S-3: Registration statement under Securities Act of 1933
Published on
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 2009
REGISTRATION NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
PRUCO LIFE INSURANCE COMPANY
OF NEW JERSEY
(Exact Name of Registrant)
NEW JERSEY
(State or other jurisdiction of incorporation or organization)
22-2426091
(I.R.S. Employer Identification Number)
C/O PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(973) 802-5740
(Address and telephone number of principal executive offices)
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)
Copies to:
CHRISTOPHER SPRAGUE
VICE PRESIDENT, CORPORATE COUNSEL
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
751 BROAD STREET
NEWARK, NJ 07102-2992
(973) 802-6997
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. [_]
Indicate by check mark whether the registrant is a large accelerated filer, a
non-accelerated filer, or a smaller reporting company.
Calculation of Registration fee
* Securities are not issued in predetermined units
** In this filling, Pruco Life Insurance Company of New Jersey is registering
$40,000,000 of Securities and paying a fee of $1,572.00 therefor.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission may determine.
================================================================================
NEW YORK PROSPECTUS | MAY 1, 2001
Discovery Select(R) Variable Annuity
Discovery Select(R) Variable Annuity is issued by Pruco Life Insurance Company
of New Jersey and distributed by Prudential Investment Management Services LLC.
All are Prudential companies.
IFS-A053626 [LOGO] Prudential Financial
Understanding Variable Annuities
ANNUITIES AND THE BIG RETIREMENT PICTURE:
A tax-deferred retirement plan may lower your current taxable income, postpone
taxes on earnings until withdrawn,/1/ and allow tax-free transfers among
investment options.
Sources of Retirement Income
If you're like most Americans, you may have to provide more than half of the
income you'll need for the more than 20 years you may live in retirement.
42% Personal Investments, Savings, Earnings and Others
40% Social Security
18% Employer Retirement Programs
Source: Social Security Administration, Facts and Figures About Social
Security, 1998.
Consider an Annuity
Nonqualified annuities won't lower your taxable income, but they can postpone
taxes on earnings until withdrawn./1/ Nonqualified annuities add other
important benefits.
.. Unlimited contributions.
.. No required distributions at age 70 1/2.
.. Option of guaranteed income for life./2/
.. Offers a guaranteed fixed rate of return/2/ (fixed annuity option in many
variable annuities).
.. A death benefit that passes account values to beneficiaries, and which may
avoid probate, but is not tax free.
/1/ Withdrawals prior to age 59 1/2 are subject to tax penalties and ordinary
income tax.
/2/ Guarantee is based on the claims-paying ability of the issuing company,
and does not apply to the investment performance or safety of the
underlying investment.
This material includes a prospectus that describes in detail the Fund's
objectives, investment policies, risks, sales charges, and other matters of
interest. Please read the prospectus carefully, which begins on page 1, before
you invest or send money.
This is not part of the Discovery Select Variable Annuity prospectus. The
prospectus begins on page 1.
What Is a Variable Annuity?
A variable annuity allows you to create a personal investment strategy by
choosing among a range of investment options that will fluctuate in value. A
variable annuity is designed for people willing to take more risk with their
money in exchange for greater growth potential.
The Potential of Tax-Deferred Growth
You pay no taxes on annuity earnings until you withdraw your money. This means
that all your money keeps working for you without being reduced by annual
taxation. Later, when you need your money, only your earnings are taxed. (See
the chart below.)
VALUE OF $50,000 INVESTED FOR 25 YEARS EARNING AN 8% AVERAGE ANNUAL RETURN
[CHART]
This chart shows two hypothetical $50,000 investments, a taxable and
tax-deferred. Both earn 8% a year for 25 years. It does not include the effect
of mortality and expense charges, sales charges, and administrative fees
typically found with variable annuities, which would lower the performance
shown. The taxable investment is assumed to pay a combined federal and state
tax rate of 28% each year on investment returns. The tax-deferred investment
pays a combined federal and state tax of 33% on lump-sum withdrawal of earnings
at the end of 25 years. According to this example, a $342,424 lump-sum
withdrawal would have been worth $245,924 after taxes. Investors under the age
of 59 1/2 at the time of withdrawal may be subject to a 10% IRS penalty. This
hypothetical example is not intended to represent the performance of any
specific product.
Please note that the above illustration is hypothetical and is not intended to
be a projection of future values. Discovery Select Variable Annuity has a
mortality and expense risk charge of 1.40%, as well as an annual contract
charge of $30 if the contract value is less than $50,000. If these fees and
charges were included in the illustration above, the performance would have
been lower.
And How Does It Work?
You select an investment program by choosing from stock, bond, and money market
portfolios according to a strategy of growth, income and/or stability. The
value of your annuity will vary according to the performance of the investment
options that you choose. You can change your investment strategy as your needs
or market conditions change without losing money to taxes.
This is not part of the Discovery Select prospectus. The prospectus begins on
page 1.
How the Variable Options Work
Variable annuity purchasers are looking for more growth potential through their
choice of investment options.
Variable investment options are associated with specific funds, each of which
is managed by a portfolio manager who invests the money of annuity owners
according to guidelines that specify the type of stocks or bonds to be
purchased and the investment approach. The guidelines may be broadly or
narrowly defined according to the prospectus of each subaccount.
Variable annuity owners need to be sure their choice of options is in line with
their personal goals, their tolerance for risk, and the number of years until
their retirement. Make sure you understand the purpose and strategy of your
variable options, and don't be afraid to ask questions of your financial
professional--that's what he or she is paid for.
YOUR VARIABLE INVESTMENT OPTIONS
[CHART]
The chart above shows the approximate relationship among various investment
categories in terms of risk and return potential as reported by Morningstar
Inc. in August 1996.
Questions?
Dial (888) PRU-2888 (778-2888) to speak to a Prudential service specialist.
This is not part of the Discovery Select prospectus. The prospectus begins on
page 1.
DISCOVERY SELECT(R)
Variable Annuity
PROSPECTUS: MAY 1, 2001
This prospectus describes an individual variable annuity contract offered by
Pruco Life Insurance Company of New Jersey (Pruco Life of New Jersey). Pruco
Life of New Jersey is an indirect wholly-owned subsidiary of The Prudential
Insurance Company of America.
The Funds
Discovery Select offers a wide variety of investment choices, including 40
variable investment options that invest in mutual funds managed by these
leading asset managers.
Prudential Investments
A I M Capital Management, Inc.
Alliance Capital Management L.P.
American Century
Credit Suisse Asset Management, LLC
Davis Selected Advisers, L.P.
Fidelity Management & Research Co.
Franklin Advisers
INVESCO Funds Group, Inc.
Janus Capital
Jennison Associates
MFS
Oppenheimer Capital
PIMCO
T. Rowe Price
Please Read this Prospectus
Please read this prospectus before purchasing a Discovery Select variable
annuity contract and keep it for future reference. Current prospectuses for
each of the underlying mutual funds accompany this prospectus. These
prospectuses contain important information about the mutual funds. Please read
these prospectuses and keep them for reference.
To Learn More About Discovery Select
To learn more about the Discovery Select variable annuity, you can request a
copy of the Statement of Additional Information (SAI) dated May 1, 2001. The
SAI has been filed with the Securities and Exchange Commission (SEC) and is
legally a part of this prospectus. Pruco Life of New Jersey also files other
reports with the SEC. All of these filings can be reviewed and copied at the
SEC's offices, and can also be obtained from the SEC's Public Reference
Section, 450 5th Street N.W., Washington, D.C. 20549. The SEC also maintains a
Web site (http://www.sec.gov) that contains the Discovery Select SAI, material
incorporated by reference, and other information regarding registrants that
file electronically with the SEC. The Table of Contents of the SAI is on Page
35 of this prospectus.
For a Free Copy of the SAI call us at:
.. (888) PRU-2888 or write to us at:
.. Pruco Life Insurance Company of New Jersey 213 Washington Street Newark,
New Jersey 07102-2992
.. Prudential Annuity Service Center P.O. Box 7960 Philadelphia, PA 19101
The SEC has not determined that this contract is a good investment, nor has the
SEC determined that this prospectus is complete or accurate. It is a criminal
offense to state otherwise. Investment in a variable annuity contract is
subject to risk, including the possible loss of your money. An investment in
Discovery Select is not a bank deposit and is not insured by the Federal
Deposit Insurance Corporation or any other government agency.
1
Contents
2
PART III: PROSPECTUSES
VARIABLE INVESTMENT OPTIONS
The Prudential Series Fund
AIM Variable Insurance Funds
Alliance Variable Products Series Fund, Inc.
American Century Variable Portfolios, Inc.
Credit Suisse Warburg Pincus Trust
Davis Variable Account Fund, Inc.
Franklin Templeton Variable Insurance Products Trust
Janus Aspen Series
MFS Variable Insurance Trust
OCC Accumulation Trust
T. Rowe Price
3
This page intentionally left blank
4
Part I Summary
Discovery Select Prospectus
5
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Glossary
We have tried to make this prospectus as easy to read and understand as
possible. By the nature of the contract, however, certain technical words or
terms are unavoidable. We have identified the following as some of these words
or terms.
ACCUMULATION PHASE
The period that begins with the contract date (see below definition) 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.
ANNUITANT
The person whose life determines how long the contract lasts and the amount of
income payments that will be paid.
ANNUITY DATE
The date when income payments are scheduled to begin.
BENEFICIARY
The person(s) or entity you have chosen to receive a death benefit.
CASH VALUE
This is the total value of your contract minus any withdrawal charge(s) or
market-value adjustment, if applicable.
CO-ANNUITANT
The person shown on the contract data pages who becomes the Annuitant upon the
death of the Annuitant before the Annuity Date. No Co-Annuitant may be
designated if the Owner is a non-natural person.
CONTRACT DATE
The date we receive your initial purchase payment and all necessary paperwork
in good order at the Prudential Annuity Service Center. Contract anniversaries
are measured from the contract date. A contract year starts on the contract
date or on a contract anniversary.
CONTRACTOWNER, OWNER OR YOU
The person entitled to the ownership rights under the contract.
CONTRACT VALUE
The total value of the amounts in a contract allocated to the variable
investment options and the interest rate options as of a particular date.
DEATH BENEFIT
If the sole or last surviving annuitant dies, the designated person(s) or the
beneficiary will receive, at a minimum, the total amount invested or a
potentially greater amount related to market appreciation. See "What is the
Death Benefit?" on page 24.
INCOME OPTIONS
Options under the contract that define the frequency and duration of income
payments. In your contract, these are referred to as payout or annuity options.
INTEREST-RATE OPTION
An investment option that offers a fixed-rate of interest for a selected period
during which periodic transfers are made to selected variable investment
options (dollar cost averaging option), a one-year period (fixed-rate option)
or a seven-year period (market-value adjustment option).
PRUDENTIAL ANNUITY SERVICE CENTER
For general correspondence: P.O. Box 7960, Philadelphia, PA 19101. For express
overnight mail: 2101 Welsh Road, Dresher, PA 19025. The phone number is
(888) PRU-2888.
