the market at large.
-----------------------------------------------------------------
LARGE AST AllianceBernstein Growth & Income AllianceBernstein
CAP Portfolio: seeks long-term growth of L.P.
VALUE capital and income while attempting
to avoid excessive fluctuations in
market value. The Portfolio normally
will invest in common stocks (and
securities convertible into common
stocks). The Sub-advisor will take a
value-oriented approach, in that it
will try to keep the Portfolio's
assets invested in securities that
are selling at reasonable valuations
in relation to their fundamental
business prospects. The stocks that
the Portfolio will normally invest in
are those of seasoned companies.
-----------------------------------------------------------------
LARGE AST AllianceBernstein Managed Index AllianceBernstein
CAP 500 Portfolio: seeks to outperform L.P.
BLEND the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500")
through stock selection resulting in
different weightings of common stocks
relative to the index. The Portfolio
will invest, under normal
circumstances, at least 80% of its
net assets in securities included in
the S&P(R) 500.
-----------------------------------------------------------------
LARGE AST American Century Income & Growth American Century
CAP Portfolio: seeks capital growth with Investment
VALUE current income as a secondary Management, Inc.
objective. The Portfolio invests
primarily in common stocks that offer
potential for capital growth, and
may, consistent with its investment
objective, invest in stocks that
offer potential for current income.
The Sub-advisor utilizes a
quantitative management technique
with a goal of building an equity
portfolio that provides better
returns than the S&P 500 Index
without taking on significant
additional risk and while attempting
to create a dividend yield that will
be greater than the S&P 500 Index.
-----------------------------------------------------------------
29
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
ASSET AST American Century Strategic American Century
ALLOCA Allocation Portfolio (formerly known Investment
TION/ as AST American Century Strategic Management, Inc.
BALANCED Balanced Portfolio): seeks capital
growth and current income. The
Sub-advisor intends to maintain
approximately 60% of the Portfolio's
assets in equity securities and the
remainder in bonds and other fixed
income securities. Both the
Portfolio's equity and fixed income
investments will fluctuate in value.
The equity securities will fluctuate
depending on the performance of the
companies that issued them, general
market and economic conditions, and
investor confidence. The fixed income
investments will be affected
primarily by rising or falling
interest rates and the credit quality
of the issuers.
-----------------------------------------------------------------
ASSET AST Balanced Asset Allocation AST
ALLOCA Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 57.5% to 72.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 27.5% to 42.5% of its
net assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
-----------------------------------------------------------------
ASSET AST Capital Growth Asset Allocation AST
ALLOCA Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 72.5% to 87.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 12.5% to 27.5% of its
net assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
-----------------------------------------------------------------
SPECIALTY AST Cohen & Steers Realty Portfolio: Cohen & Steers
seeks to maximize total return Capital
through investment in real estate Management, Inc.
securities. The Portfolio pursues its
investment objective by investing,
under normal circumstances, at least
80% of its net assets in securities
of real estate issuers. Under normal
circumstances, the Portfolio will
invest substantially all of its
assets in the equity securities of
real estate companies, i.e., a
company that derives at least 50% of
its revenues from the ownership,
construction, financing, management
or sale of real estate or that has at
least 50% of its assets in real
estate. Real estate companies may
include real estate investment trusts
or REITs.
-----------------------------------------------------------------
ASSET AST Conservative Asset Allocation AST
ALLOCA Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 47.5% to 62.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 37.5% to 52.5% of its
net assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
-----------------------------------------------------------------
LARGE AST DeAM Large-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of capital by Investment
VALUE investing primarily in the value Management
stocks of larger companies. The Americas, Inc.
Portfolio pursues its objective,
under normal market conditions, by
primarily investing at least 80% of
the value of its assets in the equity
securities of large-sized companies
included in the Russell 1000(R) Value
Index. The Sub-advisor employs an
investment strategy designed to
maintain a portfolio of equity
securities which approximates the
market risk of those stocks included
in the Russell 1000(R) Value Index,
but which attempts to outperform the
Russell 1000(R) Value Index through
active stock selection.
-----------------------------------------------------------------
SMALL AST Neuberger Berman Small-Cap Growth Neuberger Berman
CAP Portfolio (formerly known as AST DeAM Management Inc.
GROWTH Small-Cap Growth Portfolio): seeks
maximum growth of investors' capital
from a portfolio of growth stocks of
smaller companies. The Portfolio
pursues its objective, under normal
circumstances, by primarily investing
at least 80% of its total assets in
the equity securities of small-sized
companies included in the Russell
2000 Growth(R) Index.
-----------------------------------------------------------------
30
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
----------------------------------------------------------------
SMALL AST DeAM Small-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of investors' Investment
VALUE capital by investing primarily in the Management
value stocks of smaller companies. Americas, Inc.
The Portfolio pursues its objective,
under normal market conditions, by
primarily investing at least 80% of
its total assets in the equity
securities of small-sized companies
included in the Russell 2000(R) Value
Index. The Sub-advisor employs an
investment strategy designed to
maintain a portfolio of equity
securities which approximates the
market risk of those stocks included
in the Russell 2000(R) Value Index,
but which attempts to outperform the
Russell 2000(R) Value Index.
----------------------------------------------------------------
SMALL AST Federated Aggressive Growth Federated Equity
CAP Portfolio: seeks capital growth. The Management
GROWTH Portfolio pursues its investment Company of
objective by investing primarily in Pennsylvania/
the stocks of small companies that Federated Global
are traded on national security Investment
exchanges, NASDAQ stock exchange and Management
the over-the-counter-market. Small Corp.; Federated
companies will be defined as MDTA LLC
companies with market capitalizations
similar to companies in the Russell
2000 Growth Index.
----------------------------------------------------------------
ASSET AST First Trust Balanced Target First Trust
ALLOCA- Portfolio: seeks long-term capital Advisors L.P.
TION/ growth balanced by current income.
BALANCED The Portfolio seeks to achieve its
objective by investing approximately
65% in common stocks and 35% in fixed
income securities. The Portfolio
allocates the equity portion of the
portfolio across five uniquely
specialized strategies - the Dow/SM/
Target Dividend, the Value Line(R)
Target 25, the Global Dividend Target
15, the NYSE(R) International Target
25, and the Target Small Cap. Each
strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using a
multi-factor scoring system to select
the common stocks. The fixed income
allocation is determined by the Dow
Jones Income strategy which utilizes
certain screens to select bonds from
the Dow Jones Corporate Bond Index or
like-bonds not in the index.
----------------------------------------------------------------
ASSET AST First Trust Capital Appreciation First Trust
ALLOCA- Target Portfolio: seeks long-term Advisors L.P.
TION/ growth of capital. The Portfolio
BALANCED seeks to achieve its objective by
investing approximately 80% in common
stocks and 20% in fixed income
securities. The portfolio allocates
the equity portion of the portfolio
across five uniquely specialized
strategies - the Value Line(R) Target
25, the Global Dividend Target 15,
the Target Small Cap, the Nasdaq(R)
Target 15, and the NYSE(R)
International Target 25. Each
strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using a
multi-factor scoring system to select
the common stocks. The fixed income
allocation is determined by the Dow
Jones Income strategy utilizes
certain screens to select bonds from
the Dow Jones Corporate Bond Index or
like-bonds not in the index.
----------------------------------------------------------------
ASSET AST UBS Dynamic Alpha Portfolio UBS Global Asset
ALLOCA- (formerly known as AST Global Management
TION/ Allocation Portfolio): seeks to (Americas) Inc.
BALANCED maximize total return, consisting of
capital appreciation and current
income. The Portfolio invests in
securities and financial instruments
to gain exposure to global equity,
global fixed income and cash
equivalent markets, including global
currencies. The Portfolio may invest
in equity and fixed income securities
of issuers located within and outside
the United States or in open-end
investment companies advised by UBS
Global Asset Management (Americas)
Inc., the Portfolio's Sub-Advisor, to
gain exposure to certain global
equity and global fixed income
markets.
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31
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
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STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
LARGE AST Goldman Sachs Concentrated Growth Goldman Sachs
CAP Portfolio: seeks growth of capital in Asset
GROWTH a manner consistent with the Management, L.P.
preservation of capital. Realization
of income is not a significant
investment consideration and any
income realized on the Portfolio's
investments, therefore, will be
incidental to the Portfolio's
objective. The Portfolio will pursue
its objective by investing primarily
in equity securities of companies
that the Sub-advisor believes have
the potential to achieve capital
appreciation over the long-term. The
Portfolio seeks to achieve its
investment objective by investing,
under normal circumstances, in
approximately 30 - 45 companies that
are considered by the Sub-advisor to
be positioned for long-term growth.
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MID CAP AST Goldman Sachs Mid-Cap Growth Goldman Sachs
GROWTH Portfolio: seeks long-term capital Asset
growth. The Portfolio pursues its Management, L.P.
investment objective, by investing
primarily in equity securities
selected for their growth potential,
and normally invests at least 80% of
the value of its assets in medium
capitalization companies. For
purposes of the Portfolio,
medium-sized companies are those
whose market capitalizations
(measured at the time of investment)
fall within the range of companies in
the Russell Mid Cap Growth Index. The
Sub-advisor seeks to identify
individual companies with earnings
growth potential that may not be
recognized by the market at large.
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FIXED AST High Yield Portfolio: seeks a Pacific Investment
INCOME high level of current income and may Management
also consider the potential for Company LLC
capital appreciation. The Portfolio (PIMCO)
invests, under normal circumstances,
at least 80% of its net assets plus
any borrowings for investment
purposes (measured at time of
purchase) in high yield, fixed-income
securities that, at the time of
purchase, are non-investment grade
securities. Such securities are
commonly referred to as "junk bonds".
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INTER- AST JPMorgan International Equity J.P. Morgan
NATIONAL Portfolio: seeks long-term capital Investment
EQUITY growth by investing in a diversified Management Inc.
portfolio of international equity
securities. The Portfolio seeks to
meet its objective by investing,
under normal market conditions, at
least 80% of its assets in a
diversified portfolio of equity
securities of companies located or
operating in developed non-U.S.
countries and emerging markets of the
world. The equity securities will
ordinarily be traded on a recognized
foreign securities exchange or traded
in a foreign over-the-counter market
in the country where the issuer is
principally based, but may also be
traded in other countries including
the United States.
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LARGE AST Large-Cap Value Portfolio: seeks Dreman Value
CAP current income and long-term growth Management LLC,
VALUE of income, as well as capital Hotchkis and
appreciation. The Portfolio invests, Wiley Capital
under normal circumstances, at least Management LLC;
80% of its net assets in common J.P. Morgan
stocks of large cap U.S. companies. Investment
The Portfolio focuses on common Management, Inc.
stocks that have a high cash dividend
or payout yield relative to the
market or that possess relative value
within sectors.
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FIXED AST Lord Abbett Bond-Debenture Lord, Abbett &
INCOME Portfolio: seeks high current income Co. LLC
and the opportunity for capital
appreciation to produce a high total
return. To pursue its objective, the
Portfolio will invest, under normal
circumstances, at least 80% of the
value of its assets in fixed income
securities and normally invests
primarily in high yield and
investment grade debt securities,
securities convertible into common
stock and preferred stocks. The
Portfolio may find good value in high
yield securities, sometimes called
"lower-rated bonds" or "junk bonds,"
and frequently may have more than
half of its assets invested in those
securities. At least 20% of the
Portfolio's assets must be invested
in any combination of investment
grade debt securities, U.S.
Government securities and cash
equivalents. The Portfolio may also
make significant investments in
mortgage-backed securities. Although
the Portfolio expects to maintain a
weighted average maturity in the
range of five to twelve years, there
are no restrictions on the overall
Portfolio or on individual
securities. The Portfolio may invest
up to 20% of its net assets in equity
securities.
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32
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
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STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
LARGE AST Marsico Capital Growth Portfolio: Marsico Capital
CAP seeks capital growth. Income Management, LLC
GROWTH realization is not an investment
objective and any income realized on
the Portfolio's investments,
therefore, will be incidental to the
Portfolio's objective. The Portfolio
will pursue its objective by
investing primarily in common stocks
of larger, more established
companies. In selecting investments
for the Portfolio, the Sub-advisor
uses an approach that combines "top
down" economic analysis with "bottom
up" stock selection. The "top down"
approach identifies sectors,
industries and companies that may
benefit from the trends the
Sub-advisor has observed. The
Sub-advisor then looks for individual
companies with earnings growth
potential that may not be recognized
by the market at large, utilizing a
"bottom up" stock selection process.
The Portfolio will normally hold a
core position of between 35 and 50
common stocks. The Portfolio may hold
a limited number of additional common
stocks at times when the Portfolio
manager is accumulating new
positions, phasing out existing or
responding to exceptional market
conditions.
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INTER- AST MFS Global Equity Portfolio: Massachusetts
NATIONAL seeks capital growth. Under normal Financial Services
EQUITY circumstances the Portfolio invests Company
at least 80% of its assets in equity
securities of U.S. and foreign
issuers (including issuers in
developing countries). While the
portfolio may invest its assets in
companies of any size, the Portfolio
generally focuses on companies with
large capitalizations.
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LARGE AST MFS Growth Portfolio: seeks Massachusetts
CAP long-term capital growth and future Financial Services
GROWTH income. Under normal market Company
conditions, the Portfolio invests at
least 80% of its total assets in
common stocks and related securities,
such as preferred stocks, convertible
securities and depositary receipts,
of companies. The Sub-advisor focuses
on investing the Portfolio's assets
in the stock of companies it believes
to have above average earnings growth
potential compared to other companies
(growth companies). The Portfolio may
invest up to 35% of its net assets in
foreign securities.
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MID CAP AST Mid Cap Value Portfolio: seeks to EARNEST
VALUE provide capital growth by investing Partners LLC/
primarily in mid-capitalization WEDGE Capital
stocks that appear to be undervalued. Management, LLP
The Portfolio has a non-fundamental
policy to invest, under normal
circumstances, at least 80% of the
value of its net assets in
mid-capitalization companies.
------------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Growth Neuberger Berman
GROWTH Portfolio: seeks capital growth. Management Inc.
Under normal market conditions, the
Portfolio primarily invests at least
80% of its net assets in the common
stocks of mid-cap companies. The
Sub-adviser looks for fast-growing
companies that are in new or rapidly
evolving industries.
------------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Value Neuberger Berman
VALUE Portfolio: seeks capital growth. Management Inc.
Under normal market conditions, the
Portfolio primarily invests at least
80% of its net assets in the common
stocks of mid-cap companies. For
purposes of the Portfolio, companies
with equity market capitalizations
that fall within the range of the
Russell Midcap(R) Index at the time
of investment are considered mid-cap
companies. Some of the Portfolio's
assets may be invested in the
securities of large-cap companies as
well as in small-cap companies. Under
the Portfolio's value-oriented
investment approach, the Sub-advisor
looks for well-managed companies
whose stock prices are undervalued
and that may rise in price before
other investors realize their worth.
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FIXED AST PIMCO Limited Maturity Bond Pacific Investment
INCOME Portfolio: seeks to maximize total Management
return consistent with preservation Company LLC
of capital and prudent investment (PIMCO)
management. The Portfolio will invest
in a diversified portfolio of
fixed-income investment instruments
of varying maturities. The average
portfolio duration of the Portfolio
generally will vary within a one- to
three-year time frame based on the
Sub-advisor's forecast for interest
rates.
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ASSET AST Preservation Asset Allocation AST
ALLOCA- Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 27.5% to 42.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 57.5% to 72.5% of its
net assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
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33
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
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STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------
SMALL AST Small-Cap Value Portfolio: seeks ClearBridge
CAP to provide long-term capital growth Advisors, LLC;
VALUE by investing primarily in Dreman Value
small-capitalization stocks that Management LLC;
appear to be undervalued. The J.P. Morgan
Portfolio will have a non-fundamental Investment
policy to invest, under normal Management, Inc.;
circumstances, at least 80% of the Lee Munder
value of its net assets in small Investments, Ltd
capitalization stocks. The Portfolio
will focus on common stocks that
appear to be undervalued.
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ASSET AST T. Rowe Price Asset Allocation T. Rowe Price
ALLOCA- Portfolio: seeks a high level of Associates, Inc.
TION/ total return by investing primarily
BALANCED in a diversified portfolio of fixed
income and equity securities. The
Portfolio normally invests
approximately 60% of its total assets
in equity securities and 40% in fixed
income securities. This mix may vary
depending on the sub-advisor's
outlook for the markets. The
Sub-advisor concentrates common stock
investments in larger, more
established companies, but the
Portfolio may include small and
medium-sized companies with good
growth prospects. The fixed income
portion of the Portfolio will be
allocated among investment grade
securities, high yield or "junk"
bonds, emerging market securities,
foreign high quality debt securities
and cash reserves.
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FIXED AST T. Rowe Price Global Bond T. Rowe Price
INCOME Portfolio: seeks to provide high International, Inc.
current income and capital growth by
investing in high-quality foreign and
U.S. dollar-denominated bonds. The
Portfolio will invest at least 80% of
its total assets in fixed income
securities, including high quality
bonds issued or guaranteed by U.S. or
foreign governments or their agencies
and by foreign authorities, provinces
and municipalities as well as
investment grade corporate bonds and
mortgage and asset-backed securities
of U.S. and foreign issuers. The
Portfolio generally invests in
countries where the combination of
fixed-income returns and currency
exchange rates appears attractive,
or, if the currency trend is
unfavorable, where the Sub-advisor
believes that the currency risk can
be minimized through hedging. The
Portfolio may also invest up to 20%
of its assets in the aggregate in
below investment-grade, high-risk
bonds ("junk bonds"). In addition,
the Portfolio may invest up to 30% of
its assets in mortgage-related
(including derivatives, such as
collateralized mortgage obligations
and stripped mortgage securities) and
asset-backed securities.
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SPECIALTY AST T. Rowe Price Natural Resources T. Rowe Price
Portfolio: seeks long-term capital Associates, Inc.
growth primarily through the common
stocks of companies that own or
develop natural resources (such as
energy products, precious metals and
forest products) and other basic
commodities. The Portfolio normally
invests primarily (at least 80% of
its total assets) in the common
stocks of natural resource companies.
The Portfolio looks for companies
that have the ability to expand
production, to maintain superior
exploration programs and production
facilities, and the potential to
accumulate new resources. At least
50% of Portfolio assets will be
invested in U.S. securities, up to
50% of total assets also may be
invested in foreign securities.
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GARTMORE VARIABLE INSURANCE TRUST
--------------------------------------------------------------------
INTER- GVIT Developing Markets: seeks NWD Management
NATIONAL long-term capital appreciation, under & Research Trust/
EQUITY normal conditions by investing at Gartmore Global
least 80% of its total assets in Partners
stocks of companies of any size based
in the world's developing economies.
Under normal market conditions,
investments are maintained in at
least six countries at all times and
no more than 35% of total assets in
any single one of them.
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34
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
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STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------
JANUS ASPEN SERIES
------------------------------------------------------------
LARGE Janus Aspen Series: Large Cap Growth Janus Capital
CAP Portfolio - Service Shares: seeks Management LLC
GROWTH long-term growth of capital in a
manner consistent with the
preservation of capital. The
Portfolio invests at least 80% of its
net assets plus the amount of any
borrowings for investment purposes in
common stocks of large-sized
companies. Large-sized companies are
those whose market capitalizations
fall within the range of companies in
the Russell 1000 Index at the time of
purchase.
------------------------------------------------------------
FIXED INTEREST RATE OPTIONS
We offer two fixed interest rate options:
.. a one-year fixed interest rate option, and
.. a dollar cost averaging fixed rate option (DCA Fixed Rate Option).
When you select one of these options, your payment will earn interest at the
established rate for the applicable interest rate period. A new interest rate
period is established every time you allocate or transfer money into a fixed
interest rate option. (You may not transfer amounts from other investment
options into the DCA Fixed Rate Option.) You may have money allocated in more
than one interest rate period at the same time. This could result in your
money earning interest at different rates and each interest rate period
maturing at a different time. While these interest rates may change from time
to time, they will not be less than the minimum interest rate dictated by
applicable state law. We may offer lower interest rates for Contracts With
Credit than for Contracts Without Credit. The interest rates we pay on the
fixed interest rate options may be influenced by the asset-based charges
assessed against the Separate Account.
Payments allocated to the fixed interest rate options become part of Pruco
Life of New Jersey's general assets.
One-Year Fixed Interest Rate Option
We set a one-year base guaranteed annual interest rate for the one-year fixed
interest rate option. Additionally, we may provide a higher interest rate on
each purchase payment allocated to this option for the first year after the
payment. This higher interest rate will not apply to amounts transferred from
other investment options within the contract or amounts remaining in this
option for more than one year.
Dollar Cost Averaging Fixed Rate Option
You may allocate all or part of any purchase payment to the DCA Fixed Rate
Option. Under this option, you automatically transfer amounts over a stated
period (currently, six or twelve months) from the DCA Fixed Rate Option to the
variable investment options and/or to the one-year fixed interest rate option,
as you select. We will invest the assets you allocate to the DCA Fixed Rate
Option in our general account until they are transferred. You may not transfer
from other investment options to the DCA Fixed Rate Option. Transfers to the
one-year fixed interest rate option will remain in the general account.
If you choose to allocate all or part of a purchase payment to the DCA Fixed
Rate Option, the minimum amount of the purchase payment you may allocate is
$2,000. The first periodic transfer will occur on the date you allocate your
purchase payment to the DCA Fixed Rate Option. Subsequent transfers will occur
on the monthly anniversary of the first transfer. Currently, you may choose to
have the purchase payment allocated to the DCA Fixed Rate Option transferred
to the selected variable investment option, or to the one-year fixed interest
rate option in either six or twelve monthly installments, and you may not
change that number of monthly installments after you have chosen the DCA Fixed
Rate Option. You may allocate to both the six-month and twelve-month options.
(In the future, we may make available other numbers of transfers and other
transfer schedules - for example, quarterly as well as monthly.)
If you choose a six-payment transfer schedule, each transfer generally will
equal 1/6/th/ of the amount you allocated to the DCA Fixed Rate Option, and
if you choose a twelve-payment transfer schedule, each transfer generally will
equal 1/12/th/ of the amount you allocated to the DCA Fixed Rate Option. In
either case, the final transfer amount generally will also include the
credited interest. You may change at any time the investment options into
which the DCA Fixed Rate Option assets are transferred. You may make a one
time transfer of the remaining value out of your DCA Fixed Rate Option, if you
so choose. Transfers from the DCA Fixed Rate Option do not count toward the
maximum number of free transfers allowed under the contract.
35
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
If you make a withdrawal or have a fee assessed from your contract, and all or
part of that withdrawal or fee comes out of the DCA Fixed Rate Option, we will
recalculate the periodic transfer amount to reflect the change. This
recalculation may include some or all of the interest credited to the date of
the next scheduled transfer. If a withdrawal or fee assessment reduces the
monthly transfer amount below $100, we will transfer the remaining balance in
the DCA Fixed Rate Option on the next scheduled transfer date.
By investing amounts on a regular basis instead of investing the total amount
at one time, the DCA Fixed Rate Option may decrease the effect of market
fluctuation on the investment of your purchase payment. Of course, dollar cost
averaging cannot ensure a profit or protect against loss in a declining market.
MARKET VALUE ADJUSTMENT OPTION
Under the Market Value Adjustment Option, we may offer one or more of several
guarantee periods provided that the interest rate we are able to declare will
be no less than the minimum interest rate dictated by applicable state law
with respect to any guarantee period. This option is only available in the
Contract Without Credit. The Market Value Adjustment Option is registered
separately from the variable investment options, and the amount of market
value adjustment option securities registered is stated in that registration
statement.
If amounts are withdrawn from a guarantee period, other than during the 30-day
period immediately following the end of the guarantee period, they will be
subject to a market value adjustment even if they are not subject to a
withdrawal charge.
You will earn interest on your invested purchase payment at the rate that we
have declared for the guarantee period you have chosen. You must invest at
least $1,000 if you choose this option.
We refer to interest rates as annual rates, although we credit interest within
each guarantee period on a daily basis. The daily interest that we credit is
equal to the pro rated portion of the interest that would be earned on an
annual basis. We credit interest from the business day on which your purchase
payment is received in good order at the Prudential Annuity Service Center
until the earliest to occur of any of the following events: (a) full surrender
of the contract, (b) commencement of annuity payments or settlement, (c) end
of the guarantee period, (d) transfer of the value in the guarantee period,
(e) payment of a death benefit, or (f) the date the amount is withdrawn.