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.
TAX DEFERRAL
This is a way to increase your assets without currently being taxed. You do not
pay taxes on your contract earnings until you take money out of your contract.
VARIABLE INVESTMENT OPTION
When you choose a variable investment option, we purchase shares of the mutual
fund which 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.
6
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Summary of Sections 1--9
For a more complete discussion of the following topics, see the corresponding
section in the prospectus.
SECTION 1
What is the Discovery Select Variable Annuity?
This variable annuity contract, offered by Pruco Life of New Jersey, is a
contract between you, as the owner, and us. The contract allows you to invest
on a tax-deferred basis in one or more of 40 variable investment options. There
are also two fixed interest rate options which are available in most states.
The contract is intended for retirement savings or other long-term investment
purposes and provides a death benefit and guaranteed income options.
The variable investment options are designed to offer the opportunity over
the long term for a better return than the fixed interest rate options.
However, this is NOT guaranteed. It is possible, due to market changes, that
your investments may decrease in value.
The fixed interest-rate options offer an interest-rate that is guaranteed.
While your money is in a fixed account, your principal amount is guaranteed and
the interest amount that your money will earn is guaranteed by us to always be
at least 3.0%. Payments allocated to the fixed interest-rate options become
part of Pruco Life of New Jersey's general assets. As a result, the strength of
our guarantee is based on the overall financial strength of Pruco Life of New
Jersey.
You can invest your money in any or all of the variable investment options
and the interest-rate options. You are allowed 12 transfers each contract year
among the variable investment options, without a charge. There are certain
restrictions on transfers involving the interest-rate options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase,
earnings grow on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase starts when you begin receiving regular payments
from your contract. The amount of money you are able to accumulate in your
contract during the accumulation phase will help determine the amount of the
payments you will receive during the income phase. Other factors will affect
the amount of your payments such as age, gender and the payout option you
selected.
Free Look. If you change your mind about owning Discovery Select, you may
cancel your contract within 10 days after receiving it (or whatever time period
is required in the state where the contract was issued).
SECTION 2
What Investment Options Can I Choose?
You generally can invest your money in any of the variable investment options
that invest in the mutual funds described in the fund prospectuses provided
with this prospectus:
The Prudential Series Fund
Diversified Bond Portfolio
Diversified Conservative Growth Portfolio
Equity Portfolio
Global Portfolio
High Yield Bond Portfolio
Money Market Portfolio
Prudential Jennison Portfolio
Small Capitalization Stock Portfolio
Stock Index Portfolio
Value Portfolio
20/20 Focus Portfolio
SP Aggressive Growth Asset Allocation Portfolio
SP Alliance Technology Portfolio
SP Balanced Asset Allocation Portfolio
SP Conservative Asset Allocation Portfolio
SP Growth Asset Allocation Portfolio
SP INVESCO Small Company Growth Portfolio
SP Jennison International Growth Portfolio
SP Large Cap Value Portfolio
SP MFS Capital Opportunities Portfolio
SP MFS Mid-Cap Growth Portfolio
SP PIMCO Total Return Portfolio
SP Prudential U.S. Emerging Growth Portfolio
SP Small/Mid Cap Value Portfolio
SP Strategic Partners Focused Growth Portfolio
AIM Variable Insurance Funds
AIM V.I. Growth and Income Fund
AIM V.I. Value Fund
7
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Summary of Sections 1-9 continued
Alliance Variable Products Series Fund, Inc.
Alliance Premier Growth Portfolio
American Century Variable Portfolios, Inc.
American Century VP Value
Credit Suisse Warburg Pincus Trust
Global Post-Venture Capital Portfolio
Davis Variable Account Fund, Inc.
Davis Value Portfolio
Franklin Templeton Variable Insurance Products Trust
Franklin Small Cap Fund -- Class 2
Janus Aspen Series
Growth Portfolio
International Growth Portfolio
MFS Variable Insurance Trust
Emerging Growth Series
Research Series
OCC Accumulation Trust
Managed Portfolio
Small Cap Portfolio
T. Rowe Price
Equity Series--Equity Income Portfolio
International Series--International Stock Portfolio
Depending upon market conditions, you may earn or lose money in any of these
options. The value of your contract will fluctuate depending upon the
investment performance of the mutual funds used by the variable investment
options you choose. Performance information for the variable investment options
is provided in the Statement of Additional Information (SAI). Past performance
is not a guarantee of future results.
You can also put your money into one or more of the fixed interest-rate
options.
Depending on the terms of your contract, not all portfolios of the
Prudential Series Fund may be available to you.
SECTION 3
What Kind Of Payments Will I Receive During The Income Phase? (Annuitization)
If you want to receive regular income from your annuity, you can choose one of
several options, including guaranteed payments for the annuitant's lifetime.
Generally, once you begin receiving regular payments, you cannot change your
payment plan.
SECTION 4
What Is The Death Benefit?
If the sole or last surviving annuitant dies the designated person(s) or the
beneficiary will receive at a minimum, the total amount invested or a
potentially greater amount related to market appreciation.
SECTION 5
How Can I Purchase A Discovery Select Annuity Contract?
You can purchase this contract, under most circumstances, with a minimum
initial purchase payment of $10,000. You can add $1,000 or more at any time
during the accumulation phase of the contract. Your representative can help you
fill out the proper forms.
SECTION 6
What Are The Expenses Associated With The Discovery Select Contract?
The contract has insurance features and investment features, and there are
costs related to each.
Each year we deduct a $30 contract maintenance charge if your contract value
is less than $50,000. For insurance and administrative costs, we also deduct an
annual charge of 1.40% of the average daily value of all assets allocated to
the variable investment options. This charge is not assessed against amounts
allocated to the interest-rate investment options.
8
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
There are also charges associated with the mutual funds. These charges
currently range from 0.39% to 1.40% per year of a fund's average daily assets.
During the accumulation phase, if you withdraw money less than eight years
after making a purchase payment, you may have to pay a withdrawal charge on all
or part of the withdrawal. This charge ranges from 1-7%.
SECTION 7
How Can I Access My Money?
You may take money out at any time during the accumulation phase. If you do so,
however, you may be subject to income tax, and if you make a withdrawal prior
to age 59 1/2, an additional tax penalty as well. Each year, you may withdraw
up to 10% of your total purchase payments without charge. Withdrawals greater
than 10% of your purchase payments will be subject to a withdrawal charge. This
charge decreases 1% each year. After the 7th year, there is no charge for a
withdrawal. You may also be subject to income tax and a tax penalty if you make
an early withdrawal.
SECTION 8
What Are The Tax Considerations Associated With The Discovery Select Contract?
Your earnings are not taxed until withdrawn. If you take money out during the
accumulation phase, earnings are withdrawn first and are taxed as ordinary
income. If you are younger than age 59 1/2 when you 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 partly a return of your original investment. As a result, that
portion of each payment is not taxable as income. Generally, all amounts
withdrawn from IRA contracts (excluding Roth IRAs) are fully taxable and
subject to the 10% penalty if withdrawn prior to age 59 1/2.
SECTION 9
Other Information
This contract is issued by Pruco Life of New Jersey, a subsidiary of The
Prudential Insurance Company of America.
9
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Summary of Contract Expenses
The purpose of this summary is to help you to understand the costs you will pay
for Discovery Select. This summary includes the expenses of the mutual funds
used by the variable investment options but does not include any premium taxes
that might be applicable in your state.
For More Detailed Information:
More detailed information can be found on page 26 under the section called,
"What Are The Expenses Associated With The Discovery Select Contract?" For more
detailed expense information about the mutual funds, please refer to the
individual fund prospectuses which you will find at the back of this prospectus.
TRANSACTION EXPENSES
Withdrawal Charge (see Note 1 below)
During contract year 1 7%
During contract year 2 6%
During contract year 3 5%
During contract year 4 4%
During contract year 5 3%
During contract year 6 2%
During contract year 7 1%
Transfer Fee (see Note 2 below)
first 12 transfers per year $ 0.00
each transfer after 12 $25.00
Annual Contract Fee and Full Withdrawal Fee (see Note 3 below)
$30.00
ANNUAL ACCOUNT EXPENSES
AS A PERCENTAGE OF THE AVERAGE ACCOUNT VALUE
Mortality and Expense Risk: 1.25%
Administrative Fee: 0.15%
Total: 1.40%
Note 1: As of the beginning of the contract year, you may withdraw up to 10% of
the total purchase payments plus any charge-free amount carried over from the
previous contract year without charge. There is no withdrawal charge on any
amount used to provide income under the Life Annuity with 120 payments (10
years) certain option. (see page 23). Surrender charges are waived when a death
benefit is paid.
Note 2: You will not be charged for transfers made in connection with dollar
cost averaging and auto-rebalancing.
Note 3: This fee is not charged on withdrawals if the value of your contract is
$50,000 or more.
Notes for Annual Mutual Fund Expenses:
These expenses are based on the historical fund expenses for the year ended
December 31, 2000, except as indicated. Fund expenses are not fixed or
guaranteed by the Discovery Select contract and may vary from year to year.
(1) The Prudential Series Fund:
Because this is the first full year of operations for all "SP" Portfolios,
other expenses are estimated based on management projections of non-advisory
fee expenses. Each ''SP'' Portfolio has expense reimbursement in effect, and
the table shows total expenses both with and without these expense
reimbursements. These expense reimbursements are voluntary and may be
terminated at any time.
(2) American Century Variable Portfolios Inc. and T. Rowe Price Funds
Investment Management Fees include ordinary expenses of operating the funds.
(3) Credit Suisse Warburg Pincus Trust and Davis Variable Account Fund, Inc.
Fee waivers and expense reimbursement or credits reduced investment management
fees and other expenses during 2000, but may be discontinued at any time.
(4) Franklin Templeton Variable Insurance Products Trust
The Fund's class 2 distribution plan or "rule 12b-1 plan" is described in the
Fund's prospectus. The manager has agreed in advance to make an estimated
reduction of 0.04% of its fee to reflect reduced services resulting from the
Fund's investment in a Franklin Templeton money fund. This reduction is
required by the Fund's Board of Trustees and an order of the Securities and
Exchange Commission.
(5) Janus Aspen Series
Table reflects expenses based upon expenses for the fiscal year ended December
31, 2000, restated to reflect a reduction in the management fee. All expenses
are shown without the effect of any offset arrangement.
(6) MFS Variable Insurance Trust
An expense offset arrangement with the Fund's custodian resulted in a reduction
in other expenses by 0.01%.
10
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
ANNUAL MUTUAL FUND EXPENSES (AFTER REIMBURSEMENT, IF ANY):
AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS
THIS CHART CONTINUES ON THE NEXT PAGE
11
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Summary of Contract Expenses continued
ANNUAL MUTUAL FUND EXPENSES (CONTINUED) (AFTER REIMBURSEMENT, IF ANY):
AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS
* Reflects the effect of management fee waivers and reimbursement of expenses,
if any. See notes on page 10.
** Each Asset Allocation portfolio invests in shares of other Series Fund
portfolios. The advisory fees for the Asset Allocation Portfolios depicted
above are the product of a blend of the fees of those other Fund Portfolios,
plus a 0.05% annual advisory fee payable to PIFM.
The "Expenses Examples" on the following pages are calculated using the total
actual expenses.
12
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
Expense Examples
These examples will help you compare the fees and expenses of the different
variable investment options offered by Discovery Select. You can also use the
examples to compare the cost of Discovery Select with other variable annuity
contracts.
Example 1: If You Withdraw Your Assets
Example 1 assumes that you invest $10,000 in Discovery Select and that you
allocate all of your assets to one of the variable investment options and
withdraw all your assets at the end of the time period indicated. The example
also assumes that your investment has a 5% return each year and that the mutual
fund's operating expenses remain the same. Your actual costs may be higher or
lower.
Example 2: If You Do Not Withdraw Your Assets
Example 2 assumes that you invest $10,000 in Discovery Select and allocate all
of your assets to one of the variable investment options and do not withdraw
any of your assets at the end of the time period indicated. The example also
assumes that your investment has a 5% return each year and that the mutual
fund's operating expenses remain the same. Your actual costs may be higher or
lower.
On the following page are examples of what your costs would be using these
assumptions.
Notes for Annual Mutual Fund Expenses:
These examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
The charges shown in the 10 year column are the same for Example 1 and Example
2. This is because after 10 years, the withdrawal charges are no longer
deducted by us when you make a withdrawal or when you begin the income phase of
your contract.
If your contract value is less than $50,000, on your contract anniversary (and
upon a surrender), we deduct a $30 fee. The examples use an average number as
the amount of the annual contract fee. This amount was calculated by taking the
total annual contract fees collected in 2000 and then dividing that number by
the total assets allocated to the variable investment options. Based on this
calculation the annual contract fee is included as an annual charge of .023% of
contract value.
Your actual fees will vary based on the amount of your contract and your
specific allocation(s). A table of accumulation unit values of interests in
each variable investment option appears on page 36. Charges for premium taxes
are not reflected. In these examples. Premium taxes may apply depending on the
state where you live.
13
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
EXPENSE EXAMPLES 1 AND 2
THIS CHART CONTINUES ON THE NEXT PAGE
14
PART I DISCOVERY SELECT PROSPECTUS SUMMARY
EXPENSE EXAMPLES 1 AND 2 (CONTINUED)
These examples do not show past or future expenses. Actual expenses for a
particular year may be more or less than shown in the examples.
15
This page intentionally left blank
16
Part II Sections 1-9
Discovery Select Prospectus
17
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
1:
What is the Discovery Select
Variable Annuity?
The Discovery Select Variable Annuity is a contract between you, the owner, and
us, the insurance company, Pruco Life Insurance Company of New Jersey (Pruco
Life of New Jersey, We or Us).
Under our contract or agreement, in exchange for your payment to us, we promise
to pay you a guaranteed income stream that can begin any time after the first
contract anniversary. Your annuity is in the accumulation phase until you
decide to begin receiving annuity payments. The date you begin receiving
annuity payments is the annuity date. On the annuity date, your contract
switches to the income phase.
This annuity contract benefits from tax deferral. Tax deferral means that
you are not taxed on earnings or appreciation on the assets in your contract
until you withdraw money from your contract.
Discovery Select is a variable annuity contract. This means that during the
accumulation phase, you can allocate your assets among 40 variable investment
options as well as 2 guaranteed interest-rate options. If you select a variable
investment option, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the mutual fund associated with that variable investment option. Because the
mutual funds' portfolios fluctuate in value depending upon market conditions,
your contract value can either increase or decrease. This is important, since
the amount of the annuity payments you receive during the income phase depends
upon the value of your contract at the time you begin receiving payments.
As mentioned above, Discovery Select also contains three guaranteed
interest-rate options: a fixed-rate option, a dollar cost averaging option, and
a market-value adjustment option. The fixed-rate option offers an interest rate
that is guaranteed by us for one year and will always be at least 3.0% per
year. The dollar cost averaging option offers an interest-rate that is
guaranteed by us for a selected period during which periodic transfers are made
to selected variable investment options. The market-value adjustment option
guarantees a stated interest rate, generally higher than the fixed-rate option.
However, in order to get the full benefit of the stated interest rate, assets
in this option must be held for a seven-year period.
As the owner of the contract, you have all of the decision-making rights
under the contract. You will also be the annuitant unless you designate someone
else. The annuitant(s) is the person upon whose death during the accumulation
phase, the death benefit is payable. The annuitant is the person who receives
the annuity payments when the income phase begins. The annuitant is also the
person whose life is used to determine how much and how long these payments
will continue. On and after the annuity date, the annuitant is the owner and
may not be changed. The beneficiary becomes the owner when a death benefit is
payable.
The beneficiary is: the person(s) or entity designated to receive any death
benefit if the annuitant(s) dies during the accumulation phase. You may change
the beneficiary any time prior to the annuity date by making a written request
to us. Your request becomes effective when we approve it.
Short Term Cancellation Right or "Free Look"
If you change your mind about owning Discovery Select, 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:
.. Your contract value; and
.. Any fees deducted at the time of sale
18
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
2:
What Investment Options
Can I Choose?
The contract gives you the choice of allocating your purchase payments to any
one or more of 40 variable investment options, as well as three guaranteed
interest-rate options.
The 40 variable investment options invest in mutual funds managed by leading
investment advisors. Each of these mutual funds has a separate prospectus that
is provided with this prospectus. You should read the mutual fund prospectus
before you decide to allocate your assets to the variable investment option
using that fund.
VARIABLE INVESTMENT OPTIONS
Listed below are the mutual funds in which the variable investment options
invest. Depending on the terms of your contract, not all of these options may
be available to you. Each variable investment option has a different investment
objective.
The Prudential Series Fund, Inc.
.. Diversified Bond Portfolio
.. Diversified Conservative Growth Portfolio
.. Equity Portfolio
.. Global Portfolio
.. High Yield Bond Portfolio
.. Money Market Portfolio
.. Prudential Jennison Portfolio (domestic equity)
.. Small Capitalization Stock Portfolio
.. Stock Index Portfolio
.. Value Portfolio (domestic equity) (formerly Equity Income Portfolio)
.. 20/20 Focus Fund (domestic equity)
.. SP Aggressive Growth Asset Allocation Portfolio
.. SP Alliance Technology Portfolio
.. SP Balanced Asset Allocation Portfolio
.. SP Conservative Asset Allocation Portfolio
.. SP Growth Asset Allocation Portfolio
.. SP INVESCO Small Company Growth Portfolio
.. SP Jennison International Growth Portfolio
.. SP Large Cap Value Portfolio
.. SP MFS Capital Opportunities Portfolio
.. SP MFS Mid-Cap Growth Portfolio
.. SP PIMCO Total Return Portfolio
.. SP Prudential U.S. Emerging Growth Portfolio
.. SP Small/Mid Cap Value Portfolio
.. SP Strategic Partners Focused Growth Portfolio
The Prudential Series Fund, Inc. is managed by Prudential Investments Fund
Management LLC ("PIFM"), a Prudential subsidiary, through subadvisers that PIFM
employs by using a manager-of-managers approach. Prudential Investment
Management, Inc., also a Prudential subsidiary, serves as subadviser to the
Diversified Bond Portfolio, the fixed income sleeve of the Diversified
Conservative Growth Portfolio, the High Yield Bond Portfolio, the Money Market
Portfolio, the Small Capitalization Stock Portfolio, and the Stock Index
Portfolio. Jennison Associates LLC, also a Prudential subsidiary, serves as
subadviser to the growth and value sleeves of the Diversified Conservative
Growth Portfolio, the Equity Portfolio, the Global Portfolio, the Prudential
Jennison Portfolio, the Value Portfolio, the 20/20 Focus Portfolio, the SP
Jennison International Growth Portfolio, the SP Prudential U.S. Emerging Growth
Portfolio, and a portion of the SP Strategic Partners Focused Growth Portfolio.
Franklin Advisers, Inc., the Deyfus Corporation and Pacific Investment
Management Company also each manage a portion of the Diversified Conservative
Growth Portfolio. GE Asset Management Incorporated and Salomon Brothers Asset
Management Inc. each manage a portion of the Equity Portfolio. Deutsche Asset
Management Inc. and Victory Capital Management Inc. each manage a portion of
the Value Portfolio. Alliance Capital Management, L.P. serves as subadviser to
the SP Alliance Technology Portfolio and a portion of the assets of the SP
Strategic Partners Focused Growth Portfolio. INVESCO Funds Group, Inc. serves
as subadviser to the SP INVESCO Small Company Growth Portfolio. Fidelity
Management and Research Company serves as subadviser to the SP Large Cap Value
Portfolio and the SP Small/Mid Cap Value Portfolio. Massachu-setts Financial
Services Company serves as subadviser to the SP MFS Capital Opportunities
Portfolio and the SP MFS Mid-Cap Growth Portfolio. Pacific Investment
Management Company serves as subadviser to the SP PIMCO Total Return Portfolio.
Each of the asset allocation portfolios is managed solely by PIFM.
AIM Variable Insurance Funds
.. AIM V.I. Growth and Income Fund
.. AIM V.I. Value Fund
AIM Advisors, Inc. serves as investment adviser to both of these funds.
19
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
2:
What Investment Options Can I Choose? continued
Alliance Variable Products Series Fund, Inc.
.. Alliance Premier Growth Portfolio
Alliance Capital Management L.P. is the investment adviser of the Alliance
Variable Products Series Fund.
American Century Variable Portfolios, Inc.
.. American Century VP Value
American Century Investment Management, Inc. is the investment adviser for
American Century VP Value.
Credit Suisse Warburg Pincus Trust
.. Global Post-Venture Capital Portfolio
Credit Suisse Asset Management, LLC serves as investment adviser and Abbott
Capital Management, L.P. serves as sub-investment advise for that portion of
the Global Post-Venture Capital Portfolio allocated to private limited
partnerships or other investment funds.
Davis Variable Account Fund, Inc.
.. Davis Value Portfolio
Davis Selected Advisers, L.P. is the investment adviser and Davis Selected
Advisers-NY, Inc. is sub-adviser to the Davis Value Portfolio.
Franklin Templeton Variable Insurance Products Trust
.. Franklin Small Cap Fund--Class 2
Franklin Advisers, Inc. is the investment manager for this portfolio of the
Franklin Templeton Variable Insurance Products Trust.
Janus Aspen Series
.. Growth Portfolio
.. International Growth Portfolio
Janus Capital Corporation serves as investment adviser to the Growth Portfolio
and the International Growth Portfolio.
MFS Variable Insurance Trust
.. Emerging Growth Series
.. Research Series (long-term growth and future income)
Massachusetts Financial Services Company, a Delaware corporation, is the
investment adviser to the Emerging Growth Series and the Research Series.