During the 30-day period immediately following the end of a guarantee period,
we allow you to do any of the following, without the imposition of the market
value adjustment:
(a)withdraw or transfer the value of the guarantee period,
(b)allocate the value to another available guarantee period or other
investment option (provided that the new guarantee period ends prior to the
annuity date). You will receive the interest rate applicable on the date we
receive your instruction, or
(c)apply the value in the guarantee period to the annuity or settlement option
of your choice.
If we do not receive instructions from you concerning the disposition of the
Contract Value in your maturing guarantee period, we will reinvest the amount
in the Prudential Money Market Portfolio investment option.
During the 30-day period immediately following the end of the guarantee
period, or until you elect to do (a), (b) or (c) listed immediately above, you
will receive the current interest rate applicable to the guarantee period
having the same duration as the guarantee period that just matured, which is
offered on the day immediately following the end of the matured guarantee
period. However, if at that time we do not offer a guarantee period with the
same duration as that which matured, you will then receive the current
interest rate applicable to the shortest guarantee period then offered.
Under the market value adjustment option, while your money remains in the
contract for the full guarantee period, your principal amount is guaranteed by
us and the interest amount that your money will earn is guaranteed by us to be
at least the minimum interest rate dictated by applicable state law.
Payments allocated to the market value adjustment option are held as a
separate pool of assets. Any gains or losses experienced by these assets will
not directly affect the contracts. The strength of our guarantees under these
options is based on the overall financial strength of Pruco Life of New Jersey.
Market Value Adjustment
When you allocate a purchase payment or transfer Contract Value to a guarantee
period, we use that money to buy and sell securities and other instruments 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.
36
The market value adjustment that we assess against your Contract Value if you
withdraw or transfer outside the 30-day period discussed above involves our
attributing to you a portion of our investment experience on these bonds and
other instruments.
For example, if you make a full withdrawal when interest rates have risen
since the time of your investment, the bonds and other investments in the
guarantee period likely would have decreased in value, meaning that we would
impose a "negative" market value adjustment on you (i.e., one that results in
a reduction of the withdrawal proceeds that you receive). For a partial
withdrawal, we would deduct a negative market value adjustment from your
remaining Contract Value. Conversely, if interest rates have decreased, the
market value adjustment would be positive.
Other things you should know about the market value adjustment include the
following:
.. We determine the market value adjustment according to a mathematical
formula, which is set forth at the end of this prospectus under the heading
"Market-Value Adjustment Formula." In that section of the prospectus, we
also provide hypothetical examples of how the formula works.
.. A negative market value adjustment could cause you to lose not only the
interest you have earned but also a portion of your principal.
.. In addition to imposing a market value adjustment on withdrawals, we also
will impose a market value adjustment on the Contract Value you apply to an
annuity or settlement option, unless you annuitize within the 30-day period
discussed above.
You should realize, however, that apart from the market value adjustment, the
value of the benefit in your guarantee period does not depend on the investment
Performance of the bonds and other instruments that we hold with respect to
your guarantee period. apart from the effect of any market value adjustment,
we do not pass through to you the gains or losses on the bonds and other
instruments that we hold in connection with a guarantee period.
TRANSFERS AMONG OPTIONS
Subject to certain restrictions, you can transfer money among the variable
investment options and the one-year fixed interest rate option. The minimum
transfer amount is the lesser of $250 or the amount in the investment option
from which the transfer is to be made. In addition, you can transfer your
Contract Value out of a market value adjustment guarantee period into another
market value adjustment guarantee period, into a variable investment option,
or into a one-year fixed interest rate option, although a market value
adjustment will apply to any transfer you make outside the 30-day period
discussed above. You may transfer Contract Value into the Market Value
Adjustment Option at any time, provided it is at least $1,000.
In general, you may make your transfer request by telephone, electronically,
or otherwise in paper form to the Prudential Annuity Service Center. We have
procedures in place to confirm that instructions received by telephone or
electronically are genuine. We will not be liable for following unauthorized
telephone or electronic instructions that we reasonably believed to be
genuine. Your transfer request will take effect at the end of the business day
on which it was received in good order by us, or by certain entities that we
have specifically designated. Our business day generally closes at 4:00 p.m.
Eastern time. Our business day may close earlier, for example if regular
trading on the New York Stock Exchange closes early. Transfer requests
received after the close of the business day will take effect at the end of
the next business day.
With regard to the Market Value Adjustment Option, you can specify the
guarantee period from which you wish to transfer. If you request a transfer
from the market value adjustment option, but you do not specify the guarantee
period from which funds are to be taken, then we will transfer funds from the
guarantee period that has the least time remaining until its maturity date.
You can make transfers out of a fixed interest rate option, other than the DCA
fixed rate option, only during the 30-day period following the end of the one
year interest rate period. transfers from the DCA fixed rate option are made
on a periodic basis for the period that you select.
During the contract accumulation phase, you can make up to 12 transfers each
contract year, among the investment options, without charge. Currently we
charge $25 for each transfer after the twelfth in a contract year, and we have
the right to increase this charge up to $30. (Dollar Cost Averaging and
Auto-Rebalancing transfers do not count toward the 12 free transfers per
year.) (As noted in the fee table, we have different transfer rules under the
beneficiary continuation option).
For purposes of the 12 free transfers per year that we allow, we will treat
multiple transfers that are submitted on the same business day as a single
transfer.
ADDITIONAL TRANSFER RESTRICTIONS
We limit your ability to transfer among your contract's variable investment
options as permitted by applicable law. We impose a yearly restriction on
transfers. Specifically, once you have made 20 transfers among the subaccounts
during a contract year, we will accept any additional transfer request during
that year only if the request is submitted to us in writing with an original
signature and
37
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
otherwise is in good order. For purposes of this transfer restriction, we
(i) do not view a facsimile transmission as a "writing", (ii) will treat
multiple transfer requests submitted on the same business day as a single
transfer, and (iii) do not count any transfer that involves one of our
systematic programs, such as asset allocation and automated withdrawals.
Frequent transfers among variable investment options in response to short-term
fluctuations in markets, sometimes called "market timing," can make it very
difficult for a portfolio manager to manage an underlying mutual fund's
investments. Frequent transfers may cause the fund to hold more cash than
otherwise necessary, disrupt management strategies, increase transaction
costs, or affect performance. For those reasons, the contract was not designed
for persons who make programmed, large, or frequent transfers.
In light of the risks posed to contract owners and other fund investors by
frequent transfers, we reserve the right to limit the number of transfers in
any contract year for all existing or new contract owners, and to take the
other actions discussed below. We also reserve the right to limit the number
of transfers in any contract year or to refuse any transfer request for an
owner or certain owners if: (a) we believe that excessive transfer activity
(as we define it) or a specific transfer request or group of transfer requests
may have a detrimental effect on accumulation unit values or the share prices
of the underlying mutual funds; or (b) we are informed by a fund (e.g., by the
fund's portfolio manager) that the purchase or redemption of fund shares must
be restricted because the fund believes the transfer activity to which such
purchase and redemption relates would have a detrimental effect on the share
prices of the affected fund. Without limiting the above, the most likely
scenario where either of the above could occur would be if the aggregate
amount of a trade or trades represented a relatively large proportion of the
total assets of a particular underlying mutual fund. In furtherance of our
general authority to restrict transfers as described above, and without
limiting other actions we may take in the future, we have adopted the
following specific restrictions:
.. With respect to each variable investment option (other than the Prudential
Money Market Portfolio), we track amounts exceeding a certain dollar
threshold that were transferred into the option. If you transfer such
amount into a particular variable investment option, and within 30 calendar
days thereafter transfer (the "Transfer Out") all or a portion of that
amount into another variable investment option, then upon the Transfer Out,
the former variable investment option becomes restricted (the "Restricted
Option"). Specifically, we will not permit subsequent transfers into the
Restricted Option for 90 calendar days after the Transfer Out if the
Restricted Option invests in a non-international fund, or 180 calendar days
after the Transfer Out if the Restricted Option invests in an international
fund. For purposes of this rule, we do not (i) count transfers made in
connection with one of our systematic programs, such as asset allocation
and automated withdrawals and (ii) categorize as a transfer the first
transfer that you make after the contract date, if you make that transfer
within 30 calendar days after the contract date. Even if an amount becomes
restricted under the foregoing rules, you are still free to redeem the
amount from your contract at any time.
.. We reserve the right to effect exchanges on a delayed basis for all
contracts. That is, we may price an exchange involving a variable
investment option on the business day subsequent to the business day on
which the exchange request was received. Before implementing such a
practice, we would issue a separate written notice to contract owners that
explains the practice in detail. In addition, if we do implement a delayed
exchange policy, we will apply the policy on a uniform basis to all
contracts in the relevant class.
.. The portfolios may have adopted their own policies and procedures with
respect to excessive trading of their respective shares, and we reserve the
right to enforce these policies and procedures. The prospectuses for the
Portfolios describe any such policies and procedures, which may be more or
less restrictive than the policies and procedures we have adopted. Under
SEC rules, we are required to: (1) enter into a written agreement with each
Portfolio or its principal underwriter that obligates us to provide to the
Portfolio promptly upon request certain information about the trading
activity of individual contract owners, and (2) execute instructions from
the Portfolio to restrict or prohibit further purchases or transfers by
specific contract owners who violate the excessive trading policies
established by the Portfolio. In addition, you should be aware that some
Portfolios may receive "omnibus" purchase and redemption orders from other
insurance companies or intermediaries such as retirement plans. The omnibus
orders reflect the aggregation and netting of multiple orders from
individual owners of variable insurance contracts and/or individual
retirement plan participants. The omnibus nature of these orders may limit
the Portfolios in their ability to apply their excessive trading policies
and procedures. In addition, the other insurance companies and/or
retirement plans may have different policies and procedures or may not have
any such policies and procedures because of contractual limitations. For
these reasons, we cannot guarantee that the Portfolios (and thus the
contract owners) will not be harmed by transfer activity relating to other
insurance companies and/or retirement plans that may invest in the
Portfolios.
.. A Portfolio also may assess a short term trading fee in connection with a
transfer out of the variable investment option investing in that Portfolio
that occurs within a certain number of days following the date of
allocation to the variable investment option. Each Portfolio determines the
amount of the short term trading fee and when the fee is imposed. The fee
is retained by or paid to the Portfolio and is not retained by us. The fee
will be deducted from your Contract Value to the extent allowed by law.
Currently, no Portfolio has adopted such a short term trading fee.
.. If we deny one or more transfer requests under the foregoing rules, we will
inform you promptly of the circumstances concerning the denial.
.. We will not implement these rules in jurisdictions that have not approved
contract language authorizing us to do so, or may implement different rules
in certain jurisdictions if required by such jurisdictions. Contract owners
in jurisdictions with such
38
limited transfer restrictions, and contract owners who own variable life
insurance or variable annuity contracts (regardless of jurisdiction) that
do not impose the above-referenced transfer restrictions, might make more
numerous and frequent transfers than contract owners who are subject to
such limitations. Because contract owners who are not subject to the same
transfer restrictions may have the same underlying mutual fund portfolios
available to them, unfavorable consequences associated with such frequent
trading within the underlying mutual fund (e.g., greater portfolio
turnover, higher transaction costs, or performance or tax issues) may
affect all contract owners. Apart from jurisdiction-specific and contract
differences in transfer restrictions, we will apply these rules uniformly,
and will not waive a transfer restriction for any contract owner.
Although our transfer restrictions are designed to prevent excessive
transfers, they are not capable of preventing every potential occurrence of
excessive transfer activity.
DOLLAR COST AVERAGING
The dollar cost averaging (DCA) feature (which is distinct from the DCA Fixed
Rate Option) allows you to systematically transfer either a fixed dollar
amount or a percentage out of any variable investment option into any other
variable investment option or the one-year fixed interest rate option. You can
have these automatic transfers occur monthly, quarterly, semiannually or
annually. By investing amounts on a regular basis instead of investing the
total amount at one time, dollar cost averaging may decrease the effect of
market fluctuation on the investment of your purchase payment. Of course,
dollar cost averaging cannot ensure a profit or protect against loss in
declining markets.
Transfers will be made automatically on the schedule you choose until the
entire amount you chose to have transferred has been transferred or until you
tell us to discontinue the transfers. You can allocate subsequent purchase
payments to be transferred under this option at any time.
Your transfers will occur on the last calendar day of each transfer period you
have selected, provided that the New York Stock Exchange is open on that date.
If the New York Stock Exchange is not open on a particular transfer date, the
transfer will take effect on the next business day.
Any dollar cost averaging transfers you make do not count toward the 12 free
transfers you are allowed each contract year. The dollar cost averaging
feature is available only during the contract accumulation phase and is
offered without charge.
ASSET ALLOCATION PROGRAM
We recognize the value of having asset allocation models when deciding how to
allocate your purchase payments among the investment options. If you choose to
participate in the Asset Allocation Program, your representative will give you
a questionnaire to complete that will help determine a program that is
appropriate for you. Your asset allocation will be prepared based on your
answers to the questionnaire. You will not be charged for this service, and
you are not obligated to participate or to invest according to program
recommendations.
Asset allocation is a sophisticated method of diversification which allocates
assets among classes in order to manage investment risk and enhance returns
over the long term. However, asset allocation does not guarantee a profit or
protect against a loss. You are not obligated to participate or to invest
according to the program recommendations. We do not intend to provide any
personalized investment advice in connection with these programs and you
should not rely on these programs as providing individualized investment
recommendations to you. The asset allocation programs do not guarantee better
investment results. We reserve the right to terminate or change the asset
allocation programs at any time. You should consult your representative before
electing any asset allocation program.
AUTO-REBALANCING
Once your money has been allocated among the variable investment options, the
actual performance of the investment options may cause your allocation to
shift. For example, an investment option that initially holds only a small
percentage of your assets could perform much better than another investment
option. Over time, this option could increase to a larger percentage of your
assets than you desire. You can direct us to automatically rebalance your
assets to return to your original allocation percentage or to a subsequent
allocation percentage you select. We will rebalance only the variable
investment options that you have designated. If you also participate in the
DCA feature, then the variable investment option from which you make the DCA
transfers will not be rebalanced.
You may choose to have your rebalancing occur monthly, quarterly,
semiannually, or annually. The rebalancing will occur on the last calendar day
of the period you have chosen, provided that the New York Stock Exchange is
open on that date. If the New York Stock Exchange is not open on that date,
the rebalancing will take effect on the next business day.
Any transfers you make because of auto-rebalancing are not counted toward the
12 free transfers you are allowed per year. This feature is available only
during the contract accumulation phase, and is offered without charge. If you
choose auto-rebalancing and dollar cost averaging, auto-rebalancing will take
place after the transfers from your DCA account.
39
2: WHAT INVESTMENT OPTIONS CAN I CHOOSE? continued
SCHEDULED TRANSACTIONS
Scheduled transactions include transfers under dollar cost averaging, the
asset allocation program, auto-rebalancing, systematic withdrawals, systematic
investments, required minimum distributions, substantially equal periodic
payments under Section 72(t) or 72(q) of the Internal Revenue Code of 1986, as
amended (Code), and annuity payments. Scheduled transactions are processed and
valued as of the date they are scheduled, unless the scheduled day is not a
business day. In that case, the transaction will be processed and valued on
the next business day, unless (with respect to required minimum distributions,
substantially equal periodic payments under Section 72(t) or 72(q) of the
Code, and annuity payments only), the next business day falls in the
subsequent calendar year, in which case the transaction will be processed and
valued on the prior business day.
VOTING RIGHTS
We are the legal owner of the shares of the underlying mutual funds used by
the variable investment options. However, we vote the shares of the mutual
funds according to voting instructions we receive from contract owners. When a
vote is required, we will mail you a proxy which is a form that you need to
complete and return to us to tell us how you wish us to vote. When we receive
those instructions, we will vote all of the shares we own on your behalf in
accordance with those instructions. We will vote fund shares for which we do
not receive instructions, and any other shares that we own in our own right,
in the same proportion as shares for which we receive instructions from
contract owners. This voting procedure is sometimes referred to as "mirror
voting" because, as indicated in the immediately preceding sentence, we mirror
the votes that are actually cast, rather than decide on our own how to vote.
In addition, because all the shares of a given mutual fund held within our
separate account are legally owned by us, we intend to vote all of such shares
when that underlying fund seeks a vote of its shareholders. As such, all such
shares will be counted towards whether there is a quorum at the underlying
fund's shareholder meeting and towards the ultimate outcome of the vote. Thus,
under "mirror voting," it is possible that the votes of a small percentage of
contract owners who actually vote will determine the ultimate outcome. We may
change the way your voting instructions are calculated if it is required or
permitted by federal or state regulation.
SUBSTITUTION
We may substitute one or more of the underlying mutual funds used by the
variable investment options. We may also cease to allow investments in
existing funds. We would not do this without the approval of the Securities
and Exchange Commission (SEC) and any necessary state insurance departments.
You will be given specific notice in advance of any substitution we intend to
make.
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION)
PAYMENT PROVISIONS
We can begin making annuity payments any time on or after the first contract
anniversary. Annuity payments must begin no later than the later of the
contract anniversary coinciding with or next following the annuitant's 90/th/
birthday or the tenth contract anniversary.
Upon annuitization, any value in a guarantee period of the market value
adjustment option may be subject to a market value adjustment.
The Strategic Partners Annuity One 3 variable annuity contract offers an
optional Guaranteed Minimum Income Benefit, which we describe below. Your
annuity options vary depending upon whether you choose this benefit.
Please note that annuitization essentially involves converting your Contract
Value to an annuity payment stream, the length of which depends on the terms
of the applicable annuity option. Thus, once annuity payments begin, your
death benefit is determined solely under the terms of the applicable annuity
payment option and you no longer participate in any optional living benefit
(unless you have annuitized under that benefit).
PAYMENT PROVISIONS WITHOUT THE GUARANTEED MINIMUM INCOME BENEFIT
We make the income plans described below available at any time before the
annuity date. These plans are called "annuity options" or "settlement
options." During the income phase, all of the annuity options under this
contract are fixed annuity options. This means that your participation in the
variable investment options ends on the annuity date. If an annuity option is
not selected by the annuity date, the Life Income Annuity Option (Option 2,
described below) will automatically be selected unless prohibited by
applicable law. GENERALLY, ONCE THE ANNUITY PAYMENTS BEGIN, THE ANNUITY OPTION
CANNOT BE CHANGED AND YOU CANNOT MAKE WITHDRAWALS. IN ADDITION TO THE ANNUITY
PAYMENT OPTIONS DISCUSSED IN THIS SECTION, PLEASE NOTE THAT IF YOU CHOOSE THE
OPTIONAL LIFETIME FIVE INCOME BENEFIT, THERE ARE ADDITIONAL ANNUITY PAYMENT
OPTIONS THAT ARE ASSOCIATED WITH THAT BENEFIT. SEE SECTION 5 OF THIS
PROSPECTUS FOR ADDITIONAL DETAILS.
40
Option 1
Annuity Payments For A Fixed Period: Under this option, we will make equal
payments for the period chosen, up to 25 years (but not to exceed life
expectancy). The annuity payments may be made monthly, quarterly,
semiannually, or annually, as you choose, for the fixed period. If the
annuitant dies during the income phase, payments will continue to the
beneficiary for the remainder of the fixed period or, if the beneficiary so
chooses, we will make a single lump-sum payment. The amount of the lump sum
payment is determined by calculating the present value of the unpaid future
payments. This is done by using the interest rate used to compute the actual
payments. The interest rate will be at least 3% a year.
Option 2
Life Income Annuity Option: Under this option, we will make annuity payments
monthly, quarterly, semiannually, or annually as long as the annuitant is
alive. If the annuitant dies before we have made 10 years worth of payments,
we will pay the beneficiary in one lump sum the present value of the annuity
payments scheduled to have been made over the remaining portion of that 10
year period, unless we were specifically instructed that such remaining
annuity payments continue to be paid to the beneficiary. The present value of
the remaining annuity payments is calculated by using the interest rate used
to compute the amount of the original 120 payments. The interest rate will be
at least 3% a year.
If an annuity option is not selected by the annuity date, this is the option
we will automatically select for you.
Other Annuity Options: We currently offer a variety of other annuity options
not described above. At the time annuity payments are chosen, we may make
available to you any of the fixed annuity options that are offered at your
annuity date.
TAX CONSIDERATIONS
If your contract is held under a tax-favored plan, you should consider the
minimum distribution requirements when selecting your annuity option.
GUARANTEED MINIMUM INCOME BENEFIT
The Guaranteed Minimum Income Benefit (GMIB), is an optional feature that
guarantees that once the income period begins, your income payments will be no
less than the GMIB protected value applied to the GMIB guaranteed annuity
purchase rates. If you want the Guaranteed Minimum Income Benefit, you must
elect it when you make your initial purchase payment. Once elected, the
Guaranteed Minimum Income Benefit cannot be revoked. You may not elect both
GMIB and the Lifetime Five Income Benefit.
The GMIB protected value is calculated daily and is equal to the GMIB roll-up
until the GMIB roll-up either reaches its cap or if we stop applying the
annual interest rate based on the age of the annuitant, number of contract
anniversaries, or number of years since the last GMIB reset, as described
below. At this point, the GMIB protected value will be increased by any
subsequent invested purchase payments and reduced proportionally by
withdrawals.
The Guaranteed Minimum Income Benefit is subject to certain restrictions
described below.
.. The annuitant must be 75 or younger in order for you to elect the
Guaranteed Minimum Income Benefit.
.. If you choose the Guaranteed Minimum Income Benefit, we will impose an
annual charge equal to 0.50% for contracts sold on or after May 1, 2004
(0.45% for all other contracts) of the average GMIB protected value
described below. The maximum GMIB charge is 1.00% of average GMIB protected
value. Please note that the charge is calculated based on average GMIB
protected value. Thus, for example, the fee would not decline on account of
a reduction in Contract Value.
.. Under the contract terms governing the GMIB, we can require GMIB
participants to invest only in designated underlying mutual funds or can
require GMIB participants to invest according to an asset allocation model.
Owners electing this benefit currently, must allocate contract value to one
or more of the following asset allocation portfolios of the Advanced Series
Trust (we reserve the right to change these required portfolios on a
prospective basis): AST Capital Growth Asset Allocation Portfolio, AST
Balanced Asset Allocation Portfolio, AST Conservative Asset Allocation
Portfolio, AST Preservation Asset Allocation Portfolio, AST Advanced
Strategies Portfolio, AST First Trust Balanced Target Portfolio, AST First
Trust Capital Appreciation Target Portfolio, or AST T. Rowe Price Asset
Allocation Portfolio.
.. TO TAKE ADVANTAGE OF THE GUARANTEED MINIMUM INCOME BENEFIT, YOU MUST WAIT A
CERTAIN AMOUNT OF TIME BEFORE YOU BEGIN THE INCOME PHASE. THE WAITING
PERIOD IS THE PERIOD EXTENDING FROM THE CONTRACT DATE TO THE 7/TH/ CONTRACT
ANNIVERSARY BUT, IF THE GUARANTEED MINIMUM INCOME BENEFIT HAS BEEN RESET
(AS DESCRIBED BELOW), THE WAITING PERIOD IS THE 7 YEAR PERIOD BEGINNING
WITH THE DATE OF THE MOST RECENT RESET. IN LIGHT OF THIS WAITING PERIOD
UPON RESETS, IT IS NOT RECOMMENDED THAT YOU RESET YOUR GUARANTEED MINIMUM
INCOME BENEFIT IF THE REQUIRED BEGINNING DATE UNDER IRS REQUIRED MINIMUM
DISTRIBUTION PROVISIONS WOULD COMMENCE DURING THE 7 YEAR WAITING PERIOD.
SEE "REQUIRED MINIMUM DISTRIBUTION PROVISIONS AND PAYMENT OPTIONS" IN
SECTION 10 FOR ADDITIONAL INFORMATION ON IRS REQUIREMENTS.
41
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION) continued
Once the waiting period has elapsed, you will have a 30-day period each year,
beginning on the contract anniversary (or in the case of a reset, the
anniversary of the most recent reset), during which you may begin the income
phase with the Guaranteed Minimum Income Benefit by submitting the necessary
forms in good order to the Prudential Annuity Service Center.