OCC Accumulation Trust
.. Managed Portfolio (equity)
.. Small Cap Portfolio
OpCap Advisors is the investment adviser to the Managed Portfolio and the Small
Cap Portfolio.
T. Rowe Price
.. T. Rowe Price Equity Series, Inc., Equity Income Portfolio
.. T. Rowe Price International Series, Inc., International Stock Portfolio
T. Rowe Price Associates, Inc. is the investment manager for the Equity Income
Portfolio and Rowe Price-Fleming International, Inc. is the investment manager
for the International Stock Portfolio.
Except for the Prudential Series Fund Inc., we are paid by the fund or an
affiliate of each fund for administrative and other services that we provide.
The amount we receive is based on an annual percentage of the average assets of
Discovery Select invested in the fund held by the associated variable
investment option.
FIXED INTEREST-RATE OPTIONS
We offer two interest-rate options: a one-year fixed-rate option, and a
market-value adjustment option. We set a one year guaranteed annual interest
rate that is always available for the one-year 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. Transfers are not permitted to the DCA Option. You may
have money allocated in more than one interest rate period at the same time.
This could result in your money earning interest at different rates and each
interest rate period maturing at a different time. While these interest rates
may change from time to time, the minimum rate will never be less than 3.0%.
Payments that you apply to the fixed interest-rate option become part of
Pruco Life of New Jersey's general assets. As a result, the strength of the
interest rate guarantee is based on the overall financial strength of Pruco
Life of New Jersey. If Pruco Life of New Jersey suffered a material financial
set back, the ability of Pruco Life of New Jersey to meet its financial
obligations could be affected.
20
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
Market-Value Adjustment
If you transfer or withdraw assets or annuitize from the market-value
adjustment option before an interest rate period is over, the assets will be
subject to a market value adjustment. The market-value adjustment may increase
or decrease the amount being withdrawn or transferred and may be substantial.
The adjustment, whether up or down will never be greater than 40%. The amount
of the market-value adjustment is based on the difference between the:
1) Guaranteed interest rate for the amount you are withdrawing or transferring;
and
2) Interest rate that is in effect on the date of the withdrawal or transfer.
The amount of time left in the interest rate period is also a factor. You
will find a detailed description of how the market-value adjustment is
calculated on Page 39 of this prospectus.
TRANSFERS AMONG OPTIONS
You can transfer money among the variable investment options and the fixed
interest-rate options. Your transfer request may be made by telephone,
electronically, or in paper form to the Prudential Annuity Service Center
(electronic transfer capability will become available during 2001). Only two
transfers per month may be made by telephone or electronically. After that, all
transfer requests must be in writing with an original signature. We have
procedures in place to confirm that instructions received by telephone or
electronically are genuine. We will not be liable for following telephone or
electronic instructions that we reasonably believe to be genuine. Your transfer
request will take effect at the end of the business day on which it was
received. Our business day usually closes at 4:00 p.m. Eastern time.
You can make transfers out of a fixed interest-rate option, only during the
30-day period following the end of an interest rate period. If you transfer
money from a market-value adjustment option after the 30-day period has ended,
the money will be subject to a market-value adjustment.
During the contract accumulation phase, you can make 12 transfers each
contract year, among the investment options, without charge. If you make more
than 12 transfers in one contract year, you will be charged $25 for each
additional transfer. (Dollar Cost Averaging and Auto-Rebalancing transfers do
not count toward the 12 free transfers per year.)
OTHER AVAILABLE FEATURES
Dollar Cost Averaging Feature
This feature allows you to systematically transfer either a fixed dollar amount
or a percentage out of any variable investment option or the one-year fixed
interest-rate option and into any variable investment option(s). You can
transfer money to more than one variable investment option. The investment
option used for the transfers is designated as the DCA account. If this feature
is elected, your assets are not allocated to the DCA Option. You can have these
automatic transfers made from the DCA account monthly, quarterly, semiannually
or annually. By allocating amounts on a regular schedule instead of allocating
the total amount at one particular time, you may be less susceptible to the
impact of market fluctuations. Of course, there is no guarantee that dollar
cost averaging will ensure a profit or protect against a loss in declining
markets.
Transfers must be at least $100 from your DCA account. After that, transfers
will continue automatically until the entire amount in your DCA account has
been transferred or until you tell us to discontinue the transfers. If your DCA
account balance drops below $100, the entire remaining balance of the account
will be transferred on the next transfer date. You can allocate subsequent
purchase payments to re-open the DCA account at any time.
Your transfers will be made 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.
21
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
2:
What Investment Options Can I Choose? continued
Any transfers you make because of dollar cost averaging are not counted
toward the 12 free transfers you are allowed per year. This feature is
available only during the contract accumulation phase.
Asset Allocation Program
We recognize the value of having advice when deciding on the allocation of your
money. If you choose to participate in the Asset Allocation Program, your
financial professional 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.
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 or to change allocations by
selecting the Auto-Rebalancing feature. The fixed interest-rate option and the
DCA account cannot participate in this feature.
Your rebalancing will be done monthly, quarterly, semiannually or annually
based on your choice. The rebalancing will be done 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-Rebalanc-ing are not counted toward
the 12 free transfers you are allowed per year. This feature is available only
during the contract accumulation phase. If you choose auto-rebalancing and
dollar cost averaging, auto-rebalanc-ing will take place after the transfers
from your DCA account.
VOTING RIGHTS
We are the legal owner of the shares in the mutual funds associated with the
variable investment options. However, we vote the shares of the mutual funds
according to voting instructions we receive from contractowners. We will mail
you a proxy which is a form you need to complete and return to us to tell us
how you wish us to vote. When we receive those instructions, we will vote all
of the shares we own on your behalf in accordance with those instructions. We
will vote the shares for which we do not receive instructions, and shares that
we own in our own right, in the same proportion as the shares for which
instructions are received. We may change the way your voting instructions are
calculated if it is required by federal or state regulation.
SUBSTITUTION
We may substitute one or more of the mutual funds used by the variable
investment options. We may also cease to allow investments in existing funds.
We would do this only if events such as investment policy changes or tax law
changes make the mutual fund unsuitable. We would not do this without the
approval of the Securities and Exchange Commission and necessary state
insurance department approvals. You will be given specific notice in advance of
any substitution we intend to make.
22
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
3:
What Kind of Payments Will I Receive During the Income Phase? (Annuitization)
PAYMENT PROVISIONS
We can begin making annuity payments any time after the first contract
anniversary. Annuity payments must begin no later than the annuitant's 90th
birthday.
We make the income plans described below available at any time before the
annuity date. These plans are called annuity options. During the income phase,
all of the annuity options under this contract are fixed annuity options. This
means that your participation in the variable investment options ends on the
annuity date. If an annuity option is not selected by the annuity date, the
Interest Payment Option (Option 3, described below) will automatically be
selected. Once the annuity payments begin, the annuity option can not be
changed.
Option 1
Annuity Payments for a Fixed Period
Under this option, we will make equal payments for the period chosen, up to 25
years. The annuity payments may be made monthly, quarterly, semiannually, or
annually for as long as the annuitant is alive. If the annuitant dies during
the income phase, a lump sum payment will be made to the beneficiary. The
amount of the lump sum payment is determined by calculating the present value
of the unpaid future payments. This is done by using the interest rate used to
compute the actual payments. The interest rate used will always be at least
3.50% a year. For payment periods of 5 years or more, we will waive any
withdrawal charges that otherwise would have been applied.
Option 2
Life Annuity with 120 Payments (10 Years) Certain
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 the present value of the remaining annuity payments in one lump sum
unless we are specifically instructed that the remaining monthly 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 used will
always be at least 3.50% a year.
Option 3
Interest Payment Option
Under this option, we hold all or a portion of your contract value in order to
accumulate interest. We can make interest payments on a monthly, quarterly,
semiannual, or annual basis or allow the interest to accrue on your contract
assets. If an annuity option is not selected by the annuity date, this is the
option we will automatically select for you. Under this option, we will pay you
interest at an effective rate of at least 3.0% a year. Under this option, all
gains in the annuity will be taxable as of the annuity date.
This option is not available if your contract is held in an Individual
Retirement Account.
Option 4
Other Annuity Options
We currently offer a variety of other annuity options not described above. At
the time annuity payments are chosen, we may make available any of the fixed
annuity options that are offered at your annuity date.
You should be aware that depending on your contract date and the annuity
option you choose, you may have to pay withdrawal charges.
23
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
4:
What is the
Death Benefit?
The death benefit feature protects the value of the contract for the
beneficiary.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued, unless
you change it at a later date. Unless an irrevocable beneficiary has been
named, you can change the beneficiary at any time before the annuitant or last
surviving annuitant dies.
CALCULATION OF THE DEATH BENEFIT
If the annuitant (or the last surviving annuitant, if there are co-annuitants)
dies during the accumulation phase, we will, upon receiving appropriate proof
of death and any other needed documentation, pay a death benefit to the
beneficiary designated by the contractowner. If death is prior to age 80, the
beneficiary will receive the greater of the following (as of the time we
receive appropriate proof of death):
.. Current value of your contract; or
.. Guaranteed Minimum Death Benefit--This is the highest value of the contract
on any contract anniversary date. This is called the step-up value. Between
anniversary dates, the step-up value is only increased by additional
purchase payments and reduced proportionally by withdrawals.
If death occurs on or after age 80, the beneficiary will receive the greater
of: 1) the current contract value as of the date that due proof of death is
received, and 2) the Guaranteed Minimum Death benefit as of age 80, increased
by additional purchase payments, and reduced proportionally by withdrawals. For
this purpose, an annuitant is deemed to reach age 80 on the contract
anniversary on or following the annuitant's actual 80th birthday.
If the sole or older annuitant is age 80 or older at the time the contract
is issued, upon death, the beneficiary will receive, as of the date that due
proof of death is received, the greater of: 1) current contract value; or 2)
the total purchase payments reduced proportionally by withdrawals.
Here is an example of a proportional reduction:
If an owner withdrew 50% of a contract valued at $100,000 and if the step-up
value was $80,000, the new step-up value following the withdrawal would be
$40,000 or 50% of what it had been prior to the withdrawal.
If the contractowner and annuitant are not the same, the death benefit is
payable only in the event of the death of a sole annuitant or last surviving
annuitant, not the death of the contractowner.
This death benefit was enhanced in January, 1998, to provide for the
Guaranteed Minimum Death Benefit. Certain contractowners must have elected an
endorsement in order for this enhanced death benefit to apply. See the
Statement of Additional Information (SAI) for details.
24
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
5:
How Can I Purchase a
Discovery Select Contract?
PURCHASE PAYMENTS
A purchase payment is the amount of money you give us to purchase the contract.
The minimum purchase payment is $10,000. You can make additional purchase
payments of at least $1,000 or more at any time during the accumulation phase.