GMIB Roll-Up
The GMIB roll-up is equal to the invested purchase payments (after a reset,
the Contract Value at the time of the reset), increased daily at an effective
annual interest rate of 5% starting on the date each invested purchase payment
is made, until the cap is reached (GMIB roll-up cap). We will reduce this
amount by the effect of withdrawals. The GMIB roll-up cap is equal to two
times each invested purchase payment (for a reset, two times the sum of
(1) the Contract Value at the time of the reset, and (2) any invested purchase
payments made subsequent to the reset).
Even if the GMIB roll-up cap has not been reached, we will nevertheless stop
increasing the GMIB roll-up value by the effective annual interest rate on the
latest of:
.. the contract anniversary coinciding with or next following the annuitant's
80/th/ birthday,
.. the 7/th/ contract anniversary, or
.. 7 years from the most recent GMIB reset (as described below).
However, even if we stop increasing the GMIB roll-up value by the effective
annual interest rate, we will still increase the GMIB protected value by
subsequent invested purchase payments, reduced proportionally by withdrawals.
Effect of Withdrawals
In any contract year when the GMIB protected value is increasing at the rate
of 5%, withdrawals will first reduce the GMIB protected value on a
dollar-for-dollar basis, by the same dollar amount of the withdrawal up to the
first 5% of GMIB protected value calculated on the contract anniversary (or,
during the first contract year, on the contract date). Any withdrawals made
after the dollar-for-dollar limit has been reached will proportionally reduce
the GMIB protected value. We calculate the proportional reduction by dividing
the Contract Value after the withdrawal by the Contract Value immediately
following the withdrawal of any available dollar-for-dollar amount. The
resulting percentage is multiplied by the GMIB protected value after
subtracting the amount of the withdrawal that does not exceed 5%. In each
contract year during which the GMIB protected value has stopped increasing at
the 5% rate, withdrawals will reduce the GMIB protected value proportionally.
The GMIB roll-up cap is reduced by the sum of all reductions described above.
The following examples of dollar-for-dollar and proportional reductions
assume: 1.) the contract date and the effective date of the GMIB are
January 1, 2006; 2.) an initial purchase payment of $250,000; 3.) an initial
GMIB protected value of $250,000; 4.) an initial 200% cap of $500,000; and 5.)
an initial dollar-for-dollar limit of $12,500 (5% of $250,000):
Example 1. Dollar-for-dollar Reduction
A $10,000 withdrawal is taken on February 1, 2006 (in the first contract
year). No prior withdrawals have been taken. Immediately prior to the
withdrawal, the GMIB protected value is $251,038.10 (the initial value
accumulated for 31 days at an annual effective rate of 5%). As the amount
withdrawn is less than the dollar-for-dollar limit:
.. The GMIB protected value is reduced by the amount withdrawn (i.e., by
$10,000, from $251,038.10 to $241,038.10).
.. The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000,
from $500,000 to $490,000).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance
of the first contract year is also reduced by the amount withdrawn (from
$12,500 to $2,500).
Example 2. Dollar-for-dollar and Proportional Reductions
A second $10,000 withdrawal is taken on March 1, 2006 (still within the first
contract year). Immediately before the withdrawal, the Contract Value is
$220,000 and the GMIB protected value is $241,941.95. As the amount withdrawn
exceeds the Remaining Limit of $2,500 from Example 1:
.. The GMIB protected value is first reduced by the Remaining Limit (from
$241,941.95 to $239,441.95).
.. The result is then further reduced by the ratio of A to B, where:
.. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
.. B is the Contract Value less the Remaining Limit ($220,000 - $2,500, or
$217,500). The resulting GMIB protected value is: $239,441.95 X (1 -
($7,500/$217,500)), or $231,185.33.
.. The GMIB 200% cap is reduced by the sum of all reductions above ($490,000 -
$2,500 - $8,256.62, or $479,243.38).
.. The Remaining Limit is set to zero (0) for the balance of the first
contract year.
Example 3. Dollar-for-dollar Limit in Second Contract Year
A $10,000 withdrawal is made on the first anniversary of the contract date,
January 1, 2007 (second contract year). Prior to the withdrawal, the GMIB
protected value is $240,837.69. The dollar-for-dollar limit is equal to 5% of
this amount, or $12,041.88. As the amount withdrawn is less than the
dollar-for-dollar limit:
42
.. The GMIB protected value is reduced by the amount withdrawn (i.e., reduced
by $10,000, from $240,837.69 to $230,837.69). The GMIB 200% cap is reduced
by the amount withdrawn (i.e., by $10,000, from $479,243.38 to $469,243.38).
.. The Remaining Limit for the balance of the second contract year is also
reduced by the amount withdrawn (from $12,041.88 to $2,041.88).
GMIB Reset Feature
You may elect to "reset" your GMIB protected value to equal your current
Contract Value twice over the life of the contract. You may only exercise this
reset option if the annuitant has not yet reached his or her 76/th/ birthday.
If you reset, you must wait a new 7-year period from the most recent reset to
exercise the Guaranteed Minimum Income Benefit. Further, we will reset the
GMIB roll-up cap to equal two times the GMIB protected value as of such date.
Additionally, if you reset, we will determine the GMIB payout amount by using
the GMIB guaranteed annuity purchase rates (specified in your contract) based
on the number of years since the most recent reset. These purchase rates may
be less advantageous than the rates that would have applied absent a reset.
Payout Amount
The Guaranteed Minimum Income Benefit payout amount is based on the age and
sex of the annuitant (and, if there is one, the co-annuitant). After we first
deduct a charge for any applicable premium taxes that we are required to pay,
the payout amount will equal the greater of:
1) the GMIB protected value as of the date you exercise the GMIB payout
option, applied to the GMIB guaranteed annuity purchase rates (which are
generally less favorable than the annuity purchase rates for annuity
payments not involving GMIB) and based on the annuity payout option as
described below, or
2) the adjusted Contract Value - that is, the value of the contract adjusted
for any market value adjustment minus any charge we impose for premium
taxes and withdrawal charges - as of the date you exercise the GMIB payout
option applied to the current annuity purchase rates then in use.
GMIB Annuity Payout Options
We currently offer two Guaranteed Minimum Income Benefit annuity payout
options. Each option involves payment for at least a period certain of ten
years. In calculating the amount of the payments under the GMIB we apply
certain assumed interest rates, equal to 2% annually for a waiting period of
7-9 years, and 2.5% annually for waiting periods of 10 years or longer for
contracts sold on or after May 1, 2004 (and 2.5% annually for a waiting period
of 7-9 years, 3% annually for a waiting period of 10-14 years, and 3.5%
annually for waiting periods of 15 years or longer for all other contracts).
GMIB Option 1
Single Life Payout Option: We will make monthly payments for as long as the
annuitant lives, with payments for a period certain. We will stop making
payments after the later of the death of the annuitant or the end of the
period certain.
GMIB Option 2
Joint Life Payout Option: In the case of an annuitant and co-annuitant, we
will make monthly payments for the joint lifetime of the annuitant and
co-annuitant, with payments for a period certain. If the co-annuitant dies
first, we will continue to make payments until the later of the death of the
annuitant and the end of the period certain. If the annuitant dies first, we
will continue to make payments until the later of the death of the
co-annuitant and the end of the period certain, but if the period certain ends
first, we will reduce the amount of each payment to 50% of the original amount.
You have no right to withdraw amounts early under either GMIB payout option.
We may make other payout frequencies available, such as quarterly,
semi-annually or annually.
Because we do not impose a new waiting period for each subsequent purchase
payment, if you choose the Guaranteed Minimum Income Benefit, we reserve the
right to limit subsequent purchase payments if we discover that by the timing
of your purchase payments, your GMIB protected value is increasing in ways we
did not intend. In determining whether to limit purchase payments, we will
look at purchase payments which are disproportionately larger than your
initial purchase payment and other actions that may artificially increase the
GMIB protected value. Certain state laws may prevent us from limiting your
subsequent purchase payments. You must exercise one of the GMIB payout options
described above no later than 30 days after the later of the contract
anniversary coinciding with or next following the annuitant's attainment of
age 90 or the 10/th/ contract anniversary.
You should note that GMIB is designed to provide a type of insurance that
serves as a safety net only in the event that your Contract Value declines
significantly due to negative investment performance. If your Contract Value
is not significantly affected by negative investment performance, it is
unlikely that the purchase of GMIB will result in your receiving larger
annuity payments than if you had not purchased GMIB. This is because the
assumptions that we use in computing the GMIB, such as the annuity purchase
rates, (which include assumptions as to age-setbacks and assumed interest
rates), are more conservative than the assumptions that we use in computing
non-GMIB annuity payout options. Therefore, you may generate higher income
payments if
43
3: WHAT KIND OF PAYMENTS WILL I RECEIVE DURING THE INCOME PHASE?
(ANNUITIZATION) continued
you were to annuitize a lower Contract Value at the current annuity purchase
rates, than if you were to annuitize under the GMIB with a higher GMIB
protected value than your Contract Value but at the annuity purchase rates
guaranteed under the GMIB.
Terminating The Guaranteed Minimum Income Benefit
The Guaranteed Minimum Income Benefit cannot be terminated by the owner once
elected. The GMIB automatically terminates as of the date the contract is
fully surrendered, on the date the death benefit is payable to your
beneficiary (unless your surviving spouse elects to continue the contract), or
on the date that your Contract Value is transferred to begin making annuity
payments. The GMIB may also be terminated if you designate a new annuitant who
would not be eligible to elect the GMIB based on his or her age at the time of
the change.
Upon termination of the GMIB, we will deduct the charge from your Contract
Value for the portion of the contract year since the prior contract
anniversary (or the contract date if in the first contract year).
HOW WE DETERMINE ANNUITY PAYMENTS
Generally speaking, the annuity phase of the contract involves our
distributing to you in increments the value that you have accumulated. We make
these incremental payments either over a specified time period (e.g., 15
years) (fixed period annuities) or for the duration of the life of the
annuitant (and possibly co-annuitant) (life annuities). There are certain
assumptions that are common to both fixed period annuities and life annuities.
In each type of annuity, we assume that the value you apply at the outset
toward your annuity payments earns interest throughout the payout period. For
annuity options within the GMIB, this interest rate ranges from 2% to 2.5% for
contracts sold on or after May 1, 2004 (and 2.5% to 3.5% for all other
contracts). For non-GMIB annuity options, the guaranteed minimum rate is 3%.
The GMIB guaranteed annuity purchase rates in your contract depict the minimum
amounts we will pay (per $1000 of adjusted Contract Value). If our current
annuity purchase rates on the annuity date are more favorable to you than the
guaranteed rates, we will make payments based on those more favorable rates.
Other assumptions that we use for life annuities and fixed period annuities
differ, as detailed in the following overview:
Fixed Period Annuities
Currently, we offer fixed period annuities only under the Income Appreciator
Benefit and non-GMIB annuity options. Generally speaking, in determining the
amount of each annuity payment under a fixed period annuity, we start with the
adjusted Contract Value, add interest assumed to be earned over the fixed
period, and divide the sum by the number of payments you have requested. The
life expectancy of the annuitant and co-annuitant are relevant to this
calculation only in that we will not allow you to select a fixed period that
exceeds life expectancy.
Life Annuities
There are more variables that affect our calculation of life annuity payments.
Most importantly, we make several assumptions about the annuitant's or
co-annuitant's life expectancy, including the following:
.. The Annuity 2000 Mortality Table is the starting point for our life
expectancy assumptions. This table anticipates longevity of an insured
population based on historical experience and reflecting anticipated
experience for the year 2000.
Guaranteed and GMIB Annuity Payments
Because life expectancy has lengthened over the past few decades, and likely
will increase in the future, our life annuity calculations anticipate these
developments. We do this largely by making a hypothetical reduction in the age
of the annuitant (or co-annuitant), in lieu of using the annuitant's (or
co-annuitant's) actual age, in calculating the payment amounts. By using such
a reduced age, we base our calculations on a younger person, who generally
would live longer and therefore draw life annuity payments over a longer time
period. Given the longer pay-out period, the payments made to the younger
person would be less than those made to an older person. We make two such age
adjustments:
1. First, for all annuities, we start with the age of the annuitant (or
co-annuitant) on his/her most recent birthday and reduce that age by either
(a) four years, for life annuities under the GMIB sold in contracts on or
after May 1, 2004 or (b) two years, with respect to guaranteed payments
under life annuities not involving GMIB, as well as GMIB payments under
contracts not described in (a) immediately above. For the reasons explained
above in this section, the four year age reduction causes a greater
reduction in the amount of the annuity payments than does the two-year age
reduction.
2. Second, for life annuities under both versions of GMIB as well as
guaranteed payments under life annuities not involving GMIB, we make a
further age reduction according to the table in your contract entitled
"Translation of Adjusted Age." As indicated in the table, the further into
the future the first annuity payment is, the longer we expect the person
receiving those payments to live, and the more we reduce the annuitant's
(or co-annuitant's) age.
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Current Annuity Payments
Immediately above, we have referenced how we determine annuity payments based
on "guaranteed" annuity purchase rates. By "guaranteed" annuity purchase
rates, we mean the minimum annuity purchase rates that are set forth in your
annuity contract and thus contractually guaranteed by us. "Current" annuity
purchase rates, in contrast, refer to the annuity purchase rates that we are
applying to contracts that are entering the annuity phase at a given point in
time. These current annuity purchase rates vary from period to period,
depending on changes in interest rates and other factors. We do not guarantee
any particular level of current annuity purchase rates. When calculating
current annuity purchase rates, we use the actual age of the annuitant (or
co-annuitant), rather than any reduced age.
4: WHAT IS THE DEATH BENEFIT?
THE DEATH BENEFIT FEATURE PROTECTS THE CONTRACT VALUE FOR THE BENEFICIARY.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless
you change it at a later date. A change of beneficiary will take effect on the
date you sign the change request form, provided we receive the form in good
order. Unless an irrevocable beneficiary has been named, during the
accumulation period, you can change the beneficiary at any time before the
owner dies. However, if the contract is jointly owned, the owner must name the
joint owner and the joint owner must name the owner as the beneficiary. For
entity-owned contracts, we pay a death benefit upon the death of the annuitant.
CALCULATION OF THE DEATH BENEFIT
If the owner or joint owner dies during the accumulation phase, we will, upon
receiving the appropriate proof of death and any other needed documentation in
good order (proof of death), pay a death benefit to the beneficiary designated
by the deceased owner or joint owner. If there is a sole owner and there is
only one beneficiary who is the owner's spouse on the date of death, then the
surviving spouse may continue the contract under the Spousal Continuance
Option. If there are an owner and joint owner of the contract, and the owner's
spouse is both the joint owner and the beneficiary on the date of death, then,
at the death of the first to die, the death benefit will be paid to the
surviving owner or the surviving owner may continue the contract under the
Spousal Continuance Option.
Upon receiving appropriate proof of death, the beneficiary will receive the
greater of the following:
1) The current Contract Value (as of the time we receive proof of death in
good order). If you have purchased the Contract With Credit, we will first
deduct any credit corresponding to a purchase payment made within one year
of death. We impose no market value adjustment on Contract Value held
within the market value adjustment option when a death benefit is paid.
2) Either the base death benefit, which equals the total invested purchase
payments you have made proportionally reduced by any withdrawals, or, if
you have chosen the Guaranteed Minimum Death Benefit (GMDB), the GMDB
protected value.
GUARANTEED MINIMUM DEATH BENEFIT
The Guaranteed Minimum Death Benefit provides for the option to receive an
enhanced death benefit upon the death of the sole owner or the first to die of
the owner or joint owner during the accumulation phase.
The GMDB protected value option equals the GMDB step-up. The GMDB protected
value is calculated daily.
GMDB Step-Up
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS LESS THAN AGE
80 ON THE CONTRACT DATE, the GMDB step-up before the first contract
anniversary is the initial invested purchase payment increased by subsequent
invested purchase payments, and proportionally reduced by the effect of
withdrawals. The GMDB step-up on each contract anniversary will be the greater
of the previous GMDB step-up and the Contract Value as of such contract
anniversary. Between contract anniversaries, the GMDB step-up will increase by
invested purchase payments and reduce proportionally by withdrawals.
We stop increasing the GMDB step-up by any appreciation in the Contract Value
on the later of:
.. the contract anniversary coinciding with or next following the sole or
older owner's 80th birthday, or
.. the 5/th/ contract anniversary.
However, we still increase the GMDB protected value by subsequent invested
purchase payments and proportionally reduce it by withdrawals.
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4: WHAT IS THE DEATH BENEFIT? continued
Here is an example of a proportional reduction:
The current Contract Value is $100,000 and the protected value is $80,000. The
owner makes a withdrawal that reduces the Contract Value by 25% (including the
effect of any withdrawal charges). The new protected value is $60,000, or 75%
of what it was before the withdrawal.
IF THE SOLE OWNER OR THE OLDER OF THE OWNER AND JOINT OWNER IS BETWEEN AGE 80
AND 85 ON THE CONTRACT DATE, the GMDB step-up before the third contract
anniversary is the sum of invested purchase payments, reduced by the effect of
withdrawals. On the third contract anniversary, we will adjust the GMDB
step-up to the greater of the then current GMDB step-up or the Contract Value
as of that contract anniversary. Thereafter, we will only increase the GMDB
protected value by subsequent invested purchase payments and proportionally
reduce it by withdrawals.
Special rules apply if the beneficiary is the spouse of the owner and the
contract does not have a joint owner. In that case, upon the death of the
owner, the spouse will have the choice of the following:
.. If the sole beneficiary under the contract is the owner's spouse, and the
other requirements of the Spousal Continuance Option are met, then the
contract can continue, and the spouse will become the new owner of the
contract; or
.. The spouse can receive the death benefit. A surviving spouse who is
eligible for the Spousal Continuance Option must choose between that
benefit and receiving the death benefit during the first 60 days following
our receipt of proof of death.
If ownership of the contract changes as a result of the owner assigning it to
someone else, we will reset the value of the death benefit to equal the
Contract Value on the date the change of ownership occurs, and for purposes of
computing the future death benefit, we will treat that Contract Value as a
purchase payment occurring on that date.
SPECIAL RULES IF JOINT OWNERS
If the contract has an owner and a joint owner and they are spouses at the
time that one dies, the Spousal Continuance Option may apply. If the contract
has an owner and a joint owner and they are not spouses at the time one dies,
we will pay the death benefit and the contract will end.
PAYOUT OPTIONS
Originally, a beneficiary could, within 60 days of providing proof of death,
choose to take the death benefit under one of several death benefit payout
options listed below.
The death benefit payout options are:
Choice 1. Lump sum payment of the death benefit.
If the beneficiary does not choose a payout option within sixty days, the
beneficiary will receive this payout option.
Choice 2. The payment of the entire death benefit within a period of 5 years
from the date of death of the second-to-die of the owner or joint owner.
The entire death benefit will include any increases or losses resulting from
the performance of the variable or fixed interest rate options during this
period. During this period the beneficiary may: reallocate the Contract Value
among the variable or fixed interest rate options; name a beneficiary to
receive any remaining death benefit in the event of the beneficiary's death;
and make withdrawals from the Contract Value, in which case, any such
withdrawals will not be subject to any withdrawal charges. However, the
beneficiary may not make any purchase payments to the contract.
During this 5 year period, we will continue to deduct from the death benefit
proceeds the charges and costs that were associated with the features and
benefits of the contract. Some of these features and benefits may not be
available to the beneficiary, such as the Guaranteed Minimum Income Benefit.
Choice 3. Payment of the death benefit under an annuity or annuity settlement
option over the lifetime of the beneficiary or over a period not extending
beyond the life expectancy of the beneficiary with distribution beginning
within one year of the date of death of the owner or joint owner.
The tax consequences to the beneficiary vary among the three death benefit
payout options. See Section 9, "What Are The Tax Considerations Associated
With The Strategic Partners Annuity One Contract?"
46
With respect to death benefits paid on or after March 19, 2007, unless the
surviving spouse opts to continue the contract (or spousal continuance is
required under the terms of your contract), a beneficiary of the death benefit
may, within 60 days of providing proof of death also take the death benefit as
indicated above, or as follows:
.. as a lump sum. If the beneficiary does not choose a payout option within
sixty days, the beneficiary will be paid in this manner; or
.. as payment of the entire death benefit within a period of 5 years from the
date of death; or
.. as a series of payments not extending beyond the life expectancy of the
beneficiary, or over the life of the beneficiary. Payments under this
option must begin within one year of the date of death; or
.. as the beneficiary continuation option, described immediately below.
BENEFICIARY CONTINUATION OPTION
Instead of receiving the death benefit in a single payment, or under an
annuity option, a beneficiary may take the death benefit under an alternative
death benefit payment option, as provided by the Code. This "Beneficiary
Continuation Option" is described below and is only available for an IRA, Roth
IRA, SEP IRA, 403(b), or a non-qualified contract.
Under the beneficiary continuation option:
.. The Owner's contract will be continued in the Owner's name, for the benefit
of the beneficiary.
.. The beneficiary will be charged an amount equal to 1.00% daily against the
average daily net assets allocated to the variable investment options.
.. The beneficiary will incur an annual maintenance fee equal to the lesser of
$30 or 2% of contract value if the contract value is less than $25,000 at
the time the fee is assessed. The fee will not apply if it is assessed 30
days prior to a surrender request.
.. The initial contract value will be equal to any death benefit (including
any optional death benefit) that would have been payable to the beneficiary
if they had taken a lump sum distribution.
.. The available variable investment options will be among those available to
the Owner at the time of death, however certain variable investment options
may not be available.
.. The beneficiary may request transfers among variable investment options,
subject to the same limitations and restrictions that applied to the Owner.
Transfers in excess of 20 per year will incur a $10 transfer fee.
.. No additional Purchase Payments can be applied to the contract.
.. The basic death benefit and any optional benefits elected by the Owner will
no longer apply to the beneficiary.
.. The beneficiary can request a withdrawal of all or a portion of the
Contract Value at any time without application of any applicable CDSC
unless the Beneficiary Continuation Option was the payout predetermined by
the Owner and the Owner restricted the beneficiary's withdrawal rights.
.. Upon the death of the beneficiary, any remaining Contract Value will be
paid in a lump sum to the person(s) named by the beneficiary, unless the
beneficiary named a successor who may continue receiving payments.
Currently only investment options corresponding to Portfolios of the Advanced
Series Trust and the Prudential Money Market Portfolio of The Prudential
Series Fund are available under the Beneficiary Continuation Option.
Your beneficiary will be provided with a prospectus and a settlement agreement
that will describe this option. Please contact us for additional information
on the availability, restrictions and limitations that will apply to a
beneficiary under the beneficiary continuation option. We may pay compensation
to the selling broker-dealer based on amounts held in the Beneficiary
Continuation Option.
ALTERNATIVE DEATH BENEFIT PAYMENT OPTIONS--CONTRACTS OWNED BY INDIVIDUALS (NOT
ASSOCIATED WITH TAX-FAVORED PLANS)
Upon your death, certain distributions must be made under the contract. The
required distributions depend on whether you die before you start taking
annuity payments under the contract or after you start taking annuity payments
under the contract.
If you die on or after the annuity date, the remaining portion of the interest
in the contract must be distributed at least as rapidly as under the method of
distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within five years after the date of death or as periodic
payments over a period not extending beyond the life or life expectancy of
such 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.
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4: WHAT IS THE DEATH BENEFIT? continued
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.
ALTERNATIVE DEATH BENEFIT PAYMENT OPTIONS--CONTRACTS HELD BY TAX-FAVORED PLANS
The Code provides for alternative death benefit payment options when a
contract is used as an IRA, 403(b) or other "qualified investment" that
requires minimum distributions. 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 to begin, whether you have
named a designated beneficiary and whether the beneficiary is your surviving
spouse.
. If you die after a designated beneficiary has been named, the death
benefit must be distributed by 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 (provided such 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 within five years from 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.
The tax consequences to the beneficiary may vary among the different death
benefit payment options. See the Tax Considerations section of this
prospectus, and consult your tax advisor.
SPOUSAL CONTINUANCE OPTION
This option is available if, on the date we receive proof of the owner's death
(or annuitant's death, for custodial contracts) in good order (1) there is
only one owner of the contract and there is only one beneficiary who is the
owner's spouse, or (2) for contracts sold on or after May 1, 2003 or upon
subsequent state approval, there are an owner and joint owner of the contract,
and the joint owner is the owner's spouse and the owner's beneficiary under
the contract or (3) for contracts sold on or after May 1, 2003 or upon
subsequent state approval, the contract is held by a Custodial Account and the
custodian of the account has elected to continue the contract, and designate
the surviving spouse as annuitant. Continuing the contract in the latter
scenario will result in the contract no longer qualifying for tax deferral
under the Internal Revenue Code. However, such tax deferral should result from
the ownership of the contract by the Custodial Account. Spousal continuance
may be available where the contract is owned by certain other types of
entity-owners. Please consult your tax or legal adviser.