You must get our prior approval for any purchase payments over $5 million.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, we will allocate your purchase payment among the
variable investment options and the fixed interest-rate options based on the
percentages you choose. The percentage of your allocation to a specific
investment option can range in whole percentages from 0% to 100%. If, after the
initial invested purchase payment, we receive a purchase payment without
allocation instructions, we will allocate the corresponding invested purchase
payment in the same proportion as your most recent purchase payment (unless you
directed us to allocate that purchase payment on a one-time-only basis). (If
you allocated all or part of your initial payment to the DCA Fixed Option and
do not change your allocation instructions, we will treat your allocation
instructions for the DCA Fixed Option as part of your allocation instructions
for all subsequent purchase payments.) You may submit an allocation change
request at any time. Contact the Prudential Annuity Service Center for details.
We will credit the initial purchase payment to your contract within two
business days from the day on which we receive your payment 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. We will generally credit subsequent purchase payments
received in good order after the close of a business day on the following
business day.
CALCULATING CONTRACT VALUE
The value of the variable portion of your contract will go up or down depending
on the investment performance of the variable investment option(s) you choose.
To determine the value of your contract, 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; and
3) Dividing this amount by the number of outstanding accumulation units.
When you make a purchase payment, we credit your contract with accumulation
units relating to the variable investment options you have chosen. The number
of accumulation units credited to your contract is determined by dividing the
amount of the purchase payment allocated to an investment option by the unit
price of the accumulation unit for that investment option. We calculate the
unit price for each investment option after the New York Stock Exchange closes
each day and then credit your contract. The value of the accumulation units can
increase, decrease, or remain the same from day to day. The Accumulation Unit
Values chart provided in page 36 to this prospectus gives you more detailed
information about the accumulation units of the variable investment options.
We cannot guarantee that the value of your contract will increase or that it
will not fall below the amount of your total purchase payments. However, we do
guarantee a minimum interest rate of 3.0% a year on that portion of the
contract value allocated to the fixed interest-rate options.
25
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
6:
What are the Expenses Associated with the
Discovery Select Contract?
There are charges and other expenses associated with the contract that reduce
the return on your investment. These charges and expenses are described below.
INSURANCE CHARGES
Each day, we makes a deduction for its insurance charges. The insurance charges
have two parts:
1) Mortality and expense risk charge
2) Administrative expense charge
1) Mortality and Expense Risk Charge
The mortality risk charge is for assuming the risk that the annuitant(s) will
live longer than expected based on our life expectancy tables. When this
happens, we pay a greater number of annuity payments. The expense risk charge
is for assuming that the current charges will be insufficient in the future to
cover the cost of administering the contract.
The mortality and expense risk charge is equal, on an annual basis, to 1.25%
of the daily value of the contract invested in the variable investment options,
after expenses have been deducted. This charge is not assessed against amounts
allocated to the interest-rate options.
If the charges under the contract are not sufficient, then we will bear the
loss. We do, however, expect to profit from this charge. The mortality and
expense risk charge cannot be increased. Any profits made from this charge may
be used by us to pay for the costs of distributing the contracts.
2) Administrative Expense Charge
This charge is for the expenses associated with the administration of the
contract. The administration of the contract includes preparing and issuing the
contract, establishing and maintaining contract records, issuing confirmations
and annual reports, personnel costs, legal and accounting fees, filing fees,
and systems costs.
This charge is equal, on an annual basis, to 0.15% of the daily value of the
contract invested in the variable investment options, after expenses have been
deducted.
ANNUAL CONTRACT FEE
During the accumulation phase, if your contract value is less than $50,000, we
will deduct $30 per contract year (this fee may differ in certain states). This
annual contract fee is used for administrative expenses and cannot be
increased. The $30 charge will be deducted proportionately from each of the
contract's investment options. This charge will also be deducted when you
surrender your contract if your contract value is less than $50,000.
WITHDRAWAL CHARGE
During the accumulation phase you can make withdrawals from your contract. When
you make a withdrawal, money will be taken first from your purchase payments
for purposes of determining withdrawal charges. When your purchase payments
have been used up, then we will take the money from your earnings. You will not
have to pay any withdrawal charge when you withdraw your earnings.
The withdrawal charge is for the payment of the expenses involved in selling
and distributing the contracts, including sales commissions, printing of
prospectuses, sales administration, preparation of sales literature and other
promotional activities. If the contract is sold under circumstances that reduce
the sales expenses, we may reduce or eliminate the withdrawal charge. For
example, a large group of individuals purchasing contracts or an individual who
already has a relationship with us may receive such a reduction.
You can withdraw up to 10% of your total purchase payments each contract
year without paying a withdrawal charge. This amount is referred to as the
"charge-free amount." If any of the charge-free amount is not used during a
contract year, it will be carried over to the next contract year. During the
first seven contract years, if your withdrawal of purchase payments is more
than the charge-free amount, a withdrawal charge will be applied. This charge
is based on your contract date.
26
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
The following table shows the percentage of withdrawal charges that would apply:
Percentage of Applicable Withdrawal Charges
- -------------------------------------------
During contract year 1 7%
During contract year 2 6%
During contract year 3 5%
During contract year 4 4%
During contract year 5 3%
During contract year 6 2%
During contract year 7 1%
After that 0%
Note: As of the beginning of the contract year, you may withdraw up to 10%
of the total purchase payments plus any charge-free amount carried over from
the previous contract year without charge. There is no withdrawal charge on any
amount used to provide income under the Life Annuity with 120 Payments (10
years) Certain Option or for a fixed period of 5 years or more. Surrender
charges are waived when a death benefit is paid. There will be a reduction in
the withdrawal charge for contracts issued to contractowners whose age is 84
and older.
TAXES ATTRIBUTABLE TO PREMIUM
There are federal, state and local premium based taxes applicable to your
purchase payment. We are responsible for the payment of these taxes and may
make a deduction from the value of the contract to pay some or all of these
taxes. Some of these taxes are due when the contract is issued, others are due
when the annuity payments begin. It is our current practice not to deduct a
charge for state premium taxes until annuity payments begin. In the states that
impose a premium tax, the current rates range up to 3.5%. New York does not,
however, currently charge premium taxes. It is also our current practice not to
deduct a charge for the federal deferred acquisition costs paid by us that are
based on premium received. However, we reserve the right to charge the
contractowner in the future for any such deferred acquisition costs and any
federal, state or local income, excise, business or any other type of tax
measured by the amount of premium received by us.
TRANSFER FEE
You can make 12 free transfers every year. If you make more than 12 transfers
in a year (excluding Dollar Cost Averaging and Auto-Rebalancing), we will
deduct a transfer fee of $25 for each additional transfer. We will deduct the
transfer fee pro-rata from the investment options from which the transfer is
made. The transfer fee is deducted before the market value adjustment, if any,
is calculated.
COMPANY TAXES
We will pay the taxes on the earnings of the Separate Account. We are not
currently charging the Separate Account for taxes. We will periodically review
the issue of charging the Separate Account for these taxes, and may impose such
a charge in the future.
27
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
7:
How Can I
Access My Money?
You can access your money by:
.. Making a withdrawal (either partial or complete); or
.. electing to receive annuity payments during the income phase.
YOU CAN MAKE WITHDRAWALS ONLY DURING THE ACCUMULATION PHASE
When you make a complete withdrawal, you will receive the value of your
contract, less any applicable charges. We will calculate the value of your
contract, and charges, if any, as of the date we receive your request in good
order at the Prudential Annuity Service Center.
Unless you tell us otherwise, any partial withdrawal will be made
proportionately from all of the affected investment options and interest-rate
options you have selected. You will need our consent to make a partial
withdrawal if the requested withdrawal is less than $500.
We will generally pay the withdrawal amount, less any required tax
withholding, within seven days after we receive a properly completed withdrawal
request. We will deduct applicable charges, and apply a market-value
adjustment, if any, from the assets in your contract.
Income taxes, tax penalties and certain restrictions may apply to any
withdrawal you make. For a more complete explanation, see Section 8 of this
prospectus and the tax discussion in the Statement of Additional Information.
AUTOMATED WITHDRAWALS
We offer an Automated Withdrawal feature. This feature enables you to receive
periodic withdrawals in monthly, quarterly, semiannual or annual intervals. We
will process your withdrawals at the end of the business day at the intervals
you specify. We will continue at these intervals until you tell us otherwise.
You can make withdrawals from any designated investment option or
proportionally from all investment options. Market-value adjustments may apply.
Withdrawal charges may be deducted if the withdrawals in any contract year are
more than the charge-free amount. The minimum automated withdrawal amount you
can make is $250.
Income taxes, tax penalties and certain restrictions may apply to automated
withdrawals. For a more complete explanation, see Section 8 of this prospectus
and the tax discussion in the Statement of Additional Information.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required 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 of shares
of the mutual funds are not feasible or we cannot reasonably value the
accumulation units; or
.. The Securities and Exchange Commission, by order, permits suspension or
postponement of payments for the protection of owners.
We expect to pay the amount of any withdrawal or transfer made from the fixed
interest-rate options promptly upon request.
28
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
8:
What are the Tax Considerations Associated with the
Discovery Select Contract?
The tax considerations associated with the Discovery Select contact vary
depending on whether the contract is (i) owned by an individual and not
associated with a tax-favored retirement plan, or (ii) held under a tax-favored
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. It is not intended as tax advice. A
qualified tax adviser should be consulted for complete information and advice.
CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX FAVORED RETIREMENT
PLANS)
Taxes Payable by You
We believe the contract is an annuity contract for tax purposes. Accordingly,
as a general rule, you should not pay any tax until you receive money under the
contract.
Generally, annuity contracts issued by the same company (and affiliates) to
you during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
Taxes on Withdrawals and Surrender
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income, rather
than as return of purchase payments, until all gain has been withdrawn.
If you assign or pledge all or part of your contract as collateral for a
loan, the part assigned will be treated as a withdrawal. Also, if you elect the
interest payment option, you 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 the gain in the contract. This rule does not
apply if you transfer the contract to your spouse or under most circumstances
if you transfer the contract incident to divorce.
Taxes on Annuity Payments
A portion of each annuity payment you receive will be treated as a partial
return of your purchase payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your purchase payments (less any amounts previously
received tax-free) and the denominator of which is the total expected payments
under the contract.
After the full amount of your purchase payments have been recovered
tax-free, the full amount of the annuity payments will be taxable. If annuity
payments stop due to the death of the annuitant before the full amount of your
purchase payments have been recovered, a tax deduction may be allowed for the
unrecovered amount.
Tax Penalty on Withdrawals and Annuity Payments
Any taxable amount you receive under your contract may be subject to a 10
percent tax penalty. Amounts are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled;
.. the amount paid or received is in the form of level annuity payments not
less frequently than annually under a lifetime annuity; and
.. the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
If you modify the lifetime annuity payment stream (other than as a result of
death or disability) before you reach age 59 1/2 (or before the end of the five
year period beginning with the first payment and ending after you reach age
59 1/2), your tax for the year of modification will be increased by the penalty
tax that would have been imposed without the exception, plus interest for the
deferral.
29
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
8:
Tax Considerations Associated with the Discovery
Select Contract continued
Taxes Payable by Beneficiaries
All of the death benefit options are subject to income tax to the extent the
distribution exceeds the adjusted basis in the contract and the full value of
the contract and the full value of the death benefit is included in the owner's
estate. Generally, the same tax rules apply to amounts received by your
beneficiary as those set forth above with respect to you. The election of an
annuity payment option instead of a lump sum death benefit may defer taxes.
Certain minimum distribution requirements apply upon your death, as discussed
further below.
Withholding of Tax from Distributions
Taxable amounts distributed from your annuity contracts are subject to tax
withholding. You may generally elect not to have tax withheld from your
payments. These elections must be made on the appropriate forms that we provide.
Annuity Qualification
Diversification and Investor Control In order to qualify for the tax rules
applicable to annuity contracts described above, the contract must be an
annuity contract for tax purposes. This means that the assets underlying the
annuity contract must be diversified, according to certain rules. It also means
that we, and not you as the contractowner, must have sufficient control over
the underlying assets to be treated as the owner of the underlying assets for
tax purposes. We believe these rules, which are further discussed in the
Statement of Additional Information, will be met.
Required Distributions Upon Your Death Upon your death (or the death of a joint
owner, if earlier), certain distributions must be made under the contract. The
required distributions depend on whether you die on or before you start taking
annuity payments under the contract or after you start taking annuity payments
under the contract.
If you die on or after the annuity date, the remaining portion of the
interest in the contract must be distributed at least as rapidly as under the
method of distribution being used as of the date of death.
If you die before the annuity date, the entire interest in the contract must
be distributed within 5 years after the date of death. However, if an annuity
payment option is selected by your designated beneficiary and if annuity
payments begin within 1 year of your death, the value of the contract may be
distributed over the beneficiary's life or a period not exceeding the
beneficiary's life expectancy. Your designated beneficiary is the person to
whom ownership of the contract passes by reason of death, and must be a natural
person.
If any portion of the contract is payable to (or for the benefit of) your
surviving spouse, such portion of the contract may be continued with your
spouse as the owner.
Changes in the Contract We reserve the right to make any changes we deem
necessary to assure that the contract qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contractowners and you will be
given notice to the extent feasible under the circumstances.
Additional Information
You should refer to the Statement of Additional Information if:
.. The contract is held by a corporation or other entity instead of by an
individual or as agent for an individual.
.. Your contract was issued in exchange for a contract containing purchase
payments made before August 14, 1982.
.. You are a nonresident alien.
.. You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
.. You wish additional information on withholding taxes.
CONTRACTS HELD BY TAX FAVORED 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),
30
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
408(b) and 408A of the Code. At some future time we may allow the contract to
be purchased in connection with other retirement arrangements which are also
entitled to favorable federal income tax treatment ("tax favored plans"). These
other tax favored plans include:
.. Simplified employee pension plans ("SEPs") under Section 408(k) of the Code;
.. Saving incentive match plans for employees-IRAs ("SIMPLE-IRAs") under
Section 408(p) of the Code; and
.. Tax-deferred annuities ("TDAs") under Section 403(b) of the Code.
This description assumes that (i) we will be offering this to both IRA and
non-IRA tax favored plans, and (ii) you have satisfied the general 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.
IRAs If you buy a contract for use as an IRA, we will provide you a copy of the
prospectus and the contract. The IRA Disclosure Statement on page 41 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 greater, the amount credited under the contract,
calculated as of the valuation period that we receive this cancellation notice).
Contributions Limits/Rollovers: Because of the way the contract is designed,
you may only purchase a contract for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan or transfer from another IRA. You must
make a minimum initial payment of $10,000 to purchase a contract. This minimum
is greater than the maximum amount of any annual contribution you may make to
an IRA (which is generally $2,000/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 be able subsequently to "roll over" the
contract funds originally derived from a qualified retirement plan into another
Section 401(a) plan or TDA (although you may be able to transfer the funds to
another IRA).
Required Provisions: Contracts that are IRAs (or endorsements that are part
of the contract) must contain certain provisions:
.. You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree
of divorce);
.. Your rights as owner are non-forfeitable;
.. You cannot sell, assign or pledge the contract, other than to us;
.. The annual premium you pay cannot be greater than $2,000 (which does not
include any rollover amounts);
.. The date on which annuity payments must begin cannot be later than the
April 1st of the calendar year after the calendar year you turn age 70 1/2;
and
.. Death and annuity payments must meet "minimum distribution requirements"
(described below).
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As taxable
income, these distributions are subject to the general tax withholding rules
described earlier. In addition to this normal tax
31
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
8:
Tax Considerations Associated with the Discovery Select Contract continued
liability, you may also be liable for the following, depending on your actions:
.. A 10% "early distribution penalty" (described below);
.. Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
.. Failure to take a minimum distribution (also generally described below).
SEPs SEPs are a variation on a standard IRA, and contracts issued to a SEP must
satisfy the same general requirements described under IRAs (above). There are,
however, some differences:
.. If you participate in a SEP, you generally do not include into income any
employer contributions made to the SEP on your behalf up to the lesser of
(a) $35,000 (in 2001) or (b) 15% of the employee's earned income (not
including the employer contribution amount as "earned income" for these
purposes). However, for these purposes, compensation in excess of certain
limits established by IRS will not be considered. In 2001, this limit is
$170,000;
.. SEPs must satisfy certain participation and nondiscrimination requirements
not generally applicable to IRAs; and
.. Some SEPs for small employers permit salary deferrals (up to $10,500 in
2001) with the employer making these contributions to the SEP. However, no
new "salary reduction" or "SAR-SEPs" can be established after 1996.
You will also be provided the same information, and have the same "free
look" period, as you would have if you were purchasing the contract for a
standard IRA.
SIMPLE-IRAs SIMPLE-IRAs are another variation on the standard IRA, available to
small employers (under 100 employees, on a "controlled group" basis) that do
not offer other tax favored plans. SIMPLE-IRAs are also subject to the same
basic IRA requirements with the following exceptions:
.. Participants in a SIMPLE-IRA may contribute up to $6,500 (in 2001,
indexed), as opposed to the usual $2,000 limit, and employer contributions
may also be provided as either a match (up to 3% of your compensation); and
.. SIMPLE -IRAs are not subject to the SEP nondiscrimination rules.
TDAs You may own a TDA generally if you are either an employer or employee of a
tax-exempt organization (as defined under Code Section 501(c)(3)) or a public
educational organization, you may make contributions to a TDA so long as the
employee's rights to the annuity are nonforfeitable. Contributions to a TDA,
and any earnings, are not taxable until distribution. You may also make
contributions to a TDA under a salary reduction agreement, generally up to a
maximum of $10,500 (2001, indexed). Further, you may roll over TDA amounts to
another TDA or an IRA.
A contract may only qualify as a TDA if distributions (other than
"grandfathered" amounts held as of December 31, 1988) may be made only on
account of:
.. Your attainment of age 59 1/2;
.. Your severance of employment;
.. Your death;
.. Your total and permanent disability; OR
.. Hardship (under limited circumstances, and only related to salary deferrals
and any earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by
April 1st of the calendar year after the calendar year you turn age 70 1/2 or
retire, whichever is later.
These distribution limits do not apply either to transfers or exchanges of
investments under the contract, or to any "direct transfer" of your interest in
the contract to another TDA or to a mutual fund "custodial account" described
under Code Section 403(b)(7).
Employer contributions to TDAs are subject to the same general contribution,
nondiscrimination, and minimum participation rules applicable to "qualified"
retirement plans.
Minimum Distribution Requirements and Payment Option
If you hold the contract under an IRA (or other tax-favored plan), IRS minimum
distribution requirements must be satisfied. This means that payments must
start by April 1 of the year after the year you reach age 70 1/2 and must be
made for each year thereafter. The
32
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
amount of the payment must at least equal the minimum required under the IRS
rules. Several choices are available for calculating the minimum amount,
including a new method permitted under IRS rules released in January 2001. 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% IRS penalty tax on the
amount of any minimum distribution not made in a timely manner.
You can use the Minimum Distribution option to satisfy the IRS minimum
distribution requirements for this contract without either beginning annuity
payments or surrendering the contract. We will send you a check for this
minimum distribution amount, less any other partial withdrawals that you made
during the year. Please note that the Minimum Distribution option may need to
be modified after 2001 to satisfy recently announced changes in IRS rules.
Penalty for Early Withdrawals
You may owe a 10% tax penalty on the taxable part of distributions received
from an IRA, SEP, SIMPLE-IRA (which may increase to 25%), Roth IRA, TDA or
qualified retirement plan before you attain age 59 1/2.
There are only limited exceptions to this tax, and you should consult your tax
adviser for further details.
Withholding
The Code requires a mandatory 20% federal income tax withholding for certain
distributions from a TDA or qualified retirement plan, unless the distribution
is an eligible rollover contribution that is "directly" rolled into another
qualified plan, IRA (including the IRA variations described above) or TDA. For
all other distributions, unless you elect otherwise, we will withhold federal
income tax from the taxable portion of such distribution at an appropriate
percentage. The rate of withholding on annuity payments where no mandatory
withholding is required is determined on the basis of the withholding
certificate that you file with us. If you do not file a certificate, we will
automatically withhold federal taxes on the following basis:
.. For any annuity payments not subject to mandatory withholding, you will
have taxes withheld by us as if you are a married individual, with 3
exemptions; and
.. For all other distributions, you will be withheld 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
prevents a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from receiving
any benefit from any party dealing with the plan, as a result of the sale of
the contract.
Administrative exemptions under ERISA generally permit the sale of
insurance/annuity products to plans, provided that certain information is
disclosed to the person purchasing the contract. This information has to do
primarily with the fees, charges, discounts and other costs related to the
contract, as well as any commissions paid to any agent selling the contract.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found under "What Are the Expenses Associated with the
Discovery Select Contract" starting on page 26. Information about sales
representatives and commissions may be found under "Other Information" and
"Sale and Distribution of the Contract" on page 34.
In addition, other relevant information required by the exemptions is
contained in the contract and accompanying documentation. Please consult your
tax advisor if you have any additional questions.
Additional Information
For additional information about the requirements of federal tax law applicable
to tax favored plans, see the "IRA Disclosure Statement" on page 41.
33
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
9:
Other
Information
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey is a stock life insurance company
organized in 1982 under the laws of the State of New Jersey. Pruco Life of New
Jersey is licensed to sell life insurance and annuities in the states of New
Jersey and New York and therefore is subject to the insurance laws and
regulations of those states where it is licensed to do business. Pruco Life of
New Jersey is a wholly-owned subsidiary of Pruco Life Insurance Company, which
is a wholly-owned subsidiary of The Prudential Life Insurance Company of
America (Prudential), a mutual insurance company founded in 1875 under the laws
of the State of New Jersey.
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. The
most recent annual report is contained in the SAI. While Pruco Life of New
Jersey's annual report is not ordinarily mailed to contractholders, you can
obtain a copy at no cost by calling us at our number listed on the cover. This
information, together with all the more current reports filed with the SEC as
required by section 15 of the Exchange Act of 1934, is legally a part of this
prospectus.