In no event, however, can the annuitant be older than the maximum age for
annuitization on the date of the owner's death, nor can the surviving spouse
be older than 95 on the date of the owner's death (or the annuitant's death,
in the case of a custodially-owned contract referenced above). Assuming the
above conditions are present, the surviving spouse (or custodian, for the
custodially-owned contracts referenced above) can elect the Spousal
Continuance Option, but must do so no later than 60 days after furnishing
proof of death in good order.
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Upon activation of the Spousal Continuance Option, the Contract Value is
adjusted to equal the amount of the death benefit to which the surviving
spouse would have been entitled. This Contract Value will serve as the basis
for calculating any death benefit payable upon the death of the surviving
spouse. We will allocate any increase in the adjusted Contract Value among the
variable, fixed interest rate or market value adjustment options in the same
proportions that existed immediately prior to the spousal continuance
adjustment. We will waive the $1,000 minimum requirement for the market value
adjustment option.
Under the Spousal Continuance Option, we waive any potential withdrawal
charges applicable to purchase payments made prior to activation of the
Spousal Continuance Option. However, we will continue to impose withdrawal
charges on purchase payments made after activation of this benefit. In
addition, Contract Value allocated to the market value adjustment option will
remain subject to a potential market value adjustment.
IF YOU ELECTED THE BASE DEATH BENEFIT, then upon activation of the Spousal
Continuance Option, we will adjust the Contract Value to equal the greater of:
.. the Contract Value, or
.. the sum of all invested purchase payments (adjusted for withdrawals).
IF YOU HAVE ELECTED THE GMDB STEP-UP, we will adjust the Contract Value to
equal the greater of:
.. the Contract Value, or
.. the GMDB step-up.
After we have made the adjustment to Contract Value set out immediately above,
we will continue to compute the GMDB step-up under the surviving spousal
owner's contract, and will do so in accordance with the preceding discussion
in this section.
If the contract is being continued by the surviving spouse, the attained age
of the surviving spouse will be the basis used in determining the death
benefit payable under the Guaranteed Minimum Death Benefit provisions of the
contract. The contract may not be continued upon the death of a spouse who had
assumed ownership of the contract through the exercise of the Spousal
Continuance Option.
IF YOU ELECTED THE GUARANTEED MINIMUM INCOME BENEFIT, it will be continued for
the surviving spousal owner. All provisions of the Guaranteed Minimum Income
Benefit (i.e., waiting period, GMIB roll-up cap, etc.) will remain the same as
on the date of the owner's death. If the GMIB reset feature was never
exercised, the surviving spousal owner can exercise the GMIB reset feature
twice. If the original owner had previously exercised the GMIB reset feature
once, the surviving spousal owner can exercise the GMIB reset once. However,
the surviving spouse (or new annuitant designated by the surviving spouse)
must be under 76 years of age at the time of reset. If the original owner had
previously exercised the GMIB reset feature twice, the surviving spousal owner
may not exercise the GMIB reset at all. If the attained age of the surviving
spouse at activation of the Spousal Continuance Option, when added to the
remainder of the GMIB waiting period to be satisfied, would preclude the
surviving spouse from utilizing the Guaranteed Minimum Income Benefit, we will
revoke the Guaranteed Minimum Income Benefit under the contract at that time
and we will no longer charge for that benefit.
IF YOU ELECTED THE LIFETIME FIVE INCOME BENEFIT, OR SPOUSAL LIFETIME FIVE
BENEFIT on the owner's death, the Benefit will end. However, if the owner's
surviving spouse would be eligible to acquire the Benefit as if he/she were a
new purchaser, then the surviving spouse may elect the Benefit under the
Spousal Continuance Option. The surviving spouse (or new annuitant designated
by the surviving spouse) must be at least 45 years of age (55 years, for
Spousal Lifetime Five) at the time of election.
IF YOU ELECTED THE INCOME APPRECIATOR BENEFIT, on the owner's death (or
first-to-die, in the case of joint owners), the Income Appreciator Benefit
will end unless the contract is continued by the deceased owner's surviving
spouse under the Spousal Continuance Option. If the contract is continued by
the surviving spouse, we will continue to pay the balance of any Income
Appreciator Benefit payments until the earliest to occur of the following:
(a) the date on which 10 years' worth of IAB automatic withdrawal payments or
IAB credits, as applicable, have been paid, (b) the latest date on which
annuity payments would have had to have commenced had the owner not died
(i.e., the later of the contract anniversary next following the annuitant's
90th birthday or the 10/th/ contract anniversary), or (c) the later of the
10/th/ contract anniversary or the contract anniversary next following the
surviving spouse's 90/th/ birthday (or the annuitant's 90/th/ birthday if
other than the surviving spouse).
If the Income Appreciator Benefit has not been in force for 7 contract years,
the surviving spouse may not activate the benefit until it has been in force
for 7 contract years. If the attained age of the surviving spouse at
activation of the Spousal Continuance Option, when added to the remainder of
the Income Appreciator Benefit waiting period to be satisfied, would preclude
the surviving spouse from utilizing the Income Appreciator Benefit, we will
revoke the Income Appreciator Benefit under the contract at that time and we
will no longer charge for that benefit. If the Income Appreciator Benefit has
been in force for 7 contract years or more, but the benefit has not been
activated, the surviving spouse may activate the benefit at any time after the
contract has been continued. If the Income Appreciator Benefit is activated
after the contract is continued by the surviving spouse, the Income
Appreciator Benefit calculation will exclude any amount added to the contract
at the time of spousal continuance resulting from any death benefit value
exceeding the Contract Value.
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5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT?
LIFETIME FIVE INCOME BENEFIT
The Lifetime Five Income Benefit (Lifetime Five) is an optional feature that
guarantees your ability to withdraw amounts equal to a percentage of an
initial principal value (called the "Protected Withdrawal Value"), regardless
of the impact of market performance on your Contract Value, subject to our
rules regarding the timing and amount of withdrawals. There are two options -
one is designed to provide an annual withdrawal amount for life (the "Life
Income Benefit") and the other is designed to provide a greater annual
withdrawal amount (than the first option) as long as there is Protected
Withdrawal Value (adjusted as described below) (the "Withdrawal Benefit"). If
there is no Protected Withdrawal Value, the Withdrawal Benefit will be zero.
You do not choose between these two options; each option will continue to be
available as long as the annuity has a Contract Value and Lifetime Five is in
effect. Certain benefits under Lifetime Five may remain in effect even if the
Contract Value is zero. The option may be appropriate if you intend to make
periodic withdrawals from your contract and wish to ensure that market
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals - the guarantees are not lost if you withdraw
less than the maximum allowable amount each year.
Lifetime Five is subject to certain restrictions described below.
.. Currently, Lifetime Five can only be elected once each contract year, and
only where the annuitant and the contract owner are the same person or, if
the contract owner is an entity, where there is only one annuitant. We
reserve the right to limit the election frequency in the future. Before
making any such change to the election frequency, we will provide prior
notice to contract owners who have an effective Lifetime Five Income
Benefit.
.. The annuitant must be at least 45 years old when Lifetime Five is elected.
.. Lifetime Five is not available if you elect the Guaranteed Minimum Income
Benefit or Income Appreciator Benefit.
.. Owners electing this benefit prior to December 5, 2005, were required to
allocate Contract Value to one or more of the following asset allocation
portfolios of the Prudential Series Fund: SP Balanced Asset Allocation
Portfolio, SP Conservative Asset Allocation Portfolio, and SP Growth Asset
Allocation Portfolio. Owners electing this benefit after December 5, 2005
must allocate Contract Value to one or more of the following asset
allocation portfolios of Advanced Series Trust: AST Capital Growth Asset
Allocation Portfolio, AST Balanced Asset Allocation Portfolio, AST
Conservative Asset Allocation Portfolio, AST Preservation Asset Allocation
Portfolio, AST Advanced Strategies Portfolio, AST First Trust Balanced
Target Portfolio, AST First Trust Capital Appreciation Target Portfolio,
AST T. Rowe Price Asset Allocation Portfolio, AST American Century
Strategic Allocation Portfolio, or AST UBS Dynamic Alpha Portfolio. As
specified in this paragraph, you generally must allocate your Contract
Value in accordance with the then-available option(s) that we may
prescribe, in order to elect and maintain Lifetime Five. If, subsequent to
your election of the benefit, we change our requirements for how Contract
Value must be allocated under the benefit, that new requirement will apply
only to new elections of the benefit, and will not compel you to
re-allocate your Contract Value in accordance with our newly-adopted
requirements. All subsequent transfers and purchase payments will be
subject to the new investment limitations.
Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Life Income Benefit and the Withdrawal Benefit.
The initial Protected Withdrawal Value is determined as of the date you make
your first withdrawal under your contract following your election of Lifetime
Five. The initial Protected Withdrawal Value is equal to the greater of: (A)
the Contract Value on the date you elect Lifetime Five, plus any additional
Purchase Payments (and any Credits), each growing at 5% per year from the date
of your election of the benefit, or application of the Purchase Payment to
your contract, as applicable, until the date of your first withdrawal or the
10th anniversary of the benefit effective date, if earlier; (B) the Contract
Value on the date of the first withdrawal from your contract, prior to the
withdrawal; (C) the highest Contract Value on each contract anniversary, plus
subsequent Purchase Payments (plus any Credits) prior to the first withdrawal
or the 10th anniversary of the benefit effective date, if earlier. With
respect to A and C above, after the 10th anniversary of the benefit effective
date, each value is increased by the amount of any subsequent Purchase
Payments (plus any Credits).
.. If you elect Lifetime Five at the time you purchase your contract, the
Contract Value will be your initial Purchase Payment (plus any Credits).
.. If you make additional Purchase Payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each
additional Purchase Payment (plus any Credits).
You may elect to step-up your Protected Withdrawal Value if, due to positive
market performance, your Contract Value is greater than the Protected
Withdrawal Value.
If you elected Lifetime Five on or after March 20, 2006:
.. you are eligible to step-up the Protected Withdrawal Value on or after the
1st anniversary of the first withdrawal under Lifetime Five.
.. the Protected Withdrawal Value can be stepped up again on or after the 1st
anniversary of the preceding step-up.
50
If you elected Lifetime Five prior to March 20, 2006 and that original
election remains in effect:
.. you are eligible to step-up the Protected Withdrawal Value on or after the
5th anniversary of the first withdrawal under Lifetime Five.
.. the Protected Withdrawal Value can be stepped up again on or after the 5th
anniversary of the preceding step-up.
In either scenario (i.e., elections before or after March 20, 2006) if you
elect to step-up the Protected Withdrawal Value, and on the date you elect to
step-up, the charges under Lifetime Five have changed for new purchasers, you
may be subject to the new charge at the time of step-up. Upon election of the
step-up, we increase the Protected Withdrawal Value to be equal to the then
current Contract Value. For example, assume your initial Protected Withdrawal
Value was $100,000 and you have made cumulative withdrawals of $40,000,
reducing the Protected Withdrawal Value to $60,000. On the date you are
eligible to step-up the Protected Withdrawal Value, your Contract Value is
equal to $75,000. You could elect to step-up the Protected Withdrawal Value to
$75,000 on the date you are eligible. If your current Annual Income Amount and
Annual Withdrawal Amount are less than they would be if we did not reflect the
step-up in Protected Withdrawal Value, then we will increase these amounts to
reflect the step-up as described below.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force.
If you elected Lifetime Five on or after March 20, 2006 and have also elected
the Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the 1st contract
anniversary that is at least one year after the later of (1) the date of
the first withdrawal under Lifetime Five or (2) the most recent step-up.
.. your Protected Withdrawal Value will only be stepped-up if 5% of the
Contract Value is greater than the Annual Income Amount by any amount.
.. if at the time of the first Auto Step-Up opportunity, 5% of the Contract
Value is not greater than the Annual Income Amount, an Auto Step-Up
opportunity will occur on each successive contract anniversary until a
step-up occurs.
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
1st contract anniversary that is at least one year after the most recent
step-up.
If you elected Lifetime Five prior to March 20, 2006 and have also elected the
Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the contract anniversary
that is at least five years after the later of (1) the date of the first
withdrawal under Lifetime Five or (2) the most recent step-up.
.. your Protected Withdrawal Value will only be stepped-up if 5% of the
Contract Value is greater than the Annual Income Amount by 5% or more.
.. if at the time of the first Auto Step-Up opportunity, 5% of the Contract
Value does not exceed the Annual Income Amount by 5% or more, an Auto
Step-Up opportunity will occur on each successive contract anniversary
until a step-up occurs.
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
contract anniversary that is at least 5 years after the most recent step-up.
In either scenario (i.e., elections before or after March 20, 2006), if on the
date that we implement an Auto Step-Up to your Protected Withdrawal Value, the
charge for Lifetime Five has changed for new purchasers, you may be subject to
the new charge at the time of such step-up. Subject to our rules and
restrictions, you will still be permitted to manually step-up the Protected
Withdrawal Value even if you elect the Auto Step-Up feature.
The Protected Withdrawal Value is reduced each time a withdrawal is made on a
"dollar-for-dollar" basis up to 7% per contract year of the Protected
Withdrawal Value and on the greater of a "dollar-for-dollar" basis or a pro
rata basis for withdrawals in a contract year in excess of that amount until
the Protected Withdrawal Value is reduced to zero. At that point, the Annual
Withdrawal Amount will be zero until such time (if any) as the contract
reflects a Protected Withdrawal Value (for example, due to a step-up or
additional purchase payments being made into the contract).
Annual Income Amount Under the Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals in a
contract year are less than or equal to the Annual Income Amount, they will
not reduce your Annual Income Amount in subsequent contract years. If your
cumulative withdrawals are in excess of the Annual Income Amount (Excess
Income), your Annual Income Amount in subsequent years will be reduced (except
with regard to required minimum distributions) by the result of the ratio of
the Excess Income to the Contract Value immediately prior to such withdrawal
(see examples of this calculation below). Reductions include the actual amount
of the withdrawal, including any withdrawal charges that may apply. A
withdrawal can be considered Excess Income under the Life Income Benefit even
though it does not exceed the Annual Withdrawal Amount under the Withdrawal
Benefit. When you elect a step-up, your Annual Income Amount increases to
equal 5% of your Contract Value after the step-up if such amount is greater
than your Annual Income Amount. Your Annual Income Amount also increases if
you make additional purchase payments. The amount of the increase is equal to
5% of any additional purchase payments. Any increase will be added to your
Annual Income Amount beginning on the day that the step-up is effective or the
purchase payment is made. A determination of whether you have exceeded your
Annual Income Amount is made at the time of each withdrawal; therefore, a
subsequent increase in the Annual Income Amount will not offset the effect of
a withdrawal that exceeded the Annual Income Amount at the time the withdrawal
was made.
51
5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT? continued
Annual Withdrawal Amount Under the Withdrawal Benefit
The initial Annual Withdrawal Amount is equal to 7% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals each
contract year are less than or equal to the Annual Withdrawal Amount, your
Protected Withdrawal Value will be reduced on a "dollar-for-dollar" basis. If
your cumulative withdrawals are in excess of the Annual Withdrawal Amount
(Excess Withdrawal), your Annual Withdrawal Amount will be reduced (except
with regard to required minimum distributions) by the result of the ratio of
the Excess Withdrawal to the Contract Value immediately prior to such
withdrawal (see the examples of this calculation below). Reductions include
the actual amount of the withdrawal, including any withdrawal charges that may
apply. When you elect a step-up, your Annual Withdrawal Amount increases to
equal 7% of your Contract Value after the step-up if such amount is greater
than your Annual Withdrawal Amount. Your Annual Withdrawal Amount also
increases if you make additional purchase payments. The amount of the increase
is equal to 7% of any additional purchase payments. A determination of whether
you have exceeded your Annual Withdrawal Amount is made at the time of each
withdrawal; therefore, a subsequent increase in the Annual Withdrawal Amount
will not offset the effect of a withdrawal that exceeded the Annual Withdrawal
Amount at the time the withdrawal was made.
Lifetime Five does not affect your ability to make withdrawals under your
contract or limit your ability to request withdrawals that exceed the Annual
Income Amount and the Annual Withdrawal Amount. You are not required to
withdraw all or any portion of the Annual Withdrawal Amount or Annual Income
Amount in each contract year.
.. If, cumulatively, you withdraw an amount less than the Annual Withdrawal
Amount under the Withdrawal Benefit in any contract year, you cannot
carry-over the unused portion of the Annual Withdrawal Amount to subsequent
contract years.
.. If, cumulatively, you withdraw an amount less than the Annual Income Amount
under the Life Income Benefit in any contract year, you cannot carry-over
the unused portion of the Annual Income Amount to subsequent contract years.
However, because the Protected Withdrawal Value is only reduced by the actual
amount of withdrawals you make under these circumstances, any unused Annual
Withdrawal Amount or Annual Income Amount may extend the period of time until
the remaining Protected Withdrawal Value is reduced to zero.
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and
Annual Income Amount assume: 1.) the contract date and the effective date of
Lifetime Five are February 1, 2005; 2.) an initial purchase payment of
$250,000;3.) the Contract Value on February 1, 2006 is equal to $265,000; and
4.) the first withdrawal occurs on March 1, 2006 when the Contract Value is
equal to $263,000. The values set forth here are purely hypothetical and do
not reflect the charge for Lifetime Five.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05(393/365) = $263,484
(b)Contract value on March 1, 2006 (the date of the first withdrawal) =
$263,000
(c)Contract value on February 1, 2006 (the first contract anniversary) =
$265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7%
of $265,000). The Annual Income Amount is equal to $13,250 under the Life
Income Benefit (5% of $265,000).
Example 1. Dollar-for-Dollar Reduction
If $10,000 was withdrawn (less than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
.. Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$10,000 = $8,550
.. Annual Withdrawal Amount for future contract years remains at $18,550
.. Remaining Annual Income Amount for current contract year = $13,250 -
$10,000 = $3,250
.. Annual Income Amount for future contract years remains at $13,250
.. Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000
Example 2. Dollar-for-Dollar and Proportional Reductions
a) If $15,000 was withdrawn (more than the Annual Income Amount but less than
the Annual Withdrawal Amount) on March 1, 2006, then the following values
would result:
. Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$15,000 = $3,550
. Annual Withdrawal Amount for future contract years remains at $18,550
. Remaining Annual Income Amount for current contract year = $0
. Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future contract years.
52
. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $1,750/($263,000 - $13,250) X
$13,250 = $93
. Annual Income Amount for future contract years = $13,250 - $93 = $13,157
. Protected Withdrawal Value is reduced by $15,000 from $265,000 to
$250,000
b) If $25,000 was withdrawn (more than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
. Remaining Annual Withdrawal Amount for current contract year = $0
. Excess of withdrawal over the Annual Withdrawal Amount ($25,000 -
$18,550 = $6,450) reduces Annual Withdrawal Amount for future contract
years.
. Reduction to Annual Withdrawal Amount = Excess Withdrawal/Contract Value
before Excess Withdrawal X Annual Withdrawal Amount = $6,450/($263,000 -
$18,550) X $18,550 = $489
. Annual Withdrawal Amount for future contract years = $18,550 - $489 =
$18,061
. Remaining Annual Income Amount for current contract year = $0
. Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 =
$11,750) reduces Annual Income Amount for future contract years.
. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $11,750/($263,000 - $13,250) X
$13,250 = $623
. Annual Income Amount for future contract years = $13,250 - $623 = $12,627
. Protected Withdrawal Value is first reduced by the Annual Withdrawal
Amount ($18,550) from $265,000 to $246,450. It is further reduced by the
greater of a dollar-for-dollar reduction or a proportional reduction.
. Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450
. Proportional reduction = Excess Withdrawal/eContract Value before Excess
Withdrawal X Protected Withdrawal Value = $6,450/($263,000 - $18,550) X
$246,450 = $6,503
. Protected Withdrawal Value = $246,450 - max [$6,450, $6,503] = $239,947
Example 3. Step-Up of the Protected Withdrawal Value
If the Annual Income Amount ($13,250) is withdrawn each year starting on
March 1, 2006 for a period of 3 years, the Protected Withdrawal Value on
February 1, 2012 would be reduced to $225,250 {$265,000 - ($13,250 X 3)}. If a
step-up is elected on February 1, 2012, and the Contract Value on February 1,
2012 is $280,000, then the following values would result:
.. Protected Withdrawal Value = Contract Value on February 1, 2012 = $280,000
.. Annual Income Amount is equal to the greater of the current Annual Income
Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual
Income Amount is $13,250. 5% of the stepped up Protected Withdrawal Value
is 5% of $280,000, which is $14,000. Therefore, the Annual Income Amount is
increased to $14,000.
.. Annual Withdrawal Amount is equal to the greater of the current Annual
Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value.
Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected
Withdrawal Value is 7% of $280,000, which is $19,600. Therefore the Annual
Withdrawal Amount is increased to $19,600.
.. Because the Issue Date and Effective Date of Lifetime Five for this example
is prior to March 20, 2006, if the step-up request on February 1, 2012 was
due to the election of the auto step-up feature, we would first check to
see if an auto step-up should occur by checking to see if 5% of the
Contract Value exceeds the Annual Income Amount by 5% or more. 5% of the
Contract Value is equal to 5% of $280,000, which is $14,000. 5% of the
Annual Income Amount ($13,250) is $662.50, which added to the Annual Income
Amount is $13,912.50. Since 5% of the Contract Value is greater than
$13,912.50, the step-up would still occur in this scenario, and all of the
values would be increased as indicated above. Had the Issue Date and
Effective Date of the Lifetime Five benefit been on or after March 20,
2006, the step-up would still occur because 5% of the Contract Value is
greater than the Annual Income Amount.
Benefits Under Lifetime Five
.. If your Contract Value is equal to zero, and the cumulative withdrawals in
the current contract year are greater than the Annual Withdrawal Amount,
Lifetime Five will terminate. To the extent that your Contract Value was
reduced to zero as a result of cumulative withdrawals that are equal to or
less than the Annual Income Amount and amounts are still payable under both
the Life Income Benefit and the Withdrawal Benefit, you will be given the
choice of receiving the payments under the Life Income Benefit or under the
Withdrawal Benefit. Once you make this election we will make an additional
payment for that contract year equal to either the remaining Annual Income
Amount or Annual Withdrawal Amount for the contract year, if any, depending
on the option you choose. In subsequent contract years we make payments
that equal either the Annual Income Amount or the Annual Withdrawal Amount.
You will not be able to change the option after your election and no
further purchase payments will be accepted under your contract. If you do
not make an election, we will pay you annually under the Life Income
Benefit. To the extent that cumulative withdrawals in the current contract
year that reduced your Contract Value to zero are more than the Annual
Income Amount but less than or equal to the Annual Withdrawal Amount and
amounts are still payable under the Withdrawal Benefit, you will receive
the payments under the Withdrawal Benefit. In the year of a withdrawal that
reduced your Contract Value to zero, we will make an additional payment to
equal any remaining Annual Withdrawal Amount and make payments equal to the
Annual Withdrawal Amount in each subsequent year (until the Protected
Withdrawal Value is depleted). Once your Contract Value equals zero no
further purchase payments will be accepted under your contract.
53
5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT? continued
.. If annuity payments are to begin under the terms of your contract or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent contract years or any remaining Protected
Withdrawal Value, you can elect one of the following three options:
1. apply your Contract Value to any annuity option available;
2. request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We make
such annuity payments until the annuitant's death; or
3. request that, as of the date annuity payments are to begin, we pay
out any remaining Protected Withdrawal Value as annuity payments.
Each year such annuity payments will equal the Annual Withdrawal
Amount or the remaining Protected Withdrawal Value if less. We make
such annuity payments until the earlier of the annuitant's death or
the date the Protected Withdrawal Value is depleted.
We must receive your request in a form acceptable to us at the Prudential
Annuity Service Center.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a single life fixed annuity with
five payments certain using the greater of the annuity rates then currently
available or the annuity rates guaranteed in your contract. The amount that
will be applied to provide such annuity payments will be the greater of:
1. the present value of future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your contract; and
2. the Contract Value.
If no withdrawal was ever taken, we will determine a Protected Withdrawal
Value and calculate an Annual Income Amount and an Annual Withdrawal Amount as
if you made your first withdrawal on the date the annuity payments are to
begin.
Other Important Considerations
.. Withdrawals under Lifetime Five are subject to all of the terms and
conditions of the contract, including any withdrawal charges.