Pruco Life is a wholly-owned subsidiary of The Prudential Insurance Company
of America ("Prudential"), a mutual insurance company founded in 1875 under the
laws of the State of New Jersey. Prudential is currently pursuing reorganizing
itself into a stock life insurance company through a process known as
"demutualization". On July 1, 1998, legislation was enacted in New Jersey that
would permit this conversion to occur and that specified the process for
conversion. On December 15, 2000, the Board of Directors adopted a plan of
reorganization pursuant to that legislation and authorized management to submit
an application to the New Jersey Commissioner of Banking and Insurance for
approval of the plan. The application was submitted on March 14, 2001. However,
demutualization is a complex process and a number of additional steps must be
taken before the demutualization can occur, including a public hearing, voting
by qualified policyholders, and regulatory approval. Prudential is planning on
completing this process in 2001, but there is no certainty that the
demutualization will be completed in this timeframe or that the necessary
approvals will be obtained. Also it is possible that after careful review,
Prudential could decide not to demutualize or could decide to delay its plans.
As a general rule, the plan of reorganization provides that, in order for
policies or contracts to be eligible for compensation in the demutualization,
they must have been in force on the date the Board of Directors adopted the
plan, December 15, 2000. If demutualization does occur, all the guaranteed
benefits described in your policy or contract would stay the same.
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 contracts. The Separate Account was established under
New Jersey law on May 20, 1996, and is registered with the U.S. Securities and
Exchange Commission under the Investment Company Act of 1940, as a unit
investment trust, which is a type of investment company. The assets of the
Separate Account are held in the name of Pruco Life of New Jersey and legally
belong to us. These assets are kept separate from all of our other assets and
may not be charged with liabilities arising out of any other business we may
conduct. More detailed information about Pruco Life of New Jersey, including
its audited financial statements, is provided in the Statement of Additional
Information.
SALE AND DISTRIBUTION OF THE CONTRACT
Prudential Investment Management Services LLC ("PIMS"), 100 Mulberry Street,
Newark, New Jersey 07102-4077, acts as the distributor of the contracts. PIMS
is a wholly-owned subsidiary of Prudential and is a limited liability
corporation organized under Delaware
34
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
law in 1996. It is a registered broker-dealer under the Securities Exchange Act
of 1934 and a member of the National Association of Securities Dealers, Inc. We
pay the broker-dealer whose registered representatives sell the Contract either:
.. a commission of up to 6.25% of your Purchase Payments; or
.. a combination of a commission on Purchase Payments and a "trail" commission
-- which is a commission determined as a percentage of your Contract Value
that is paid periodically over the life of your Contract.
The commission amount quoted above is the maximum amount which is paid. In
most circumstances, the registered representative who sold the contract will
receive significantly less.
From time to time, Prudential or its affiliates may offer and pay non-cash
compensation to registered representatives who sell the Contract. For example,
Prudential or an affiliate may pay for a training and education meeting that is
attended by registered representatives of both Prudential-affiliated
broker-dealers and independent broker-dealers. Prudential and its affiliates
retain discretion as to which broker-dealers to offer non-cash (and cash)
compensation arrangements, and will comply with NASD rules and other pertinent
laws in making such offers and payments. Our payment of cash or non-cash
compensation in connection with sales of the Contract does not result directly
in any additional charge to you.
ASSIGNMENT
You can assign the contract at any time during your lifetime. We will not be
bound by the assignment until we receive written notice. We will not be liable
for any payment or other action we take in accordance with the contract if that
action occurs before we receive notice of the assignment. An assignment, like
any other change in ownership, may trigger a taxable event.
If the contract is issued under a qualified plan, there may be limitations
on your ability to assign the contract. For further information please speak to
your financial professional.
FINANCIAL STATEMENTS
The financial statements of the Separate Account associated with Discovery
Select are included in the Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Contents:
.. Company
.. Experts
.. Litigation
.. Legal Opinions
.. Principal Underwriter
.. Determination of Accumulation Unit Values
.. Performance Information
.. Comparative Performance Information
.. Further Information about the Death Benefit
.. Federal Tax Status
.. 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
contractholder 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 1-877-778-5008.
35
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
Accumulation Unit Values
ACCUMULATION UNIT VALUES: AS A PERCENTAGE OF EACH FUND'S AVERAGE DAILY NET
ASSETS
THIS CHART CONTINUES ON THE NEXT PAGE
36
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
ACCUMULATION UNIT VALUES (CONTINUED): AS A PERCENTAGE OF EACH FUND'S AVERAGE
DAILY NET ASSETS
THIS CHART CONTINUES ON THE NEXT PAGE
37
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
Accumulation Unit Values continued
ACCUMULATION UNIT VALUES (CONTINUED): AS A PERCENTAGE OF EACH FUND'S AVERAGE
DAILY NET ASSETS
* Commencement of Business
38
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
Market-Value
Adjustment Formula
MARKET-VALUE ADJUSTMENT FORMULA
The Market-Value Adjustment, which is applied to withdrawals and transfers made
at any time other than the 30-day period following the end of an interest rate
period, involves three amounts:
1) The number of whole months remaining in the existing interest rate period.
2) The guaranteed interest rate.
3) The interest rate that Pruco Life declares for a duration of one year longer
than the number of whole years remaining on the existing cell being
withdrawn from.
Stated as a Formula, the Market Value is Equal to: (M/12) X (R-C)
not to exceed +0.40 or be less than -0.40; where,
M = the number of whole months (not to be less than
one) remaining in the interest-rate period
R = the Contract's guaranteed interest-rate expressed
as a decimal. Thus 6.2% is converted to 0.062.
C = the interest-rate, expressed as a decimal, that
Pruco Life declares for a duration equal to the
number of whole years remaining in the present
interest-rate period, plus 1 year as of the date the
request for a withdrawal or transaction is received
The Market-Value Adjustment is then equal to the Market Value Factor multiplied
by the amount subject to a Market-Value Adjustment.
Step by Step
The steps below explain how a market-value adjustment is calculated.
Step 1: Divide the number of whole months left in the existing interest rate
period (not to be less than one) by 12.
Step 2: Divide the interest rate Pruco Life declares on the date the request
for withdrawal or transfer is received for a duration of years equal to the
whole number of years determined in Step 1, plus 1 additional year. Subtract
this interest rate from the guaranteed interest rate. The result could be
negative.
Step 3: Multiply the results of Step 1 and Step 2. Again, the result could be
negative. If the result is less than -0.4, use the value -0.4. If the result is
in between -0.4 and 0.4, use the actual value. If the result is more than 0.4,
use the value 0.4.
Step 4: Multiply the result of Step 3 (which is the Market Value Factor) by the
value of the amount subject to a Market-Value Adjustment. The result is the
Market-Value Adjustment.
Step 5: The result of Step 4 is added to the interest cell. If the Market-Value
Adjustment is positive, the interest cell will go up in value. If the
Market-Value Adjustment is negative, the interest cell will go down in value.
Depending upon when the withdrawal request is made, a withdrawal charge may
apply.
The following example will illustrate the application of a market-value
adjustment and the determination of the withdrawal charge: Suppose a
contractowner made two invested purchase payments, the first in the amount of
$10,000 on December 1, 1995, all of which was allocated to the Equity
Subaccount, and the second in the amount of $5,000 on October 1, 1997, all of
which was allocated to the MVA Option with a guaranteed interest rate of 8%
(0.08) for 7 years. A request for withdrawal of $8,500 is made on February 1,
2000 (the contract owner does not provide any withdrawal instructions). On that
date the amount in the Equity Subaccount is equal to $12,000 and the amount in
the interest cell with a maturity date of September 30, 2004 is $5,985.23, so
that the contract fund on that date is equal to $17,985.23.
On February 1, 2000, the interest rates declared by Pruco Life for the
duration of 5 Years (4 whole years remaining until September 30, 2004, plus 1
year) is 11%.
39
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
Market-Value Adjustment Formula continued
The following computations would be made:
1) Calculate the Contract Fund value as of the effective date of the
transaction. This would be $17,985.23.
2) Calculate the charge-free amount (the amount of the withdrawal that is not
subject to a withdrawal charge).
Date Payment Free
- ---- ------- ------
12/1/95 $10,000 $1,000
12/1/96 $2,000
10/1/97 $ 5,000 $2,500
12/1/97 $4,000
12/1/98 $5,500
12/1/99 $7,000
The charge-free amount in the fifth Contract year is 10% of $15,000 (total
purchase payments) plus $5,500 (the charge-free amount available in the
fourth Contract year) for a total of $7,000.
3) Since the withdrawal request is in the fifth Contract year, a 3% withdrawal
charge rate applies to any portion of the withdrawal which is not charge-free.
$8,500.00 requested withdrawal amount
- -$7,000.00 charge-free
$1,500.00 additional amount needed to
complete withdrawal
The Contract provides that the Contract Fund will be reduced by an amount
which, when reduced by the withdrawal charge, will equal the amount requested.
Therefore, in order to produce the amount needed to complete the withdrawal
request ($1,500), we must "gross-up" that amount, before applying the
withdrawal charge rate. This is done by dividing by 1 minus the withdrawal
charge rate.
$1,500.00 / (1-.03) =
$1,500.00 / 0.97 = $1,546.39 grossed-up amount
Please note that a 3% withdrawal charge on this grossed-up amount reduces it to
$1,500, the balance needed to complete the request.
$1,546.39 grossed-up amount
X .03 withdrawal charge rate
$46.39 withdrawal charge
4) The Market Value Factor is determined as described in steps 1 through 5,
above. In this case, it is equal to 0.08 (8% is the guaranteed rate in the
existing cell) minus 0.11 (11% is the interest-rate that would be offered
for an interest cell with a duration of the remaining whole years plus 1),
which is -0.03, multiplied by 4.58333 (55 months remaining until
September 30, 2004, divided by 12) or -0.13750. Thus, there will be a
negative Market-Value Adjustment of 14% of the amount in the interest cell
that is subject to the adjustment.
- -0.13750 X$5,985.23 =
- -822.97 negative MVA
$5,985.23 unadjusted value
$5,162.26 adjusted value
$12,000.00 equity value
$17,162.26 adjusted contract fund
5) The total amount to be withdrawn, $8,546.39, (sum of the surrender charge,
$46.39, and the requested withdrawal amount of $8,500) is apportioned over
all accounts making up the Contract Fund following the Market-Value
Adjustments, if any, associated with the MVA option.
Equity
($12,000/$17,162.26) X$8,546.39 $5,975.71
7-Yr MVA
($5,162.26/$17,162.26) X$8,546.39 = $2,570.68
---------
$8,546.39
6) The adjusted value of the interest cell, $5,162.26, reduced by the
withdrawal of $2,570.68 leaves $2,591.58. This amount must be ''unadjusted''
by dividing it by 0.86250 (1 plus the Market-Value Adjustment of -0.13750)
to determine the amount remaining in the interest cell to which the
guaranteed interest-rate of 8% will continue to be credited until
September 30, 2004 or a subsequent withdrawal. That amount is $3,004.73.