.. Withdrawals made while Lifetime Five is in effect will be treated, for tax
purposes, in the same way as any other withdrawals under the contract.
Lifetime Five does not directly affect the Contract Value or surrender
value, but any withdrawal will decrease the Contract Value by the amount of
the withdrawal (plus any applicable withdrawal charges). If you surrender
your contract, you will receive the current Contract Value, not the
Protected Withdrawal Value.
.. You can make withdrawals from your contract while your Contract Value is
greater than zero without purchasing Lifetime Five. Lifetime Five provides
a guarantee that if your Contract Value declines due to market performance,
you will be able to receive your Protected Withdrawal Value or Annual
Income Amount in the form of periodic benefit payments.
Election of Lifetime Five
Lifetime Five can be elected at the time you purchase your contract, or after
the contract date. Elections of Lifetime Five are subject to our eligibility
rules and restrictions. The contract owner's Contract Value as of the date of
election will be used as the basis to calculate the initial Protected
Withdrawal Value, the initial Annual Withdrawal Amount, and the initial Annual
Income Amount.
Termination of Lifetime Five
Lifetime Five terminates automatically when your Protected Withdrawal Value
and Annual Income Amount reach zero. You may terminate Lifetime Five at any
time by notifying us. If you terminate Lifetime Five, any guarantee provided
by the benefit will terminate as of the date the termination is effective.
Lifetime Five terminates:
.. upon your surrender of the contract,
.. upon the death of the annuitant (but your surviving spouse may elect a new
Lifetime Five benefit if your spouse elects the spousal continuance option
and your spouse would then be eligible to elect the benefit as if he/she
were a new purchaser),
.. upon a change in ownership of the contract that changes the tax
identification number of the contract owner, or
.. upon your election to begin receiving annuity payments.
We cease imposing the charge for Lifetime Five upon the earliest to occur of
(i) your election to terminate the benefit, (ii) our receipt of appropriate
proof of the death of the owner (or annuitant, for entity owned contracts),
(iii) the annuity date, (iv) automatic termination of the benefit due to an
impermissible change of owner or annuitant, or (v) a withdrawal that causes
the benefit to terminate.
While you may terminate Lifetime Five at any time, we may not terminate the
benefit other than in the circumstances listed above. However, we may stop
offering Lifetime Five for new elections or re-elections at any time in the
future.
Currently, if you terminate Lifetime Five, you will only be permitted to
re-elect the benefit or elect the Spousal Lifetime Five Income Benefit on any
anniversary of the contract date that is at least 90 calendar days from the
date the benefit was last terminated.
54
If you elected Lifetime Five at the time you purchased your contract and prior
to March 20, 2006, and you terminate Lifetime Five, there will be no waiting
period before you can re-elect the benefit or elect Spousal Lifetime Five.
However, once you choose to re-elect/elect, the waiting period described above
will apply to subsequent re-elections. If you elected Lifetime Five after the
time you purchased your contract, but prior to March 20, 2006, and you
terminate Lifetime Five, you must wait until the contract anniversary
following your cancellation before you can re-elect the benefit or elect
Spousal Lifetime Five. Once you choose to re-elect/elect, the waiting period
described above will apply to subsequent re-elections. We reserve the right to
limit the re-election/election frequency in the future. Before making any such
change to the re-election/election frequency, we will provide prior notice to
contract owners who have an effective Lifetime Five Income Benefit.
Additional Tax Considerations
If you purchase an annuity contract as an investment vehicle for "qualified"
investments, including an IRA, the minimum distribution rules under the Code
require that you begin receiving periodic amounts from your annuity contract
beginning after age 70 1/2. Roth IRAs are not subject to these rules during
the owner's lifetime. The amount required under the Code may exceed the Annual
Withdrawal Amount and the Annual Income Amount, which will cause us to
increase the Annual Income Amount and the Annual Withdrawal Amount in any
contract year that required minimum distributions due from your contract are
greater than such amounts. Any such payments will reduce your Protected
Withdrawal Value. In addition, the amount and duration of payments under the
contract payment and death benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as required minimum distribution provisions under the tax law.
SPOUSAL LIFETIME FIVE INCOME BENEFIT
Spousal Lifetime Five must be elected based on two Designated Lives, as
described below. Each Designated Life must be at least 55 years old when the
benefit is elected. Spousal Lifetime Five is not available if you elect any
other optional living or death benefit. As long as your Spousal Lifetime Five
Income Benefit is in effect, you must allocate your Contract Value in
accordance with the then permitted and available option(s). Owners electing
this benefit currently must allocate contract value to one or more of the
following asset allocation portfolios of the Advanced Series Trust (we reserve
the right to change these required portfolios on a prospective basis): AST
Capital Growth Asset Allocation Portfolio, AST Balanced Asset Allocation
Portfolio, AST Conservative Asset Allocation Portfolio, AST Preservation Asset
Allocation Portfolio, AST Advanced Strategies Portfolio, AST First Trust
Balanced Target Portfolio, AST First Trust Capital Appreciation Target
Portfolio, AST T. Rowe Price Asset Allocation Portfolio, AST UBS Dynamic Alpha
Portfolio or AST American Century Strategic Allocation Portfolio. Currently,
if you elect Spousal Lifetime Five and subsequently terminate the benefit,
there will be a restriction on your ability to re-elect Spousal Lifetime Five
and Lifetime Five. We reserve the right to further limit the election
frequency in the future. Before making any such change to the election
frequency, we will provide prior notice to contract owners who have an
effective Spousal Lifetime Five Income Benefit.
We offer a benefit that guarantees until the later death of two natural
persons that are each other's spouses at the time of election of Spousal
Lifetime Five and at the first death of one of them (the "Designated Lives",
each a "Designated Life") the ability to withdraw an annual amount (Spousal
Life Income Benefit) equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of market performance
on the Contract Value, subject to our rules regarding the timing and amount of
withdrawals. The Spousal Life Income Benefit may remain in effect even if the
Contract Value is zero. Spousal Lifetime Five may be appropriate if you intend
to make periodic withdrawals from your annuity, wish to ensure that market
performance will not affect your ability to receive annual payments and you
wish either spouse to be able to continue the Spousal Life Income Benefit
after the death of the first. You are not required to make withdrawals as part
of the benefit - the guarantees are not lost if you withdraw less than the
maximum allowable amount each year under the rules of the benefit.
Key Feature - Protected Withdrawal Value.
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Spousal Life Income Benefit. The initial Protected
Withdrawal Value is determined as of the date you make your first withdrawal
under your contract following your election of Spousal Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of:
(A)the Contract Value on the date you elect Spousal Lifetime Five, plus any
additional Purchase Payments (and any Credits), each growing at 5% per year
from the date of your election of the benefit, or application of the
Purchase Payment to your contract, as applicable, until the date of your
first withdrawal or the 10/th/ anniversary of the benefit effective date,
if earlier;
(B)the Contract Value on the date of the first withdrawal from your contract,
prior to the withdrawal;
(C)the highest Contract Value on each contract anniversary, plus subsequent
Purchase Payments (plus any Credits) prior to the first withdrawal or the
10/th/ anniversary of the benefit effective date, if earlier.
With respect to A and C above, after the 10/th/ anniversary of the benefit
effective date, each value is increased by the amount of any subsequent
Purchase Payments (plus any Credits).
55
5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT? continued
.. If you elect Spousal Lifetime Five at the time you purchase your contract,
the Contract Value will be your initial purchase payment (plus any credits).
.. For existing contract owners who are electing the Spousal Lifetime Five
Benefit, the Contract Value on the date of your election of Spousal
Lifetime Five will be used to determine the initial Protected Withdrawal
Value.
Annual Income Amount Under the Spousal Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under Spousal Lifetime Five, if your cumulative withdrawals
in a contract year are less than or equal to the Annual Income Amount, they
will not reduce your Annual Income Amount in subsequent contract years, but
any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that contract year. If your cumulative withdrawals
are in excess of the Annual Income Amount ("Excess Income"), your Annual
Income Amount in subsequent years will be reduced (except with regard to
required minimum distributions) by the result of the ratio of the Excess
Income to the Contract Value immediately prior to such withdrawal (see
examples of this calculation below). Reductions include the actual amount of
the withdrawal, including any withdrawal charges that may apply.
You may elect to step-up your Annual Income Amount if, due to positive market
performance, 5% of your Contract Value is greater than the Annual Income
Amount. You are eligible to step-up the Annual Income Amount on or after the
1st anniversary of the first withdrawal under Spousal Lifetime Five. The
Annual Income Amount can be stepped up again on or after the 1st anniversary
of the preceding step-up. If you elect to step-up the Annual Income Amount,
and on the date you elect to step-up, the charges under Spousal Lifetime Five
have changed for new purchasers, you may be subject to the new charge at the
time of such step-up. When you elect a step-up, your Annual Income Amount
increases to equal 5% of your Contract Value after the step-up. Your Annual
Income Amount also increases if you make additional Purchase Payments. The
amount of the increase is equal to 5% of any additional Purchase Payments. Any
increase will be added to your Annual Income Amount beginning on the day that
the step-up is effective or the Purchase Payment is made. A determination of
whether you have exceeded your Annual Income Amount is made at the time of
each withdrawal; therefore a subsequent increase in the Annual Income Amount
will not offset the effect of a withdrawal that exceeded the Annual Income
Amount at the time the withdrawal was made.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force. If you elect this feature, the first
Auto Step-Up opportunity will occur on the 1st contract anniversary that is at
least one year after the later of (1) the date of the first withdrawal under
Spousal Lifetime Five or (2) the most recent step-up. At this time, your
Annual Income Amount will be stepped-up if 5% of your Contract Value is
greater than the Annual Income Amount by any amount. If 5% of the Contract
Value does not exceed the Annual Income Amount, then an Auto Step-Up
opportunity will occur on each successive contract anniversary until a step-up
occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on
the 1st contract anniversary that is at least 1 year after the most recent
step-up. If, on the date that we implement an Auto Step-Up to your Annual
Income Amount, the charge for Spousal Lifetime Five has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Subject to our rules and restrictions, you will still be permitted to manually
step-up the Annual Income Amount even if you elect the Auto Step-Up feature.
Spousal Lifetime Five does not affect your ability to make withdrawals under
your contract or limit your ability to request withdrawals that exceed the
Annual Income Amount. Under Spousal Lifetime Five, if your cumulative
withdrawals in a contract year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent contract
years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that contract year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount
under Spousal Lifetime Five Income Benefit in any contract year, you cannot
carry-over the unused portion of the Annual Income Amount to subsequent
contract years.
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Annual Income Amount assume: 1.) the contract date and the
effective date of Spousal Lifetime Five are February 1, 2005; 2.) an initial
purchase payment of $250,000; 3.) the Contract Value on February 1, 2006 is
equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the
Contract Value is equal to $263,000; and 5.) the Contract Value on February 1,
2010 is equal to $280,000. The values set forth here are purely hypothetical,
and do not reflect the charge for the Spousal Lifetime Five Income Benefit.
The initial Protected Withdrawal Value is calculated as the greatest of
(a),(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05(393/365)= $263,484
(b)Contract value on March 1, 2006 (the date of the first withdrawal) =
$263,000
(c)Contract value on February 1, 2006 (the first contract anniversary) =
$265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit
(5% of $265,000).
56
Example 1. Dollar-for-dollar Reduction
If $10,000 was withdrawn (less than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current contract year = $13,250 -
$10,000 = $3,250 Annual Income Amount for future contract years remains at
$13,250
Example 2. Dollar-for-dollar and Proportional Reductions
If $15,000 was withdrawn (more than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current contract year = $0
.. Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future contract years.
.. Reduction to Annual Income Amount = Excess Income/Contract Value before
Excess Income X Annual Income Amount = $1,750 / ($263,000 - $13,250) X
$13,250 = $93
.. Annual Income Amount for future contract years = $13,250 - $93 = $13,157
Example 3. Step-up of the Annual Income Amount
If a step-up of the Annual Income Amount is requested on February 1, 2010 or
the Auto Step-Up feature was elected, the step-up would occur because 5% of
the Contract Value, which is $14,000 (5% of $280,000), is greater than the
Annual Income Amount of $13,250. The new Annual Income Amount will be equal to
$14,000.
Benefits Under Spousal Lifetime Five
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount and amounts are still payable under the Spousal Life Income Benefit,
we will make an additional payment for that contract year equal to the
remaining Annual Income Amount for the contract year, if any. Thus, in that
scenario, the remaining Annual Income Amount would be payable even though
your Contract Value was reduced to zero. In subsequent contract years we
make payments that equal the Annual Income Amount as described above. No
further purchase payments will be accepted under your contract. We will
make payments until the first of the Designated Lives to die, and will
continue to make payments until the death of the second Designated Life as
long as the Designated Lives were spouses at the time of the first death.
To the extent that cumulative withdrawals in the current contract year that
reduced your Contract Value to zero are more than the Annual Income Amount,
the Spousal Life Income Benefit terminates and no additional payments will
be made.
.. If annuity payments are to begin under the terms of your contract or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent contract years, you can elect one of the following
two options:
1. apply your Contract Value to any annuity option available; or
2. request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and
will continue to make payments until the death of the second
Designated Life as long as the Designated Lives were spouses at the
time of the first death.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with five payments certain using the same
basis that is used to calculate the greater of the annuity rates then
currently available or the annuity rates guaranteed in your contract. The
amount that will be applied to provide such annuity payments will be the
greater of:
1. the present value of future Annual Income Amount payments. Such
present value will be calculated using the same basis that is used to
calculate the single life fixed annuity rates guaranteed in your
contract; and
2. the Contract Value.
.. If no withdrawal was ever taken, we will determine an initial Protected
Withdrawal Value and calculate an Annual Income Amount as if you made your
first withdrawal on the date the annuity payments are to begin.
Other Important Considerations
.. Withdrawals under Spousal Lifetime Five are subject to all of the terms and
conditions of the contract, including any withdrawal charges.
.. Withdrawals made while Spousal Lifetime Five is in effect will be treated,
for tax purposes, in the same way as any other withdrawals under the
contract. Spousal Lifetime Five does not directly affect the Contract Value
or surrender value, but any withdrawal will decrease the Contract Value by
the amount of the withdrawal (plus any applicable withdrawal charges). If
you surrender your contract, you will receive the current surrender value.
.. You can make withdrawals from your contract while your Contract Value is
greater than zero without purchasing Spousal Lifetime Five. Spousal
Lifetime Five provides a guarantee that if your Contract Value declines due
to market performance, you will be able to receive your Annual Income
Amount in the form of periodic benefit payments.
57
5: WHAT IS THE LIFETIME FIVE INCOME BENEFIT? continued
.. In general, you must allocate your Contract Value in accordance with the
then-available option(s) that we may prescribe, in order to elect and
maintain Spousal Lifetime Five. If, subsequent to your election of the
benefit, we change our requirements for how Contract Value must be
allocated under the benefit, that new requirement will apply only to new
elections of the benefit, and will not compel you to re-allocate your
Contract Value in accordance with our newly-adopted requirements. All
subsequent transfers and purchase payments will be subject to the new
investment limitations.
.. There may be circumstances where you will continue to be charged the full
amount for Spousal Lifetime Five even when the benefit is only providing a
guarantee of income based on one life with no survivorship.
.. In order for the surviving Designated Life to continue Spousal Lifetime
Five upon the death of an owner, the Designated Life must elect to assume
ownership of the contract under the spousal continuation benefit.
Election of and Designations of Spousal Lifetime Five
Spousal Lifetime Five can only be elected based on two Designated Lives.
Designated Lives must be natural persons who are each other's spouses at the
time of election of the benefit and at the death of the first of the
Designated Lives to die. Currently, the benefit may only be elected where the
contract owner, annuitant and beneficiary designations are as follows:
.. One contract owner, where the annuitant and the contract owner are the same
person and the beneficiary is the contract owner's spouse. The contract
owner/annuitant and the beneficiary each must be at least 55 years old at
the time of election; or
.. Co-contract owners, where the contract owners are each other's spouses. The
beneficiary designation must be the surviving spouse. The first named
contract owner must be the annuitant. Both contract owners must each be 55
years old at the time of election.
.. One contract owner, where the owner is a Custodial Account established to
hold retirement assets for the benefit of the annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) the beneficiary is the Custodial Account, and the
spouse of the annuitant is the co-annuitant. Both the annuitant and
co-annuitant must each be at least 55 years old at the time of election.
When the contract is set up in this manner, in order for Spousal Lifetime
Five to be continued after the death of the first designated life (the
annuitant), the custodian must have elected to continue the contract, with
the second designated life (the co-annuitant) named as annuitant.
No ownership changes or annuitant changes will be permitted once this benefit
is elected. However, if the contract is co-owned, the contract owner that is
not the annuitant may be removed without affecting the benefit.
Spousal Lifetime Five can be elected at the time that you purchase your
contract. We also offer existing contract owners the option to elect Spousal
Lifetime Five after the contract date of their contract, subject to our
eligibility rules and restrictions. Your Contract Value as of the date of
election will be used as a basis to calculate the initial Protected Withdrawal
Value and the Annual Income Amount.
Currently, if you terminate Spousal Lifetime Five, you will only be permitted
to re-elect the benefit or elect the Lifetime Five Income Benefit on any
anniversary of the contract date that is at least 90 calendar days from the
date the benefit was last terminated.
We reserve the right to further limit the election frequency in the future.
Before making any such change to the election frequency, we will provide prior
notice to contract owners who have an effective Spousal Lifetime Five Income
Benefit.
Termination of Spousal Lifetime Five
Spousal Lifetime Five terminates automatically when your Annual Income Amount
equals zero. You may terminate Spousal Lifetime Five at any time by notifying
us. If you terminate Spousal Lifetime Five, any guarantee provided by the
benefit will terminate as of the date the termination is effective and certain
restrictions on re-election of the benefit will apply as described above. We
reserve the right to further limit the frequency election in the future.
Spousal Lifetime Five terminates upon your surrender of the contract, upon the
first Designated Life to die if the contract is not continued, upon the second
Designated Life to die or upon your election to begin receiving annuity
payments.
The charge for Spousal Lifetime Five will no longer be deducted from your
Contract Value upon termination of the benefit.
Additional Tax Considerations
If you purchase an annuity contract as an investment vehicle for "qualified"
investments, including an IRA, the minimum distribution rules under the Code
require that you begin receiving periodic amounts from your contract beginning
after age 70 1/2. Roth IRAs are not subject to these rules during the contract
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
contract year that required minimum distributions due from your contract are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distributions under the tax law.
58
6: WHAT IS THE INCOME APPRECIATOR BENEFIT?
INCOME APPRECIATOR BENEFIT
The Income Appreciator Benefit (IAB) is an optional, supplemental income
benefit that provides an additional income amount during the accumulation
period or upon annuitization. The Income Appreciator Benefit is designed to
provide you with additional funds that can be used to help defray the impact
taxes may have on distributions from your contract. IAB may be suitable for
you in other circumstances as well, which you can discuss with your registered
representative. Because individual circumstances vary, you should consult with
a qualified tax advisor to determine whether it would be appropriate for you
to elect the Income Appreciator Benefit.
If you want the Income Appreciator Benefit, you generally must elect it when
you make your initial purchase payment. Once you elect the Income Appreciator
Benefit, you may not later revoke it.
.. The annuitant must be 75 or younger in order for you to elect the Income
Appreciator Benefit.
.. If you choose the Income Appreciator Benefit, we will impose an annual
charge equal to 0.25% of your Contract Value. See Section 8, "What Are The
Expenses Associated With The Strategic Partners Annuity One 3 Contract?"
ACTIVATION OF THE INCOME APPRECIATOR BENEFIT
YOU CAN ACTIVATE THE INCOME APPRECIATOR BENEFIT AT ANY TIME AFTER IT HAS BEEN
IN FORCE FOR SEVEN YEARS. To activate the Income Appreciator Benefit, you must
send us a written request in good order.
Once activated, you can receive the Income Appreciator Benefit:
.. (IAB OPTION 1) at annuitization when determining an annuity payment;
.. (IAB OPTION 2) during the accumulation phase through the IAB automatic
withdrawal payment program; or
.. (IAB OPTION 3) during the accumulation phase as an Income Appreciator
Benefit credit to your contract over a 10-year period.
Income Appreciator Benefit payments are treated as earnings and may be subject
to tax upon withdrawal. See Section 10, "What Are The Tax Considerations
Associated With The Strategic Partners Annuity One 3 Contract?"
If you do not activate the benefit prior to the maximum annuitization age you
may lose all or part of the IAB.
CALCULATION OF THE INCOME APPRECIATOR BENEFIT
We will calculate the Income Appreciator Benefit amount as of the date we
receive your written request in good order (or, for IAB Option 1, on the
annuity date). We do this by multiplying the current earnings in the contract
by the applicable Income Appreciator Benefit percentage based on the number of
years the Income Appreciator Benefit has been in force. For purposes of
calculating the Income Appreciator Benefit:
.. earnings are calculated as the difference between the Contract Value and
the sum of all purchase payments;
.. earnings do not include (1) any amount added to the Contract Value as a
result of the Spousal Continuance Option, or (2) if we were to permit you
to elect the Income Appreciator Benefit after the contract date, any
earnings accrued under the contract prior to that election;
.. withdrawals reduce earnings first, then purchase payments, on a
dollar-for-dollar basis;
.. the table below shows the Income Appreciator Benefit percentages
corresponding to the number of years the Income Appreciator Benefit has
been in force.
IAB Option 1 - Income Appreciator Benefit At Annuitization
Under this option, if you choose to activate the Income Appreciator Benefit at
annuitization, we will calculate the Income Appreciator Benefit amount on the
annuity date and add it to the adjusted Contract Value for purposes of
determining the amount available for annuitization. You may apply this amount
to any annuity or settlement option over the lifetime of the annuitant, joint
annuitants, or a period certain of at least 15 years (but not to exceed life
expectancy).
UPON ANNUITIZATION, YOU MAY LOSE ALL OR A PORTION OF THE INCOME APPRECIATOR
BENEFIT IF YOU CHOOSE AN ANNUITY SETTLEMENT OPTION OTHER THAN ANY LIFETIME
PAYOUT OPTION OR PERIOD CERTAIN OPTION FOR AT LEAST 15 YEARS. IN SUCH
INSTANCES, WE WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR
THIS BENEFIT.
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6: WHAT IS THE INCOME APPRECIATOR BENEFIT? continued
Effect of Income Appreciator Benefit on Guaranteed Minimum Income Benefit
If you exercise the Guaranteed Minimum Income Benefit feature and an Income
Appreciator Benefit amount remains payable under your contract, the value we
use to calculate the annuity payout amount will be the greater of:
1. the adjusted Contract Value plus the remaining Income Appreciator Benefit
amount, calculated at current IAB annuitization rates; or
2. the GMIB protected value plus the remaining Income Appreciator Benefit
amount, calculated using the GMIB guaranteed annuity purchase rates shown
in the contract.
If you exercise the Guaranteed Minimum Income Benefit feature and activate the
Income Appreciator Benefit at the same time, you must choose among the
Guaranteed Minimum Income Benefit annuity payout options available at the time.
Terminating the Income Appreciator Benefit
The Income Appreciator Benefit will terminate on the earliest of:
.. the date you make a total withdrawal from the contract;
.. the date a death benefit is payable if the contract is not continued by the
surviving spouse under the Spousal Continuance Option;
.. the date the Income Appreciator Benefit amount is reduced to zero
(generally ten years after activation) under IAB Options 2 and 3;
.. the date of annuitization; or
.. the date the contract terminates.
Upon termination of the Income Appreciator Benefit, we cease imposing the
associated charge.
INCOME APPRECIATOR BENEFIT OPTIONS DURING THE ACCUMULATION PHASE
You may choose IAB Option 1 at annuitization, but you may instead choose IAB
Options 2 or 3 during the accumulation phase of your contract. Income
Appreciator Benefit payments under IAB Options 2 and 3 will begin on the same
day of the month as the contract date, beginning with the next month following
our receipt of your request in good order. Under IAB Options 2 and 3, you can
choose to have the Income Appreciator Benefit amounts paid or credited
monthly, quarterly, semi-annually, or annually.
IAB OPTIONS 2 AND 3 INVOLVE A TEN-YEAR PAYMENT PERIOD. IF THE 10-YEAR PAYMENT
PERIOD WOULD END AFTER THE ANNUITY DATE AND YOU CHOOSE AN ANNUITY SETTLEMENT
OPTION OTHER THAN ANY LIFETIME PAYOUT OPTION OR PERIOD CERTAIN OPTION OF AT
LEAST 15 YEARS OR YOU MAKE A FULL WITHDRAWAL, YOU MAY LOSE ALL OR ANY
REMAINING PORTION OF THE INCOME APPRECIATOR BENEFIT. IN SUCH INSTANCES, WE
WOULD NOT REIMBURSE YOU FOR THE EXPENSES YOU HAD PAID US FOR THIS BENEFIT.
IAB Option 2 - Income Appreciator Benefit Automatic Withdrawal Payment Program
Under this option, you elect to receive the Income Appreciator Benefit during
the accumulation phase. When you activate the benefit, a 10-year Income
Appreciator Benefit automatic withdrawal payment program begins. We will pay
you the Income Appreciator Benefit amount in equal installments over a 10-year
payment period. You may combine this Income Appreciator Benefit amount with an
automated withdrawal amount from your Contract Value, in which case each
combined payment must be at least $100.
The maximum automated withdrawal payment amount that you may receive from your
Contract Value under this Income Appreciator Benefit program in any contract
year during the 10-year period may not exceed 10% of the Contract Value as of
the date you activate the Income Appreciator Benefit.
Once we calculate the Income Appreciator Benefit, the amount will not be
affected by changes in Contract Value due to the investment performance of any
allocation option. Withdrawal charges may apply to automatic withdrawal
payment amounts, but not to amounts attributable to the Income Appreciator
Benefit.
After the ten-year payment period has ended, if the remaining Contract Value
is $2,000 or more, the contract will continue. If the remaining Contract Value
is less than $2,000 after the end of the 10-year payment period, we will pay
you the remaining Contract Value and the contract will terminate. If the
Contract Value falls below the minimum amount required to keep the contract in
force due solely to investment results before the end of the 10-year payment
period, we will continue to pay the Income Appreciator Benefit amount for the
remainder of the 10-year payment period.
Discontinuing The Income Appreciator Benefit Automatic Withdrawal Payment
Program Under IAB Option 2
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 and activate IAB Option 3 at any time after payments have begun and
before the last payment is made. We will add the remaining Income Appreciator
Benefit amount to
60
the Contract Value at the same frequency as your initial election until the
end of the 10-year payment period. We will treat any Income Appreciator
Benefit amount added to the Contract Value as additional earnings. Unless you
direct us otherwise, we will allocate these additions to the variable
investment options, fixed interest rate options, or the market value
adjustment option in the same proportions as your most recent purchase payment
allocation percentages.
You may discontinue the Income Appreciator Benefit payment program under IAB
Option 2 before the last payment is made and elect an annuity or settlement
option. We will add the balance of the Income Appreciator Benefit amount for
the 10-year payment period to the Contract Value in a lump sum before
determining the adjusted Contract Value. The adjusted Contract Value may be
applied to any annuity or settlement option that is paid over the lifetime of
the annuitant, joint annuitants, or a period certain of at least 15 years (but
not to exceed life expectancy).
IAB Option 3 - Income Appreciator Benefit Credit To Contract Value
Under this option, you can activate the Income Appreciator Benefit and receive
the benefit as credits to your Contract Value over a 10-year payment period.
We will allocate these Income Appreciator Benefit credits to the variable
investment options, the fixed interest rate options, or the market value
adjustment option in the same manner as your current allocation, unless you
direct us otherwise. We will waive the $1,000 minimum requirement for the
market value adjustment option. We will calculate the Income Appreciator
Benefit amount on the date we receive your written request in good order. Once
we have calculated the Income Appreciator Benefit, the Income Appreciator
Benefit credit will not be affected by changes in Contract Value due to the
investment performance of any allocation option.
Before we add the last Income Appreciator Benefit credit to your Contract
Value, you may switch to IAB Option 2 and receive the remainder of the Income
Appreciator Benefit as payments to you (instead of credits to the Contract
Value) under the Income Appreciator Benefit program for the remainder of the
10-year payment period.
You can also request that any remaining payments in the 10-year payment period
be applied to an annuity or settlement option that is paid over the lifetime
of the annuitants, joint annuitants, or a period certain of at least 15 years
(but not to exceed life expectancy).
Excess Withdrawals
During the 10 year period under IAB options 2 or 3, an "excess withdrawal"
occurs when any amount is withdrawn from your Contract Value in a contract
year that exceeds the sum of (1) 10% of the Contract Value as of the date the
Income Appreciator Benefit was activated plus (2) earnings since the Income
Appreciator Benefit was activated that have not been previously withdrawn.
We will deduct the excess withdrawal on a proportional basis from the
remaining Income Appreciator Benefit amount. We will then calculate and apply
a new reduced Income Appreciator Benefit amount.
Withdrawals you make in a contract year that do not exceed the sum of (1) 10%
of the Contract Value as of the date the Income Appreciator Benefit was
activated plus (2) earnings since the Income Appreciator Benefit was activated
that have not been previously withdrawn do not reduce the remaining Income
Appreciator Benefit amount. Additionally, if the amount withdrawn in any year
is less than the excess withdrawal threshold, the difference between the
amount withdrawn and the threshold can be carried over to subsequent years on
a cumulative basis and withdrawn without causing a reduction to the Income
Appreciator Benefit amount.
Effect of Total Withdrawal On Income Appreciator Benefit
We will not make Income Appreciator Benefit payments after the date you make a
total withdrawal of the contract surrender value.
7: HOW CAN I PURCHASE A STRATEGIC PARTNERS ANNUITY ONE 3 CONTRACT?
PURCHASE PAYMENTS
The initial purchase payment is the amount of money you give us to purchase
the contract. Unless we agree otherwise, and subject to our rules, the minimum
initial purchase payment is $10,000. You must get our prior approval for any
initial and additional purchase payment of $1,000,000 or more, unless we are
prohibited under applicable state law from insisting on such prior approval.
With some restrictions, you can make additional purchase payments by means
other than electronic fund transfer of no less than $500 at any time during
the accumulation phase. However, we impose a minimum of $100 with respect to
additional purchase payments made through electronic fund transfers.
You may purchase this contract only if the oldest of the owner, joint owner,
annuitant, or co-annuitant is age 85 or younger on the contract date. Certain
age limits apply to certain features and benefits described herein. No
subsequent purchase payments may be made on or after the earliest of the
86/th/ birthday of:
.. the owner,
.. the joint owner,
.. the annuitant, or
.. the co-annuitant.
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7: HOW CAN I PURCHASE A STRATEGIC PARTNERS ANNUITY ONE 3 CONTRACT? continued
Currently, the maximum aggregate purchase payments you may make is $7 million.
We limit the maximum total purchase payments in any contract year other than
the first to $2 million absent our prior approval.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your invested purchase payment
among the variable or fixed interest rate investment options, or the market
value adjustment option based on the percentages you choose. The percentage of
your allocation to a particular investment option can range in whole
percentages from 0% to 100%.
When you make an additional purchase payment, it will be allocated in the same
way as your most recent purchase payment, unless you tell us otherwise.
Allocations to the DCA Fixed Rate Option must be no less than $2,000 and,
allocations to the market value adjustment option must be no less than $1,000.
You may change your allocation of future invested purchase payments at any
time. Contact the Prudential Annuity Service Center for details.
We generally will credit the initial purchase payment to your contract within
two business days from the day on which we receive your payment in good order
at the Prudential Annuity Service Center. If, however, your first payment is
made without enough information for us to set up your contract, we may need to
contact you to obtain the required information. If we are not able to obtain
this information within five business days, we will within that five business
day period either return your purchase payment or obtain your consent to
continue holding it until we receive the necessary information. We will
generally credit each subsequent purchase payment as of the business day we
receive it in good order at the Prudential Annuity Service Center. Our
business day generally closes at 4:00 p.m. Eastern time. Our business day may
close earlier, for example if regular trading on the New York Stock Exchange
closes early. Subsequent purchase payments received in good order after the
close of the business day will be credited on the following business day. With
respect to both your initial purchase payment and any subsequent purchase
payment that is pending investment in our Separate Account, we may hold the
amount temporarily in our general account and may earn interest on such
amount. You will not earn interest on such amounts.
At our discretion, we may give initial and subsequent purchase payments (as
well as withdrawals and transfers) received in good order by certain
broker/dealers prior to the close of a business day the same treatment as they
would have received had they been received at the same time at the Prudential
Annuity Service Center. For more detail, talk to your registered
representative.
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.
CREDITS
If you purchase the Contract With Credit, we will add a credit amount to your
Contract Value with each purchase payment you make. The credit amount is
allocated to the variable or fixed interest rate investment options or the
market value adjustment option in the same percentages as the purchase payment.
The bonus credit that we pay with respect to any purchase payment depends on
(i) the age of the older of the owner or joint owner on the date on which the
purchase payment is made and (ii) the amount of the purchase payment.
Specifically,
.. if the elder owner is 80 or younger on the date that the purchase payment
is made, then we will add a bonus credit to the purchase payment equal to
4% if the purchase payment is less than $250,000; 5% if the purchase
payment is equal to or greater than $250,000 but less than $1 million; or
6% if the purchase payment is $1 million or greater; and
.. if the older owner is aged 81-85 on the date that the purchase payment is
made, then we will add a bonus credit equal to 3% of the amount of the
purchase payment.
Under the Contract With Credit, if the owner returns the contract during the
free look period, we will recapture the bonus credits. If we pay a death
benefit under the contract, we have a contractual right to take back any
credit we applied within one year of the date of death.
CALCULATING CONTRACT VALUE
The value of the variable portion of your contract will go up or down
depending on the investment performance of the variable investment options you
choose. To determine the value of your contract allocated to the variable
investment options, we use a unit of measure called an accumulation unit. An
accumulation unit works like a share of a mutual fund.
62
Every day we determine the value of an accumulation unit for each of the
variable investment options. We do this by:
1) adding up the total amount of money allocated to a specific investment
option,
2) subtracting from that amount insurance charges and any other applicable
charges such as for taxes, and
3) dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment to a variable investment option, we credit
your contract with accumulation units of the subaccount or subaccounts for the
investment options you choose. We determine the number of accumulation units
credited to your contract by dividing the amount of the purchase payment, plus
(if you have purchased the Contract With Credit) any applicable credit,
allocated to a variable investment option by the unit price of the
accumulation unit for that variable investment option. We calculate the unit
price for each investment option after the New York Stock Exchange closes each
day and then credit your contract. The value of the accumulation units can
increase, decrease, or remain the same from day to day.
We cannot guarantee that your Contract Value will increase or that it will not
fall below the amount of your total purchase payments.
8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY ONE 3
CONTRACT?
There are charges and other expenses associated with the contract that reduce
the return on your investment. These charges and expenses are described below.
The charges under the contracts are designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits
under the contracts. They are also designed, in the aggregate, to compensate
us for the risks of loss we assume pursuant to the contracts. If, as we
expect, the charges that we collect from the contracts exceed our total costs
in connection with the contracts, we will earn a profit. Otherwise, we will
incur a loss. The rates of certain of our charges have been set with reference
to estimates of the amount of specific types of expenses or risks that we will
incur. In most cases, this prospectus identifies such expenses or risks in the
name of the charge; however, the fact that any charge bears the name of, or is
designed primarily to defray a particular expense or risk does not mean that
the amount we collect from that charge will never be more than the amount of
such expense or risk. Nor does it mean that we may not also be compensated for
such expense or risk out of any other charges we are permitted to deduct by
the terms of the contract.
INSURANCE AND ADMINISTRATIVE CHARGES
Each day, we make a deduction for the insurance and administrative charges.
These charges cover our expenses for mortality and expense risk,
administration, marketing and distribution. If you choose an optional benefit,
the insurance and administrative cost also includes a charge to cover our
assumption of the associated risk. The mortality risk portion of the charge is
for assuming the risk that the annuitant(s) will live longer than expected
based on our life expectancy tables. When this happens, we pay a greater
number of annuity payments. We also incur the risk that the death benefit
amount exceeds the Contract Value. The expense risk portion of the charge is
for assuming the risk that the current charges will be insufficient in the
future to cover the cost of administering the contract. The administrative
expense portion of the charge compensates us for the expenses associated with
the administration of the contract. This includes preparing and issuing the
contract; establishing and maintaining contract records; preparation of
confirmations and annual reports; personnel costs; legal and accounting fees;
filing fees; and systems costs.
We calculate the insurance and administrative charge based on the average
daily value of all assets allocated to the variable investment options. These
charges are not assessed against amounts allocated to the fixed interest rate
options. The amount of the charge depends on the death benefit (or other)
option that you choose.
The death benefit charge is equal to:
.. 1.40% on an annual basis if you choose the base death benefit, or
.. 1.65% on an annual basis if you choose the step-up Guaranteed Minimum Death
Benefit option (i.e., 0.25% in addition to the base death benefit charge).
We impose an additional insurance and administrative charge of 0.10% annually
(of Contract Value attributable to the variable investment options) for the
Contract With Credit.
We impose an additional charge of 0.60% annually if you choose the Lifetime
Five Income Benefit. We impose an additional charge of 0.75% annually if you
choose the Spousal Lifetime Five Income Benefit. The 0.60% and 0.75% charges
are in addition to the charge we impose for the applicable death benefit, and
are deducted daily based on the Contract Value in the variable investment
options. Upon any reset of the amounts guaranteed under these benefits, we
reserve the right to adjust the charge to that being imposed at that time for
new elections of the benefits.
If the charges under the contract are not sufficient to cover our expenses,
then we will bear the loss. We do, however, expect to profit from these
charges. Any profits made from these charges may be used by us to pay for the
costs of distributing the contracts.
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8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY ONE 3
CONTRACT? continued
If you choose the Contract With Credit, we will also use any profits from this
charge to recoup our costs of providing the credit. The charges that we
discuss in this section are assessed against the assets of the separate
account. Certain of these charges are part of the base annuity and other
charges are assessed only if any available optional benefit is selected. If a
fixed interest rate option is available under your contract, the interest rate
that we credit to that option may be reduced by an amount that corresponds to
the asset-based charges to which you are subject under the variable investment
options.
WITHDRAWAL CHARGE
A withdrawal charge may apply if you make a full or partial withdrawal during
the withdrawal charge period for a purchase payment. The amount and duration
of the withdrawal charge depends on whether you choose the Contract With
Credit or the Contract Without Credit. The withdrawal charge varies with the
number of contract anniversaries that have elapsed since each purchase payment
being withdrawn was made. Specifically, we maintain an "age" for each purchase
payment you have made by keeping track of how many contract anniversaries have
passed since the purchase payment was made.
The withdrawal charge is the percentage, shown below, of the amount withdrawn.
If a withdrawal is effective on the day before a contract anniversary, the
withdrawal charge percentage as of the next following contract anniversary
will apply.
If you request a withdrawal, we will deduct an amount from the Contract Value
that is sufficient to pay the withdrawal charge, and provide you with the
amount requested.
If you request a full withdrawal, we will provide you with the full amount of
the Contract Value after making deductions for charges.
Each contract year, you may withdraw a specified amount of your Contract Value
without incurring a withdrawal charge. We determine the "charge-free" amount
available to you in a given contract year on the contract anniversary that
begins that year. In calculating the charge-free amount, we divide purchase
payments into two categories - payments that are subject to a withdrawal
charge and those that are not. We determine the charge-free amount based only
on purchase payments that are subject to a withdrawal charge. The charge-free
amount in a given contract year is equal to 10% of the sum of all the purchase
payments subject to the withdrawal charge that you have made as of the
applicable contract anniversary. During the first contract year, the
charge-free amount is equal to 10% of the initial purchase payment.
When you make a withdrawal (including a withdrawal under the optional Lifetime
Five Income Benefit), we will deduct the amount of the withdrawal first from
the available charge-free amount. Any excess amount will then be deducted from
purchase payments in excess of the charge-free amount and subject to
applicable withdrawal charges. Once you have withdrawn all purchase payments,
additional withdrawals will come from any earnings. We do not impose
withdrawal charges on earnings.
If a withdrawal or transfer is taken from a market value adjustment guarantee
period, prior to the expiration of the rate guarantee period, we will make a
market value adjustment to the withdrawal amount. We will then apply a
withdrawal charge to the adjusted amount.
If you choose the Contract With Credit and make a withdrawal that is subject
to a withdrawal charge, we may use part of that withdrawal charge to recoup
our costs of providing the credit. However, we do not impose any withdrawal
charge on your withdrawal of a credit amount.
Withdrawal charges will never be greater than permitted by applicable law.
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REQUIRED MINIMUM DISTRIBUTIONS
If a withdrawal is taken from a tax qualified contract under the minimum
distribution option in order to satisfy an Internal Revenue Service mandatory
distribution requirement only with respect to that contract's account balance,
we will waive withdrawal charges. See Section 10, "What Are The Tax
Considerations Associated With The Strategic Partners Annuity One 3 Contract?"
CONTRACT MAINTENANCE CHARGE
On each contract anniversary during the accumulation phase, if your Contract
Value is less than $75,000, we will deduct the lesser of $30 or 2% of your
Contract Value, for administrative expenses. We may raise the level of the
Contract Value at which we waive this fee. The charge will be deducted
proportionately from each of the contract's investment options. This same
charge will also be deducted when you surrender your contract if your Contract
Value is less than $75,000.
GUARANTEED MINIMUM INCOME BENEFIT CHARGE
We will impose an additional charge if you choose the Guaranteed Minimum
Income Benefit. FOR CONTRACTS SOLD ON OR AFTER MAY 1, 2004, we will deduct a
charge equal to 0.50% per year of the average GMIB protected value for the
period the charge applies. FOR ALL OTHER CONTRACTS, this is an annual charge
equal to 0.45% of the average GMIB protected value for the period the charge
applies. We deduct the charge from your Contract Value on each of the
following events:
.. each contract anniversary,
.. when you begin the income phase of the contract,
.. upon a full withdrawal, and
.. upon a partial withdrawal if the remaining Contract Value would not be
enough to cover the then applicable Guaranteed Minimum Income Benefit
charge.
If we impose this fee other than on a contract anniversary, then we will
pro-rate it based on the portion of the contract year that has elapsed since
the full annual fee was most recently deducted.
Because the charge is calculated based on the average GMIB protected value, it
does not increase or decrease based on changes to the annuity's Contract Value
due to market performance. If the GMIB protected value increases, the dollar
amount of the annual charge will increase, while a decrease in the GMIB
protected value will decrease the dollar amount of the charge.
The charge is deducted annually in arrears each contract year on the contract
anniversary. We deduct the amount of the charge pro-rata from the Contract
Value allocated to the variable investment options. If you surrender your
contract, begin receiving annuity payments under the GMIB or any other annuity
payout option we make available during a contract year, or the GMIB
terminates, we will deduct the charge for the portion of the contract year
since the prior contract anniversary (or the contract date if in the first
contract year). Upon a full withdrawal or if the Contract Value remaining
after a partial withdrawal is not enough to cover the applicable Guaranteed
Minimum Income Benefit charge, we will deduct the charge from the amount we
pay you.
The fact that we may impose the charge upon a full or partial withdrawal does
not impair your right to make a withdrawal at the time of your choosing.
We will not impose the Guaranteed Minimum Income Benefit charge after the
income phase begins.
INCOME APPRECIATOR BENEFIT CHARGE
We will impose an additional charge if you choose the Income Appreciator
Benefit. This is an annual charge equal to 0.25% of your Contract Value. The
Income Appreciator Benefit charge is calculated:
.. on each contract anniversary,
.. on the annuity date,
.. upon the death of the sole owner or the first-to-die of the owner or joint
owner prior to the annuity date,
.. upon a full or partial withdrawal, and
.. upon a subsequent purchase payment.
The fee is based on the Contract Value at the time of the calculation, and is
prorated based on the portion of the contract year that has elapsed since the
full annual fee was most recently deducted.
Although the Income Appreciator Benefit charge may be calculated more often,
it is deducted only:
.. on each contract anniversary,
.. on the annuity date,
.. upon the death of the sole owner or first to die of the owner or joint
owner prior to the annuity date,
.. upon a full withdrawal, and
.. upon a partial withdrawal if the Contract Value remaining after such
partial withdrawal is not enough to cover the then-applicable Income
Appreciator Benefit charge.
We reserve the right to calculate and deduct the fee more frequently than
annually, such as quarterly.
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8: WHAT ARE THE EXPENSES ASSOCIATED WITH THE STRATEGIC PARTNERS ANNUITY ONE 3
CONTRACT? continued
The Income Appreciator Benefit charge is deducted from each investment option
in the same proportion that the amount allocated to the investment option
bears to the total Contract Value. No market value adjustment will apply to
the portion of the charge deducted from the Market Value Adjustment Option.
Upon a full withdrawal, or if the Contract Value remaining after a partial
withdrawal is not enough to cover the then-applicable Income Appreciator
Benefit charge, the charge is deducted from the amount paid. The payment of
the Income Appreciator Benefit charge will be deemed to be made from earnings
for purposes of calculating other charges. THE FACT THAT WE MAY IMPOSE THE
CHARGE UPON A FULL OR PARTIAL WITHDRAWAL DOES NOT IMPAIR YOUR RIGHT TO MAKE A
WITHDRAWAL AT THE TIME OF YOUR CHOOSING.
We do not assess this charge upon election of IAB Option 1, the completion of
IAB Option 2 or 3, and upon annuitization. However, we do assess the IAB
charge during the 10-year payment period contemplated by IAB Options 2 and 3.
Moreover, you should realize that amounts credited to your Contract Value
under IAB Option 3 increase the Contract Value, and because the IAB fee is a
percentage of your Contract Value, the IAB fee may increase as a consequence
of those additions.
Beneficiary Continuation Option Charges
If your beneficiary takes the Death Benefit under the Beneficiary Continuation
Option, we deduct a Settlement Service Charge. The charge is assessed daily
against the average assets allocated to the variable investment options, and
is equal to an annual charge of 1.00%. In addition, the beneficiary will incur
an annual maintenance fee equal to the lesser of $30 or 2% of Contract Value
if the Contract Value is less than $25,000 at the time the fee is assessed.
The fee will not apply if it is assessed 30 days prior to a surrender request.
Finally, transfers in excess of 20 per year will incur a $10 transfer fee.
TAXES ATTRIBUTABLE TO PREMIUM
There may be federal, state and premium based taxes applicable to your
purchase payment. We are responsible for the payment of these taxes and may
make a deduction from the value of the contract to pay some or all of these
taxes. New York does not currently charge premium taxes on annuities. It is
our current practice not to deduct a charge for the federal tax associated
with deferred acquisition costs paid by us that are based on premium received.
However, we reserve the right to charge the contract owner in the future for
any such tax associated with deferred acquisition costs and any federal, state
or local income, excise, business or any other type of tax measured by the
amount of premium received by us.
TRANSFER FEE
You can make 12 free transfers every contract year. We measure a contract year
from the date we issue your contract (contract date). If you make more than 12
transfers in a contract year (excluding Dollar Cost Averaging and
Auto-Rebalancing), we will deduct a transfer fee of $25 for each additional
transfer. We have the right to increase this fee up to a maximum of $30 per
transfer, but we have no current plans to do so. We will deduct the transfer
fee pro-rata from the investment options from which the transfer is made. The
transfer fee is deducted before the market value adjustment, if any, is
calculated. There is a different transfer fee under the beneficiary
continuation option.
COMPANY TAXES
We pay company income taxes on the taxable corporate earnings created by this
separate account product. While we may consider company income taxes when
pricing our products, we do not currently include such income taxes in the tax
charges you pay under the contract. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
In calculating our corporate income tax liability, we derive certain corporate
income tax benefits associated with the investment of company assets,
including separate account assets, which are treated as company assets under
applicable income tax law. These benefits reduce our overall corporate income
tax liability. Under current law, such benefits may include foreign tax
credits and corporate dividend received deductions. We do not pass these tax
benefits through to holders of the separate account annuity contracts because
(i) the contract owners are not the owners of the assets generating these
benefits under applicable income tax law and (ii) we do not currently include
company income taxes in the tax charges you pay under the contract. We reserve
the right to change these tax practices.
UNDERLYING MUTUAL FUND FEES
When you allocate a purchase payment or a transfer to the variable investment
options, we in turn invest in shares of a corresponding underlying mutual
fund. Those funds charge fees that are in addition to the contract-related
fees described in this section. For 2006, the fees of these funds ranged from
0.37% to 1.19% annually. For certain funds, expenses are reduced pursuant to
expense waivers and comparable arrangements. In general, these expense waivers
and comparable arrangements are not guaranteed, and may be terminated at any
time. For additional information about these fund fees, please consult the
prospectuses for the funds.