40
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
IRA Disclosure Statement
This statement is designed to help you understand the requirements of federal
tax law which apply to your individual retirement annuity (IRA), your Roth IRA,
your simplified employee pension IRA (SEP) for employer contributions, your
Savings Incentive Match Plan for Employees (SIMPLE) IRA, or to one you purchase
for your spouse. You can obtain more information regarding your IRA either from
your sales representative or from any district office of the Internal Revenue
Service. Those are federal tax law rules; state tax laws may vary.
FREE LOOK PERIOD
The annuity contract offered by this prospectus gives you the opportunity to
return the contract for a full refund within 10 days (or whatever period is
required by applicable state law) after it is delivered. This is a more liberal
provision than is required in connection with IRAs. To exercise this
"free-look" provision, return the contract to the representative who sold it to
you or to the Prudential Annuity Service Center at the address shown on the
first page of this prospectus.
ELIGIBILITY REQUIREMENTS
IRAs are intended for all persons with earned compensation whether or not they
are covered under other retirement programs. Additionally, if you have a
non-working spouse (and you file a joint tax return), you may establish an IRA
on behalf of your non-working spouse. A working spouse may establish his or her
own IRA. A divorced spouse receiving taxable alimony (and no other income) may
also establish an IRA.
CONTRIBUTIONS AND DEDUCTIONS
Contributions to your IRA will be deductible if you are not an "active
participant" in an employer maintained qualified retirement plan or you have
"Adjusted Gross Income" (as defined under Federal tax laws) which does not
exceed the "applicable dollar limit." IRA (or SEP) contributions must be made
by no later than the time you file your income tax return for that year. For a
single taxpayer, the applicable dollar limitation is $33,000 (in 2001), with
the amount of IRA contribution which may be deducted reduced proportionately
for Adjusted Gross Income between $33,000-$43,000. For married couples filing
jointly, the applicable dollar limitation is $53,000, with the amount of IRA
contribution which may be deducted reduced proportionately for Adjusted Gross
Income between $53,000-$63,000. There is no deduction allowed for IRA
contributions when Adjusted Gross Income reaches $43,000 for individuals and
$63,000 for married couples filing jointly. These amounts are for 2001. Income
limits are scheduled to increase until 2006 for single taxpayers and 2007 for
married taxpayers.
Contributions made by your employer to your SEP are excludable from your
gross income for tax purposes in the calendar year for which the amount is
contributed. Certain employees who participate in a SEP will be entitled to
elect to have their employer make contributions to their SEP on their behalf or
to receive the contributions in cash. If the employee elects to have
contributions made on the employee's behalf to the SEP, those funds are not
treated as current taxable income to the employee. Elective deferrals under a
SEP are subject to an inflation-adjusted limit, which is $10,500 in 2001.
Salary-reduction SEPs (also called "SARSEPs") are available only if at least
50% of the employees elect to have amounts contributed to the SARSEP and if the
employer has 25 or fewer employees at all times during the preceding year. New
SARSEPs may not be established after 1996.
The IRA maximum annual contribution and your tax deduction is limited to the
lesser of: (1) $2,000 or (2) 100% of your earned compensation. Contributions in
excess of the deduction limits may be subject to penalty. See below.
Under a SEP agreement, the maximum annual contribution which your employer
may make on your behalf to a SEP contract that is excludable from your income
is the lesser of 15% of your salary or $25,500 (in 2001). An employee who is a
participant in a SEP agreement may make after-tax contributions to the SEP
contract, subject to the contribution limits applicable to IRAs in general.
Those employee contributions will be deductible subject to the deductibility
rules described above.
41
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
IRA Disclosure Statement continued
The maximum tax deductible annual contribution that a divorced spouse with
no other income may make to an IRA is the lesser of (1) $2,000 or (2) 100% of
taxable alimony.
If you or your employer should contribute more than the maximum contribution
amount to your IRA or SEP, the excess amount will be considered an "excess
contribution." You are permitted to withdraw an excess contribution from your
IRA or SEP before your tax filing date without adverse tax consequences. If,
however, you fail to withdraw any such excess contribution before your tax
filing date, a 6% excise tax will be imposed on the excess for the tax year of
contribution.
Once the 6% excise tax has been imposed, an additional 6% penalty for the
following tax year can be avoided if the excess is (1) withdrawn before the end
of the following year, or (2) treated as a current contribution for the
following year. (See Premature Distributions below for penalties imposed on
withdrawal when the contribution exceeds $2,000.)
IRA FOR NON-WORKING SPOUSE
If you establish an IRA for yourself, you may also be eligible to establish an
IRA for your "non-working" spouse. In order to be eligible to establish such a
spousal IRA, you must file a joint tax return with your spouse and, if your
non-working spouse has compensation, his/her compensation must be less than
your compensation for the year. Contributions of up to $2,000 each may be made
to your IRA and the spousal IRA if the combined compensation of you and your
spouse is at least equal to the amount contributed. If requirements for
deductibility (including income levels) are met, you will be able to deduct an
amount equal to the least of (i) the amount contributed to the IRAs;
(ii) $4,000; or (iii) 100% of your combined gross income.
Contributions in excess of the contribution limits may be subject to
penalty. See above under "Contributions and Deductions." If you contribute more
than the allowable amount, the excess portion will be considered an excess
contribution. The rules for correcting it are the same as discussed above for
regular IRAs.
Other than the items mentioned in this section, all of the requirements
generally applicable to IRAs are also applicable to IRAs established for
non-working spouses.
ROLLOVER CONTRIBUTION
Once every year, you are permitted to withdraw any portion of the value of your
IRA or SEP and reinvest it in another IRA or bond. Withdrawals may also be made
from other IRAs and contributed to this contract. This transfer of funds from
one IRA to another is called a "rollover" IRA. To qualify as a rollover
contribution, the entire portion of the withdrawal must be reinvested in
another IRA within 60 days after the date it is received. You will not be
allowed a tax-deduction for the amount of any rollover contribution.
A similar type of rollover to an IRA can be made with the proceeds of a
qualified distribution from a qualified retirement plan or tax-sheltered
annuity. Properly made, such a distribution will not be taxable until you
receive payments from the IRA created with it. Unless you were a self-employed
participant in the distributing plan, you may later roll over such a
contribution to another qualified retirement plan as long as you have not mixed
it with IRA (or SEP) contributions you have deducted from your income. (You may
roll less than all of a qualified distribution into an IRA, but any part of it
not rolled over will be currently includable in your income without any capital
gains treatment.)
DISTRIBUTIONS
(a) Premature Distributions
At no time can your interest in your IRA or SEP be forfeited. To insure that
your contributions will be used for retirement, the federal tax law does not
permit you to use your IRA or SEP as security for a loan. Furthermore, as a
general rule, you may not sell or assign your interest in your IRA or SEP to
anyone. Use of an IRA (or SEP) as security or assignment of it to another will
invalidate the entire annuity. It then will be includable in your income in the
year it is invalidated and will be subject to a 10% tax penalty if you are not
at least age 59 1/2 or totally disabled. (You may, however, assign your IRA or
SEP without penalty to your former spouse in accordance with the terms of a
divorce decree.)
42
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
You may surrender any portion of the value of your IRA (or SEP). In the case
of a partial surrender which does not qualify as a rollover, the amount
withdrawn will be includable in your income and subject to the 10% penalty if
you are not at least age 59 1/2 or totally disabled unless you comply with
special rules requiring distributions to be made at least annually over your
life expectancy.
The 10% tax penalty does not apply to the withdrawal of an excess
contribution as long as the excess is withdrawn before the due date of your tax
return. Withdrawals of excess contributions after the due date of your tax
return will generally be subject to the 10% penalty unless the excess
contribution results from erroneous information from a plan trustee making an
excess rollover contribution or unless you are over age 59 1/2 or are disabled.
(b)Distribution After Age 59 1/2
Once you have attained age 59 1/2 (or have become totally disabled), you may
elect to receive a distribution of your IRA (or SEP) regardless of when you
actually retire. In addition, you must commence distributions from your IRA by
April 1 following the year you attain age 70 1/2 . You may elect to receive the
distribution under any one of the periodic payment options available under the
contract. The distributions from your IRA under any one of the period payment
options or in one sum will be treated as ordinary income as you receive them to
the degree that you have made deductible contributions. If you have made both
deductible and nondeductible contributions, the portion of the distribution
attributable to the nondeductible contribution will be tax-free.
(c)Inadequate Distributions--50% Tax
Your IRA or SEP is intended to provide retirement benefits over your lifetime.
Thus, federal tax law requires that you either (1) receive a lump-sum
distribution of your IRA by April 1 of the year following the year in which you
attain age 70 1/2 or (2) start to receive periodic payments by that date. If
you elect to receive periodic payments, those payments must be sufficient to
pay out the entire value of your IRA during your life expectancy (or over the
joint life expectancies of you and your spouse/beneficiary.) The calculation
method is revised under the IRS proposed regulations for distributions
beginning in 2002 and are optional for distributions in 2001. If the payments
are not sufficient to meet these requirements, an excise tax of 50% will be
imposed on the amount of any underpayment.
(d)Death Benefits
If you, (or your surviving spouse) die before receiving the entire value of
your IRA (or SEP), the remaining interest must be distributed to your
beneficiary (or your surviving spouse's beneficiary) in one lump-sum within 5
years of death, or applied to purchase an immediate annuity for the
beneficiary. This annuity must be payable over the life expectancy of the
beneficiary beginning by December 31 of the year following the year after your
or your spouse's death. If your spouse is the designated beneficiary, he or she
is treated as the owner of the IRA. If minimum required distributions have
begun, the entire amount must be distributed at least as rapidly as if the
owner had survived. A distribution of the balance of your IRA upon your death
will not be considered a gift for federal tax purposes, but will be included in
your gross estate for purposes of federal estate taxes.
ROTH IRAS
Section 408A of the Tax Code permits eligible individuals to contribute to a
type of IRA known as a "Roth IRA." Contributions may be made to a Roth IRA by
taxpayers with adjusted gross incomes of less than $160,000 for married
individuals filing jointly and less than $110,000 for single individuals.
Married individuals filing separately are not eligible to contribute to a IRA.
The maximum amount of contributions allowable for any taxable year to all Roth
IRAs maintained by an individual is generally the lesser of $2,000 and 100% of
compensation for that year (the $2,000 limit is phased out for incomes between
$150,000 and $160,000 for married and between $95,000 and $110,000 for
singles). The contribution limit is reduced by the amount of any contributions
made to a traditional IRA. Contributions to a Roth IRA are not deductible.
43
PART II DISCOVERY SELECT PROSPECTUS SECTIONS 1-9
IRA Disclosure Statement continued
For taxpayers with adjusted gross income of $100,000 or less, all or part of
amounts in a traditional IRA may be converted, transferred or rolled over to a
Roth IRA. Some or all of the IRA value will typically be includable in the
taxpayer's gross income. If such a rollover, transfer