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9: HOW CAN I ACCESS MY MONEY?
You Can Access Your Money By:
.. MAKING A WITHDRAWAL (EITHER PARTIAL OR FULL); OR
.. CHOOSING TO RECEIVE ANNUITY PAYMENTS DURING THE INCOME PHASE.
WITHDRAWALS DURING THE ACCUMULATION PHASE
When you make a full withdrawal, you will receive the value of your contract
minus any applicable charges and fees. We will calculate the value of your
contract and charges, if any, as of the date we receive your request in good
order at the Prudential Annuity Service Center.
Unless you tell us otherwise, any partial withdrawal and related withdrawal
charges will be taken proportionately from all of the investment options you
have selected. The minimum Contract Value that must remain in order to keep
your contract in force after a withdrawal is $2,000. If you request a
withdrawal amount that would reduce the Contract Value below this minimum, we
will withdraw the maximum amount available that, with the withdrawal charge,
would not reduce the Contract Value below such minimum.
With respect to the variable investment options, we will generally pay the
withdrawal amount, less any required tax withholding, within seven days after
we receive a withdrawal request in good order. We will deduct applicable
charges, if any, from the assets in your contract.
With respect to the market value adjustment option, you may specify the
guarantee period from which you would like to make a withdrawal. If you
indicate that the withdrawal is to originate from the market value adjustment
option, but you do not specify which guarantee period is to be involved, then
we will take the withdrawal from the guarantee period that has the least time
remaining until its maturity date. If you indicate that you wish to make a
withdrawal, but do not specify the investment options to be involved, then we
will take the withdrawal from your Contract Value on a pro rata basis from
each investment option that you have. In that situation, we will aggregate the
Contract Value in each of the guarantee periods that you have within the
market value adjustment option for purposes of making that pro rata
calculation. The portion of the withdrawal associated with the market value
adjustment option then will be taken from the guarantee periods with the least
amount of time remaining until the maturity date, irrespective of the original
length of the guarantee period. You should be aware that a withdrawal may
avoid a withdrawal charge based on the charge-free amount that we allow, yet
still be subject to a market value adjustment.
Income Taxes, Tax Penalties, and Certain Restrictions Also May Apply to Any
Withdrawal You Make. For a More Complete Explanation, See Section 10.
AUTOMATED WITHDRAWALS
We offer an automated withdrawal feature. This feature enables you to receive
periodic withdrawals in monthly, quarterly, semiannual, or annual intervals.
We will process your withdrawals at the end of the business day at the
intervals you specify. We will continue at these intervals until you tell us
otherwise. You can make withdrawals from any designated investment option or
proportionally from all investment options (other than a guarantee period
within the market value adjustment option). The minimum automated withdrawal
amount you can make is generally $100. An assignment of the contract
terminates any automated withdrawal program that you had in effect.
Income Taxes, Tax Penalties, Withdrawal Charges, and Certain Restrictions May
Apply to Automated Withdrawals. For a More Complete Explanation, See Section
10.
SUSPENSION OF PAYMENTS OR TRANSFERS
The SEC may require us to suspend or postpone payments made in connection with
withdrawals or transfers for any period when:
.. The New York Stock Exchange is closed (other than customary weekend and
holiday closings);
.. Trading on the New York Stock Exchange is restricted;
.. An emergency exists, as determined by the SEC, during which sales and
redemptions of shares of the underlying mutual funds are not feasible or we
cannot reasonably value the accumulation units; or
.. The SEC, by order, permits suspension or postponement of payments for the
protection of owners.
We expect to pay the amount of any withdrawal or process any transfer made
from the fixed interest rate options promptly upon request.
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10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT?
The tax considerations associated with the Strategic Partners Annuity One 3
contract vary depending on whether the contract is (i) owned by an individual
and not associated with a tax-favored retirement plan (including contracts
held by a non-natural person, such as a trust, acting as an agent for a
natural person), or (ii) held under a tax-favored retirement plan. We discuss
the tax considerations for these categories of contracts below. The discussion
is general in nature and describes only federal income tax law (not state or
other tax laws). It is based on current law and interpretations, which may
change. The discussion includes a description of certain spousal rights under
the contract and under tax-qualified plans. Our administration of such spousal
rights and related tax reporting accords with our understanding of the Defense
of Marriage Act (which defines a "marriage" as a legal union between a man and
a woman and a "spouse" as a person of the opposite sex). The information
provided is not intended as tax advice. You should consult with a qualified
tax advisor for complete information and advice. References to purchase
payments below relate to your cost basis in your contract. Generally, your
cost basis in a contract not associated with a tax-favored retirement plan is
the amount you pay into your contract, or into annuities exchanged for your
contract, on an after-tax basis less any withdrawals of such payments.
This contract may also be purchased as a non-qualified annuity by a
(401(a) trust or custodial IRA or Roth 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
401(a) plans, IRAs or Roth 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.
Charges for any investment advisory fees that are taken from the contract are
treated as partial withdrawal from the contract and will be reported as such
to the contract owner.
It is possible that the Internal Revenue Service (IRS) would assert that some
or all of the charges for the optional benefits under the contract such as the
Guaranteed Minimum Death Benefit, should be treated for federal income tax
purposes as a partial withdrawal from the contract. If this were the case, the
charge for this benefit could be deemed a withdrawal and treated as taxable to
the extent there are earnings in the contract. Additionally, for owners under
age 59 1/2, the taxable income attributable to the charge for the benefit
could be subject to a tax penalty.
If the IRS determines that the charges for one or more benefits under the
contract are taxable withdrawals, then the sole or surviving owner will be
provided with a notice from us describing available alternatives regarding
these benefits.
Taxes On Withdrawals And Surrender
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income,
rather than as return of purchase payments, until all gain has been withdrawn.
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 have been returned, all subsequent amounts will be
taxed as ordinary income. You will generally be taxed on any withdrawals from
the contract while you are alive even if the withdrawal is paid to someone
else. Withdrawals under any of the living benefit options or as a systematic
payment 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 any interest payment option that we may offer, that election will be
treated, for tax purposes, as surrendering your contract.
If you transfer your contract for less than full consideration, such as by
gift, you will trigger tax on any gain in the contract. This rule does not
apply if you transfer the contract to your spouse or under most circumstances
if you transfer the contract incident to divorce.
68
Taxes On Annuity Payments
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your purchase payments (less any amounts previously
received tax-free) and the denominator of which is the total expected payments
under the contract.
After the full amount of your purchase payments have been recovered tax-free,
the full amount of the annuity payments will be taxable. If annuity payments
stop due to the death of the annuitant before the full amount of your purchase
payments have been recovered, a tax deduction may be allowed for the
unrecovered amount.
Tax Penalty On Withdrawals And Annuity Payments
Any taxable amount you receive under your contract may be subject to a 10% tax
penalty. Amounts are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled;
.. the amount paid or received is in the form of substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty.); or
.. the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
Special Rules In Relation To Tax-free Exchanges Under Section 1035
Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits
certain tax-free exchanges of a life insurance, annuity or endowment contract
for an annuity. If the annuity is purchased through a tax-free exchange of a
life insurance, annuity or endowment contract that was purchased prior to
August 14, 1982, then any purchase payments made to the original contract
prior to August 14, 1982 will be treated as made to the new contract prior to
that date.
(See "Federal Tax Status" in the Statement of Additional Information.)
Partial surrenders may be treated in the same way as tax-free 1035 exchanges
of entire contracts, therefore avoiding current taxation of gains in the
contract as well as the 10% tax penalty of pre-age 59 1/2 withdrawals. The IRS
has reserved the right to treat transactions it considers abusive as
ineligible for this favorable partial 1035 exchange treatment. We do not know
what transactions may be considered abusive. For example we do not know how
the IRS may view early withdrawals or annuitizations after a partial exchange.
In addition, it is unclear how the IRS will treat a partial exchange from a
life insurance, endowment, or annuity contract into an immediate annuity. As
of the date of this prospectus, we will accept a partial 1035 exchange from a
non-qualified annuity into an immediate annuity as a "tax-free" exchange for
future tax reporting purposes, except to the extent that we, as a reporting
and withholding agent, believe that we would be expected to deem the
transaction to be abusive. However, some insurance companies may not recognize
these partial surrenders as tax-free exchanges and may report them as taxable
distributions to the extent of any gain distributed as well as subjecting the
taxable portion of the distribution to the 10% tax penalty. We strongly urge
you to discuss any transaction of this type with your tax advisor before
proceeding with the transaction.
Taxes Payable By Beneficiaries
The death benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the death
benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary. Choosing any option other than a lump sum death
benefit may defer taxes. Certain 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.
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10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT? continued
Reporting And Withholding On Distributions
Taxable amounts distributed from your annuity contracts are subject to federal
and state income tax reporting and withholding. In general, we will withhold
federal income tax from the taxable portion of such distribution based on the
type of distribution. In the case of an annuity or similar periodic payment,
we will withhold as if you are a married individual with three exemptions
unless you designate a different withholding status. In the case of all other
distributions, we will withhold at a 10% rate. You may generally elect not to
have tax withheld from your payments. An election out of withholding must be
made on forms that we provide.
State income tax withholding rules vary and we will withhold based on the
rules of your State of residence. Special tax rules apply to withholding for
nonresident aliens, and we generally withhold income tax for nonresident
aliens at a 30% rate. A different withholding rate may be applicable to a
nonresident alien based on the terms of an existing income tax treaty between
the United States and the nonresident alien's country. Please refer to the
CONTRACTS HELD BY TAX FAVORED PLANS section below for a discussion regarding
withholding rules for tax favored plans (for example, an IRA).
Regardless of the amount withheld by us, you are liable for payment of federal
and state income tax on the taxable portion of annuity distributions. You
should consult with your tax advisor regarding the payment of the correct
amount of these income taxes and potential liability if you fail to pay such
taxes.
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 will 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.
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.
Annuity Qualification
Diversification And Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
variable investment options of the annuity contract must be diversified,
according to certain rules under the Internal Revenue Code.
Each portfolio is required to diversify its investments each quarter so that
no more than 55% of the value of its assets is represented by any one
investment, no more than 70% is represented by any two investments, no more
than 80% is represented by any three investments, and no more than 90% is
represented by any four investments. Generally, securities of a single issuer
are treated as one investment and obligations of each U.S. Government agency
and instrumentality (such as the Government National Mortgage Association) are
treated as issued by separate issuers. In addition, any security issued,
guaranteed or insured (to the extent so guaranteed or insured) by the United
States or an instrumentality of the U.S. will be treated as a security issued
by the U.S. Government or its instrumentality, where applicable. We believe
the portfolios underlying the variable investment options of the Contract meet
these diversification requirements.
An additional requirement for qualification for the tax treatment described
above is that we, and not you as the contract owner, must have sufficient
control over the underlying assets to be treated as the owner of the
underlying assets for tax purposes. While we also believe these investor
control rules will be met, the Treasury Department may promulgate guidelines
under which a variable annuity will not be treated as an annuity for tax
purposes if persons with ownership rights have excessive control over the
investments underlying such variable annuity. It is unclear whether such
guidelines, if in fact promulgated, would have retroactive effect. It is also
unclear what effect, if any, such guidelines may have on transfers between the
investment options offered pursuant to this prospectus. We reserve the right
to take any action, including modifications to your contract or the investment
options, required to comply with such guidelines if promulgated. Any such
changes will apply uniformly to affected owners and will be made with such
notice to affected owner as is feasible under the circumstances.
Please refer to the Statement of Additional Information for further
information on these diversification and investor control issues.
70
Required Distributions Upon Your Death For Contracts Owned By Individuals (not
Associated With Tax-favored Plans).
Upon your death, certain distributions must be made under the contract. The
required distributions depend on whether you die before you start taking
annuity payments under the contract or after you start taking annuity payments
under the contract.
If you die on or after the annuity date, the remaining portion of the interest
in the contract must be distributed at least as rapidly as under the method of
distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within 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, that portion of the contract may be continued with your
spouse as the owner.
Additional Information
You should refer to the Statement of Additional Information if:
.. Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
.. You transfer your contract to, or designate, a beneficiary who is either 37
1/2 years younger than you or a grandchild.
CONTRACTS HELD BY TAX-FAVORED PLANS
The following discussion covers annuity contracts held under tax-favored
retirement plans.
Currently, the contract may be purchased for use in connection with individual
retirement accounts and annuities (IRAs) which are subject to Sections 408(a)
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.
YOU SHOULD BE AWARE THAT TAX FAVORED PLANS SUCH AS IRAS GENERALLY PROVIDE TAX
DEFERRAL REGARDLESS WHETHER THEY INVEST IN ANNUITY CONTRACTS. THIS MEANS THAT
WHEN A TAX FAVORED PLAN INVESTS IN AN ANNUITY CONTRACT, IT GENERALLY DOES NOT
RESULT IN ANY ADDITIONAL TAX DEFERRAL BENEFITS.
Types of Tax Favored Plans
IRAs. If you buy a contract for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement," attached to this
prospectus, contains information about eligibility, contribution limits, tax
particulars, and other IRA information. In addition to this information (some
of which is summarized below), the IRS requires that you have a "free look"
after making an initial contribution to the contract. During this time, you
can cancel the contract by notifying us in writing, and we will refund all of
the purchase payments under the contract (or, if provided by applicable state
law, the amount your contract is worth, if greater), less any applicable
federal and state income tax withholding.
CONTRIBUTIONS LIMITS/ROLLOVERS. Because of the way the contract is designed,
you may only purchase a contract for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan or transfer from another IRA, or if
you are age 50 or older and by making a single contribution consisting of your
IRA contributions and catch-up contributions attributable to the prior year
and the current year during the period from January 1 to April 15 of the
current year. You must make a minimum initial payment of $10,000 to purchase a
contract. This minimum is greater than the maximum amount of any annual
contribution allowed by law you may make to an IRA. For 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;
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10: WHAT ARE THE TAX CONSIDERATIONS ASSOCIATED WITH THE STRATEGIC PARTNERS
ANNUITY ONE 3 CONTRACT? continued
.. You cannot sell, assign or pledge the contract, other than to Pruco Life of
New Jersey;
.. The annual contribution you pay cannot be greater than the maximum amount
allowed by law, including catch-up contributions if applicable (which does
not include any rollover amounts);
.. The date on which required minimum distributions must begin cannot be later
than April 1/st/ 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 $10,000 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, or another Roth
IRA, or if you are age 50 or older and by making a single contribution
consisting of your Roth IRA contributions and catch-up contributions
attributable to the prior year and the current year during the period from
January 1 to April 15 of the current year. 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, 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. 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 Distributions 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% tax penalty on the amount of any minimum
distribution not made in a timely manner.
Effective in 2006, in accordance with recent changes in laws and regulations,
required minimum distributions will be calculated based on the sum of the
Contract Value and the actuarial value of any additional death benefits and
benefits from optional riders that you have purchased under the contract. As a
result, the required minimum distributions may be larger than if the
calculation were based on the Contract Value only, which may in turn result in
an earlier (but not before the required beginning date)
72
distribution of amounts under the contract and an increased amount of taxable
income distributed to the contract owner, and a reduction of death benefits
and the benefits of any optional riders.
You can use the minimum distribution option to satisfy the IRS minimum
distribution requirements for this contract without either beginning annuity
payments or surrendering the contract. We will distribute to you this minimum
distribution amount, less any other partial withdrawals that you made during
the year.
Although the IRS rules determine the required amount to be distributed from
your IRA each year, certain payment alternatives are still available to you.
If you own more than one IRA, you can choose to satisfy your minimum
distribution requirement for each of your IRAs by withdrawing that amount from
any of your IRAs. 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 by 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 distribution must begin under the Code, the death
benefit must be paid out within five years from 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 investments"
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.
Penalty for Early Withdrawals
You may owe a 10% tax penalty on the taxable part of distributions received
from an IRA or Roth IRA before you attain age 59 1/2.
Amounts are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled; or
.. the amount paid or received is in the form of substantially equal payments
not less frequently than annually (please note that substantially equal
payments must continue until the later of reaching age 59 1/2 or 5 years.
Modification of payments during that time period will generally result in
retroactive application of the 10% tax penalty.)
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
Withholding
Unless you elect otherwise, we will withhold federal income tax from the
taxable portion of such distribution at an appropriate percentage. The rate of
withholding on annuity payments where no mandatory withholding is required is
determined on the basis of
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ANNUITY ONE 3 CONTRACT? continued
the withholding certificate that you file with us. If you do not file a
certificate, we will automatically withhold federal taxes on the following
basis:
.. For any annuity payments not subject to mandatory withholding, you will
have taxes withheld by us as if you are a married individual, with three
exemptions; and
.. For all other distributions, we will withhold at a 10% rate.
We will provide you with forms and instructions concerning the right to elect
that no amount be withheld from payments in the ordinary course. However, you
should know that, in any event, you are liable for payment of federal income
taxes on the taxable portion of the distributions, and you should consult with
your tax advisor to find out more information on your potential liability if
you fail to pay such taxes.
ERISA 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 8, "What Are The Expenses Associated
With The Strategic Partners Annuity One 3 Contract?"
Information about sales representatives and commissions may be found under
"Other Information" and "Sale And Distribution Of The Contract" in Section 11.
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.
11: OTHER INFORMATION
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey) is a
stock life insurance company which was organized on September 17, 1982 under
the laws of the State of New Jersey. It is licensed to sell life insurance and
annuities in New Jersey and New York, and accordingly is subject to the laws
of each of those states.
Pruco Life of New Jersey is an indirect wholly-owned subsidiary of The
Prudential Insurance Company of America (Prudential), a New Jersey stock life
insurance company doing business since 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 of New
Jersey's ultimate parent, Prudential Financial exercises significant influence
over the operations and capital structure of Pruco Life of New Jersey and
Prudential. However, neither Prudential Financial, Prudential, nor any other
related company has any legal responsibility to pay amounts that Pruco Life of
New Jersey may owe under the contract.
Pruco Life of New Jersey publishes annual and quarterly reports that are filed
with the SEC. These reports contain financial information about Pruco Life of
New Jersey that is annually audited by independent accountants. Pruco Life of
New Jersey's annual report for the year ended December 31, 2006, together with
subsequent periodic reports that Pruco Life of New Jersey files with the SEC,
are incorporated by reference into this prospectus. You can obtain copies, at
no cost, of any and all of this information, including the Pruco Life of New
Jersey annual report that is not ordinarily mailed to contract owners, the
more current reports and any subsequently filed documents at no cost by
contacting us at the address or telephone number listed on the cover. The SEC
file number for Pruco Life of New Jersey is 811-07975. You may read and copy
any filings made by Pruco Life of New Jersey with the SEC at the SEC's Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. 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.
74
THE SEPARATE ACCOUNT
We have established a separate account, the Pruco Life of New Jersey Flexible
Premium Variable Annuity Account (separate account), to hold the assets that
are associated with the variable annuity contracts. The separate account was
established under New Jersey law on May 20, 1996, and is registered with the
SEC under the Investment Company Act of 1940 as a unit investment trust, which
is a type of investment company. The assets of the separate account are held
in the name of Pruco Life of New Jersey and legally belong to us. These assets
are kept separate from all of our other assets and may not be charged with
liabilities arising out of any other business we may conduct. More detailed
information about Pruco Life of New Jersey, including its audited financial
statements, is provided in the SAI.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC (PIMS), a wholly-owned
subsidiary of Prudential Financial, Inc., is the distributor and principal
underwriter of the securities offered through this prospectus. PIMS acts as
the distributor of a number of annuity contracts and life insurance products
we offer.
PIMS's principal business address is 100 Mulberry Street, Newark, New Jersey
07102-4077. PIMS is registered as a broker/dealer under the Securities
Exchange Act of 1934 (Exchange Act) and is a member of the National
Association of Securities Dealers, Inc. (NASD).
The contract is offered on a continuous basis. PIMS enters into distribution
agreements with broker/dealers who are registered under the Exchange Act and
with entities that may offer the contract but are exempt from registration
(firms). Applications for the contract are solicited by registered
representatives of those firms. Such representatives will also be our
appointed insurance agents under state insurance law. In addition, PIMS may
offer the contract directly to potential purchasers.
Commissions are paid to firms on sales of the contract according to one or
more schedules. The individual representative will receive a portion of the
compensation, depending on the practice of his or her firm. Commissions are
generally based on a percentage of purchase payments made, up to a maximum of
8%. Alternative compensation schedules are available that provide a lower
initial commission plus ongoing annual compensation based on all or a portion
of Contract Value. We may also provide compensation to the distributing firm
for providing ongoing service to you in relation to the contract. Commissions
and other compensation paid in relation to the contract do not result in any
additional charge to you or to the separate account.
In addition, in an effort to promote the sale of our products (which may
include the placement of Pruco Life of New Jersey and/or the contract on a
preferred or recommended company or product list and/or access to the firm's
registered representatives), we or PIMS may enter into compensation
arrangements with certain broker/dealer firms with respect to certain or all
registered representatives of such firms under which such firms may receive
separate compensation or reimbursement for, among other things, training of
sales personnel and/or marketing and/or administrative services and/or other
services they provide to us or our affiliates. These services may include, but
are not limited to: educating customers of the firm on the contract's
features; conducting due diligence and analysis; providing office access,
operations and systems support; holding seminars intended to educate
registered representatives and make them more knowledgeable about the
contract; providing a dedicated marketing coordinator; providing priority
sales desk support; and providing expedited marketing compliance approval to
PIMS. Further information about the firms that are part of these compensation
arrangements appears in the Statement of Additional Information, which is
available without charge upon request.
To the extent permitted by NASD rules and other applicable laws and
regulations, PIMS may pay or allow other promotional incentives or payments in
the form of cash or non-cash compensation. These arrangements may not be
offered to all firms and the terms of such arrangements may differ between
firms.
You should note that firms and individual registered representatives and
branch managers within some firms participating in one of these compensation
arrangements might receive greater compensation for selling the contract than
for selling a different contract that is not eligible for these compensation
arrangements. While compensation is generally taken into account as an expense
in considering the charges applicable to a contract product, any such
compensation will be paid by us or PIMS and will not result in any additional
charge to you. Overall compensation paid to the distributing firm does not
exceed, based on actuarial assumptions, 8.5% of the total purchase payments
made. Your registered representative can provide you with more information
about the compensation arrangements that apply upon the sale of the contract.
On July 1, 2003, Prudential Financial combined its retail securities brokerage
and clearing operations with those of Wachovia Corporation ("Wachovia") and
formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a
joint venture headquartered in Richmond, Virginia. PFI has a 38% ownership
interest in the joint venture, while Wachovia owns the remaining 62%. Wachovia
and Wachovia Securities are key distribution partners for certain products of
Prudential Financial affiliates, including mutual funds and individual
annuities that are distributed through their financial advisors, bank channel
and independent channel. In addition, Prudential Financial is a service
provider to the managed account platform and certain wrap-fee programs offered
by Wachovia Securities. The Strategic Partners Plus and Strategic Partners
Plus 3 variable annuities are sold through Wachovia Securities.
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11: OTHER INFORMATION continued
LITIGATION
Pruco Life of New Jersey is subject to legal and regulatory actions in the
ordinary course of its businesses, which may include class action lawsuits.
Pending legal and regulatory actions include proceedings relating to aspects
of the businesses and operations that are specific to Pruco Life of New Jersey
and that are typical of the businesses in which Pruco Life of New Jersey
operates. Class action and individual lawsuits may involve a variety of issues
and/or allegations, which include sales practices, underwriting practices,
claims payment and procedures, premium charges, policy servicing and breach of
fiduciary duties to customers. Pruco Life of New Jersey 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.
Pruco Life of New Jersey'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 flows of
Pruco Life of New Jersey in a particular quarterly or annual period could be
materially affected by an ultimate unfavorable resolution of litigation and
regulatory matters, depending, in part, upon the results of operations or cash
flows 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 of New Jersey's financial position.
ASSIGNMENT
In general, you can assign the contract at any time during your lifetime. If
you do so, we will reset the death benefit to equal the Contract Value on the
date the assignment occurs. For details, see Section 4, "What Is The Death
Benefit?" We will not be bound by the assignment until we receive written
notice. We will not be liable for any payment or other action we take in
accordance with the contract if that action occurs before we receive notice of
the assignment. An assignment, like any other change in ownership, may trigger
a taxable event. If you assign the contract, that assignment will result in
the termination of any automated withdrawal program that had been in effect.
If the new owner wants to re-institute an automated withdrawal program, then
he/she needs to submit the forms that we require, in good order.
If the contract is issued under a qualified plan, there may be limitations on
your ability to assign the contract. For further information please speak to
your representative.
FINANCIAL STATEMENTS
The financial statements of the separate account and Pruco Life of New Jersey,
the co-issuer of the Strategic Partners Annuity One 3 contract, are included
in the Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
Company
Experts
Principal Underwriter
Payments Made to Promote Sale of Our Products
Allocation of Initial Purchase Payment
Determination of Accumulation Unit Values
Federal Tax Status
Financial Statements
Separate Account Financial Information
Company Financial Information
76
HOUSEHOLDING
To reduce costs, we now send only a single copy of prospectuses and
shareholder reports to each consenting household, in lieu of sending a copy to
each contract owner that resides in the household. If you are a member of such
a household, you should be aware that you can revoke your consent to
householding at any time, and begin to receive your own copy of prospectuses
and shareholder reports, by calling (877) 778-5008.
MARKET-VALUE ADJUSTMENT FORMULA
The general formula under which Pruco Life of New Jersey calculates the market
value adjustment applicable to a full or partial surrender, annuitization, or
settlement under Strategic Partners Annuity One 3 is set forth below. The
market value adjustment is expressed as a multiplier factor. That is, the
Contract Value after the market value adjustment ("MVA"), but before any
withdrawal charge, is as follows: Contract Value (after MVA) = Contract Value
(before MVA) X (1 + MVA). The MVA itself is calculated as follows:
The MVA formula with respect to contracts issued in New York is what is
depicted above. The formula uses an interpolated rate "J" as the current
credited interest rate. Specifically, "J" is the interpolated current credited
interest rate offered on new money at the time of withdrawal, annuitization,
or settlement. The interpolated value is calculated using the following
formula:
m/365 X (n + 1) year rate + (365 - m)/365 X n year rate,
where "n" equals the number of whole years remaining in the Contract's current
guarantee period, and "m" equals the number of days remaining in year "n" of
the current guarantee period.
Market Value Adjustment Example
The following will illustrate the application of the Market Value Adjustment.
For simplicity, surrender charges are ignored in this example.
Positive market value adjustment
.. Suppose a contract owner made an invested purchase payment of $10,000 on
July 1, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. At the time, the
Contract Value will have accumulated to $11,127.11. The number of whole
years remaining in the guarantee period is 3.
.. On May 1, 2007 the interest rate declared by Pruco Life of New Jersey for a
guarantee period of 3 years (the number of whole years remaining) is 4%,
and for a guarantee period of 4 years (the number of whole years remaining
plus1) is 5%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0417 + 0.0025)] to the power
of (38/12) -1 = 0.04871
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X 0.04871 = $542.00
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11: OTHER INFORMATION continued
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + $542.00 = $11,669.11
The MVA may not always be positive. Here is an example where it is negative.
.. Suppose a contract owner made an invested purchase payment of $10,000 on
July 1, 2005 and received a guaranteed interest rate of 6% for 5 years. A
request to surrender the contract is made on May 1, 2007. At the time, the
Contract Value will have accumulated to $11,127.11. The number of whole
years remaining in the guarantee period is 3.
.. On May 1, 2007 the interest rate declared by Pruco Life of New Jersey for a
guarantee period of 3 years (the number of whole years remaining) is 7%,
and for a guarantee period of 4 years (the number of whole years remaining
plus1) is 8%.
The following computations would be made:
1) Determine the Market Value Adjustment factor.
The MVA factor calculation would be: [(1.06)/(1.0717 + 0.0025)] to the power
of (38/12) -1 = -0.04126
2) Multiply the Contract Value by the factor calculated in Step 1.
$11,127.11 X (-0.04126) = -$459.10
3) Add together the Market Value Adjustment and the Contract Value to get the
total Contract Surrender Value.
$11,127.11 + (-$459.10) = $10,668.10
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APPENDIX A - ACCUMULATION UNIT VALUES
As we have indicated throughout this prospectus, the Strategic Partners
Annuity One 3 Variable Annuity is a contract that allows you to select or
decline any of several features that carries with it a specific asset-based
charge. We maintain a unique unit value corresponding to each combination of
such contract features. Here we depict the historical unit values
corresponding to the contract features bearing the highest and lowest
combinations of asset-based charges. The remaining unit values appear in the
Statement of Additional Information, which you may obtain free of charge, by
calling (888) PRU-2888 or by writing to us at the Prudential Annuity Service
Center, P.O. Box 7960, Philadelphia, PA 19176. As discussed in the prospectus,
if you select certain optional benefits (e.g., Lifetime Five), we limit the
investment options to which you may allocate your Contract Value. In certain
of these accumulation unit value tables, we set forth accumulation unit values
that assume election of one or more of such optional benefits and allocation
of Contract Value to portfolios that currently are not permitted as part of
such optional benefits. Such unit values are set forth for general reference
purposes only, and are not intended to indicate that such portfolios may be
acquired along with those optional benefits.
(BASE DEATH BENEFIT 1.40)
A-1
A-2
A-3
A-4
A-5
* As applicable, date that portfolio was first offered in the product and/or
this charge combination first appeared.
(Contract w Credit, GMDB Step Up, Lifetime Five 2.35)
A-6
A-7
A-8
A-9
* As applicable, date that portfolio was first offered in the product and/or
this charge combination first appeared.
A-10
APPENDIX B - SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
Within the Strategic Partners(SM) family of annuities, we offer several
different deferred variable annuity products. These annuities are issued by
Pruco Life Insurance Company of New Jersey. Not all of these annuities may be
available to you due to state approval or broker-dealer offerings. You can
verify which of these annuities is available to you by asking your registered
representative, or by calling us at (888) PRU-2888. For comprehensive
information about each of these annuities, please consult the prospectus for
the annuity.
Each annuity has different features and benefits that may be appropriate for
you, based on your individual financial situation and how you intend to use
the annuity.
The different features and benefits may include variations on your ability to
access funds in your annuity without the imposition of a withdrawal charge as
well as different ongoing fees and charges you pay while your contract remains
in force. Additionally, differences may exist in various optional benefits
such as guaranteed living benefits or death benefit protection.
Among the factors you should consider when choosing which annuity product may
be most appropriate for your individual needs are the following:
.. Your age;
.. The amount of your investment and any planned future deposits into the
annuity;
.. How long you intend to hold the annuity (also referred to as investment
time horizon);
.. Your desire to make withdrawals from the annuity;
.. Your investment return objectives;
.. The effect of optional benefits that may be elected; and
.. Your desire to minimize costs and/or maximize return associated with the
annuity.
The following chart sets forth the prominent features of each Strategic
Partners variable annuity. The availability of optional features, such as
those noted in the chart, may increase the cost of the contract. Therefore,
you should carefully consider which features you plan to use when selecting
your annuity.
In addition to the chart, we set out below certain hypothetical illustrations
that reflect the Contract Value and surrender value of each variable annuity
over a variety of holding periods. These charts are meant to reflect how your
annuities can grow or decrease depending on market conditions and the
comparable value of each of the annuities (which reflects the charges
associated with the annuities) under the assumptions noted. In comparing the
values within the illustrations, a number of distinctions are evident. To
fully appreciate these distinctions, we encourage you to speak to your
registered representative and to read the prospectuses. However, we do point
out the following noteworthy items:
.. Strategic Partners Advisor, because it has no sales charge, offers the
highest surrender value during the first few years. However, unlike the
Strategic Partners Annuity One 3/Plus 3 contracts, Strategic Partners
Advisor offers few optional benefits.
.. Strategic Partners Select, as part of its standard insurance and
administrative expense, offers a guaranteed minimum death benefit equal to
the greater of the Contract Value or a step-up value. In contrast, you
incur an additional charge if you opt for an enhanced death benefit under
the other annuities.
.. Strategic Partners Annuity One 3/Plus 3 comes in both a bonus version and a
non-bonus version, each of which offers several optional insurance
features. A bonus is added to your purchase payments under the bonus
version, although the withdrawal charges under the bonus version are higher
than those under the non-bonus version. Although the non-bonus version
offers no bonus, it is accompanied by fixed interest rate options and a
market value adjustment option that may provide higher interest rates than
such options accompanying the bonus version.
STRATEGIC PARTNERS ANNUITY PRODUCT COMPARISON. Below is a summary of Strategic
Partners variable annuity products. You should consider the investment
objectives, risks, charges and expenses of an investment in any contract
carefully before investing. Each product prospectus as well as the underlying
portfolio prospectuses contains this and other information about the variable
annuities and underlying investment options. Your registered representative
can provide you with prospectuses for one or more of these variable annuities
and the underlying portfolios and can help you decide upon the product that
would be most advantageous for you given your individual needs. Please read
the prospectuses carefully before investing.
B-1
B-2
1 Withdrawals of taxable amounts will be subject to income tax, and prior to
age 59 1/2, may be subject to a 10% federal income tax penalty.
2 May offer lower interest rates for the fixed rate options than the interest
rates offered in the contracts without credit.
3 For more information on these benefits, refer to section 4, "What Is The
Death Benefit?" in the Prospectus.
4 For more information on these benefits, refer to section 3, "What Kind of
Payments Will I Receive During The Income Phase?"; section 5, "What Is The
LifeTime Five(SM) Income Benefit?"; (discussing Lifetime Five, Spousal
Lifetime Five and Highest Daily Lifetime Five) and section 6, "What Is The
Income Appreciator Benefit?" in the Prospectus.
HYPOTHETICAL ILLUSTRATION
The following examples outline the value of each annuity as well as the amount
that would be available to an investor as a result of full surrender at the
end of each of the contract years specified. The values shown below are based
on the following assumptions:
.. An initial investment of $100,000 is made into each contract earning a
gross rate of return of 0% and 6% respectively.
.. No subsequent deposits or withdrawals are made to/from the contract.
.. The hypothetical gross rates of return (as of December 31, 2006) are
reduced by the arithmetic average of the fees and expenses of the
underlying portfolios (as of December 31, 2006) and the charges that are
deducted from the contract at the Separate Account level as follows:
.. 0.97% average of all fund expenses are computed by adding Portfolio
management fees, 12b-1 fees and other expenses of all of the underlying
portfolios and then dividing by the number of portfolios. For purposes of
the illustrations, we do not reflect any expense reimbursements or expense
waivers that might apply and are described in the prospectus fee table.
Please note that because the SP Aggressive Growth Asset Allocation
Portfolio, the SP Balanced Asset Allocation Portfolio, the SP Conservative
Asset Allocation Portfolio, and the SP Growth Asset Allocation Portfolio
generally were closed to investors in 2005, the fees for such portfolios
are not reflected in the above-mentioned average.
.. The Separate Account level charges include the Insurance Charge and
Administration Charge (as applicable).
The Contract Value assumes no surrender while the Surrender Value assumes a
100% surrender two days prior to the contract anniversary, therefore
reflecting the withdrawal charge applicable to that contract year. Note that a
withdrawal on the contract anniversary, or the day before the contract
anniversary, would be subject to the withdrawal charge applicable to the next
contract year, which usually is lower. The values that you actually experience
under a contract will be different from what is depicted here if any of the
assumptions we make here differ from your circumstances, however the relative
values for each product reflected below will remain the same. We will provide
you with a personalized illustration upon request.
B-3
0% GROSS RETURN
Assumptions:
1. $100,000 initial investment.
2. Fund Expenses = 0.97%.
3. No optional death benefit(s) and/or optional living benefit(s) were elected.
4. These reductions result in hypothetical net rates of return as follows:
Strategic Partners Advisor -2.33%; Strategic Partners Select -2.44%;
Strategic Partners Annuity One 3/Plus 3 Non-Bonus -2.33%; Strategic
Partners Annuity One 3/Plus 3 Bonus -2.42%.
5. The illustration above illustrates 100% invested into the variable
sub-accounts. Investments into the fixed rate accounts, as noted above, may
receive a higher rate of interest in one product over another causing
Contract Values to differ in relation to one another.
B-4
6% GROSS RETURN
Assumptions:
1. $100,000 initial investment.
2. As of December 31, 2006, the average fund expenses = 0.97%.
3. No optional death benefit(s) and/or optional living benefit(s) were elected.
4. These reductions result in hypothetical net rates of return as follows:
Strategic Partners Advisor 3.53%; Strategic Partners Select 3.41%;
Strategic Partners Annuity One 3/Plus 3 Non-Bonus 3.53%; Strategic Partners
Annuity One 3/Plus 3 Bonus 3.43%.
5. The illustration above illustrates 100% invested into the variable
sub-accounts. Investments into the fixed rate accounts, as noted above, may
receive a higher rate of interest in one product over another causing
Contract Values to differ in relation to one another.
6. Surrender Value assumes surrender 2 days prior to policy anniversary.
B-5
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS
FURTHER DETAILS ABOUT THE PRUCO LIFE OF NEW JERSEY ANNUITY
DESCRIBED IN PROSPECTUS ORD01182NY (05/2007).
------------------------
(print your name)
------------------------
(address)
------------------------
(city/state/zip code)
MAILING ADDRESS:
PRUDENTIAL ANNUITY SERVICE CENTER
P.O. Box 7960
Philadelphia, PA 19176
[LOGO]
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102-3777
ORD01182NY
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
Pruco Life Insurance Company of New Jersey has registered $75 million of
interests in the market value adjusted annuity contracts described in this
registration statement. Pruco Life Insurance Company of New Jersey has paid
$6,067.50 to the SEC for the registration fees required under the Securities
Act of 1933.
Federal Taxes
Pruco Life Insurance Company of New Jersey estimated the federal tax effect
associated with the deferred acquisition costs attributable to receipt of $3
million of purchase payments over a two year period to be approximately $11,100.
State Taxes
Pruco Life Insurance Company of New Jersey estimated that approximately $0 in
premium taxes would be owed upon receipt of purchase payments under the
contracts.
Printing Costs
Pruco Life Insurance Company of New Jersey estimated that the cost of printing
prospectuses for the amount of securities registered herein would be
approximately $97,472.
Legal Costs
This registration statement was prepared by Prudential attorneys whose time is
allocated to Pruco Life Insurance Company of New Jersey.
Accounting Costs
PricewaterhouseCoopers LLP, the independent registered public accounting firm
that audits Pruco Life Insurance Company of New Jersey's financial statements,
charges approximately $10,000 in connection with each filing of this
registration statement with the Commission.
Premium Paid to Indemnify Officers
Officers and Directors of Pruco Life Insurance Company of New Jersey are
indemnified under a policy that also covers officers and directors of other
entities controlled by Prudential Financial, Inc. A portion of the cost of that
policy is attributed to Pruco Life Insurance Company of New Jersey.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant, in 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.
New Jersey, being the state of organization of Pruco Life Insurance Company of
New Jersey ("PLNJ"), permits entities organized under its jurisdiction to
indemnify directors and officers with certain limitations. The relevant
provisions of New Jersey law permitting
II-1
indemnification can be found in Section 14A:3-5 of the New Jersey Statutes
Annotated. The text of PLNJ's By-law, Article V, which relates to
indemnification of officers and directors, is incorporated by reference to
Exhibit 1A(6)(c) to Form S-6 filed August 13, 1999 on behalf of the Pruco Life
of New Jersey Variable Appreciable Account.
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
(a) Exhibits
(1) (a) Form of Distribution Agreement between Prudential Investment Management
Services LLC (Underwriter) and Pruco Life Insurance Company of New Jersey
(Depositor). (Note 2)
(3) (i) Articles of Incorporation of Pruco Life Insurance Company of New Jersey
as amended through February 12, 1998 (Note 5)
(ii) By-Laws of Pruco Life Insurance Company of New Jersey as amended June 7,
1999. (Note 6)
(4) (a) Strategic Partners Annuity One Variable Annuity Contract VBON 2000-NY
Ed. 10/2000. (Note 3)
(4) (b) Strategic Partners Annuity One Variable Annuity Contract VDCA 2000-NY
Ed. 10/2000. (Note 3)
(4) (c) Strategic Partners Annuity One Endorsement (MVA) ORD 112805-NY. (Note 4)
(4) (d) Strategic Partners Application ORD 99730 NY-1. (Note 4)
(4) (e) Strategic Partners Annuity One Variable Annuity Contract VDCA-NY Ed
5-2003. (Note 7)
(4) (f) Strategic Partners Annuity One Endorsement (GMIB) ORD 112737-NY. (Note
10)
(4) (g) Strategic Partners Annuity One Endorsement (Transfers) ORD 112878.
(Note 7)
(4) (h) Strategic Partners Annuity One Endorsement (IAB) ORD 112718-NY. (Note 7)
(4) (i) Strategic Partners Annuity One Application. (Note 10)
(4) (k) Endorsement Supplement (GMIB) ORD 112963-NY. (Note 10)
(4) (l) Form of Strategic Partners FlexElite Annuity Contract VFLX-2002-NY
(Note 9)
(4) (m) Fixed Rate Account Endorsement for Strategic Partners FlexElite (Note 9)
(4) (n) DCA Fixed Rate Investment Option Endorsement for Strategic Partners
FlexElite (Note 9)
(4) (o) Credit Election Endorsement for Strategic Partners FlexElite (Note 9)
(4) (p) General Endorsement for Strategic Partners FlexElite (Note 10)
(4) (q) Guaranteed Minimum Death Benefit and Spousal Continuance Option
Endorsement for Strategic Partners FlexElite (Note 10)
(4) (r) Guaranteed Minimum Death Benefit - Step Up and Spousal Continuance
Option Endorsement for Strategic Partners FlexElite (Note 10)
(4) (s) Maximum Age Endorsement (Note 11)
(4) (t) Transfer Endorsement ORD 112878 for Strategic Partners FlexElite
(Note 7)
II-2
Guaranteed Minimum Payments Benefit Endorsement (Lifetime Five) (Note 17)
(4)(u) Endorsement Supplement to Strategic Partners FlexElite Variable Annuity
Contract: Guaranteed Minimum Payments Benefit Endorsement (Lifetime Five) (Note
13)
(4)(v) Endorsement Supplement to Strategic Partners FlexElite Variable Annuity
Contract: Joint and Survivor Guaranteed Minimum Payments Benefit Schedule
(Spousal Lifetime Five) (Note 14)
(4)(w) Highest Daily Lifetime Five Benefit Rider (Enhanced) (Note 15)
(o) Joint and Survivor Guaranteed Minimum Payments Benefit Rider (Spousal
Lifetime Five) (Note 1)
(p) Endorsement Supplement (Highest Daily Lifetime Five) (Note 1)
(q) Highest Daily Lifetime Five Benefit Rider (Enhanced) (Note 1)
(5) (a) Application form for VFLX-2002. (Note 10)
(b) Application form for VFLX-2003. (Note 15)
(c) Application form ORD113670 (Note 22)
(6) (a) Articles of Incorporation of Pruco Life Insurance Company, as amended
through October 19, 1993. (Note 4)
(b) By-laws of Pruco Life Insurance Company, as amended through May 6, 1997.
(Note 5)
(7) (a) Contract of reinsurance in connection with variable annuity contract
(Lifetime Five) (Note 19)
(b) Contract of reinsurance in connection with variable annuity contract
(Spousal Lifetime Five) (Note 21)
(c) Contract of reinsurance in connection with variable annuity contract
(Highest Daily Lifetime Five)(Note 1)
(8) Other material contracts performed in whole or in part after the date the
registration statement is filed:
(a) Form of Fund Participation Agreement. (Note 6)
(b) Form of Fund Participation Agreement (AST) (Note 18)
(c) Gartmore Amended and Restated Fund Participation Agreement (Note 18)
(9) Opinion of Counsel. (Note 16)
(10) Written consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm. (Note 1)
(11) All financial statements omitted from Item 23, Financial Statements - Not
Applicable.
(12) Agreements in consideration for providing initial capital between or among
Registrant, Depositor, Underwriter, or initial Contract owners-Not Applicable.
(13) Powers of Attorney.
(a) James J. Avery, Jr. (Note 7)
(b) David R. Odenath, Jr. and Ronald P. Joelson (Note 8)
(c) Helen M. Galt (Note 9)
II-3
(23) Written Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm. (Note 1)
(24) Powers of Attorney.
(a) James J. Avery, Jr., Bernard J. Jacob, Ronald P. Joelson, , Helen M. Galt,
David E. Odenath, Jr. (Note 12)
II-4
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post-Effective Amendment No. 5 to Form
S-6, Registration No. 333-85117 filed June 28, 2001 on behalf of the
Pruco Life of New Jersey Variable Appreciable Account.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 4 to Form
N-4, Registration No. 333-49230 filed December 10, 2002 on behalf of
the Pruco Life of New Jersey Flexible Premium Variable Annuity
Account.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 1 to Form
N-4, Registration No. 333-99275, filed June 27, 2003, on behalf of
the Pruco Life of New Jersey Flexible Premium Variable Annuity
Account.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 12 to Form
S-1, Registration No. 33-20018 filed April 16, 1999, on behalf of
the Pruco Life of New Jersey Variable Contract Real Property Account.
(Note 6) Incorporated by reference to Form S-6, Registration No. 333-85117
filed August 13, 1999 on behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 9 to Form
N-4, Registration No. 333-49230, filed September 26, 2003, on behalf
of the Pruco Life of New Jersey Flexible Premium Variable Annuity
Account.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 12 to Form
N-4, Registration No. 333-49230, filed April 20, 2004 on behalf of
the Pruco Life of New Jersey Flexible Premium Variable Annuity
Account.
(Note 9) Incorporated by reference to Initial Registration on Form N-4,
Registration No. 333-99275, filed September 6, 2002 on behalf of
Pruco Life of New Jersey Flexible Premium Variable Annuity Account.
(Note 10) Incorporated by reference to Post-Effective Amendent on Form N-4,
Registration No. 333-103473, filed April 21, 2006 on behalf of Pruco
Life of New Jersey Flexible Premium Variable Annuity Account.
(Note 10) Incorporated by reference to Pre-Effective Amendment No. 14 on Form
N-4, Registration No. 333-99275 filed April 25, 2003 on behalf of
the Pruco Life of New Jersey Flexible Premium Variable Annuity
Account.
(Note 11) Incorporated by reference to Post-Effective Amendment No. 6 on Form
N-4, Registration No. 333-49230, filed April 23, 2003 on behalf of
Pruco Life of New Jersey Flexible Premium Variable Annuity Account.
(Note 12) Incorporated by reference to Post-Effective Amendment No. 7 on Form
S-3, Registration No. 333-62246, filed April 19, 2006 on behalf of
Pruco Life of New Jersey Flexible Premium Variable Annuity Account.
(Note 13) Incorporated by reference to Post-Effective Amendment No. 6 to Form
N-4, Registration No. 333-75702, filed January 20, 2005 on behalf of
the Pruco Life Flexible Premium Variable Annuity Account.
(Note 14) Incorporated by reference to Post-Effective Amendment No. 6 to Form
S-3, Registration No. 333-103474, filed February 7, 2006 on behalf
of Pruco Life Insurance Company.
(Note 15) Incorporated by reference to Pre-Effective Amendment No. 16 to Form
N-4, Registration 333-75702, filed October 6, 2006 on behalf of
Pruco Life Flexible Premium Variable Annuity Account.
(Note 16) Incorporated by reference to Post-Effective Amendment No.4 on Form
N-4, Registration No. 333-103473, filed April 20,2004 on behalf of
Pruco Life of New Jersey Flexible Premium Annuity Account.
II-5
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually, or in the aggregate, represent a
fundamental change in the information in the registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Newark, State of New Jersey, on the 20th day of
April, 2007.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(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
* Date: April 20, 2007
- ----------------------------------
JAMES J. AVERY JR.
DIRECTOR
*
- ----------------------------------
BERNARD J. JACOB
DIRECTOR
*
- ----------------------------------
TUCKER I. MARR
CHIEF FINANCIAL OFFICER
* *By: THOMAS C. CASTANO
- ---------------------------------- -------------------------------------
RONALD P. JOELSON THOMAS C. CASTANO
DIRECTOR (ATTORNEY-IN-FACT)
*
- ----------------------------------
SCOTT D. KAPLAN
DIRECTOR
*
- ----------------------------------
HELEN M. GALT
DIRECTOR, SENIOR VICE PRESIDENT
AND CHIEF ACTUARY
*
- ----------------------------------
DAVID R. ODENATH, JR.
DIRECTOR
II-7
EXHIBIT INDEX
EXHIBITS
(23) Written Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm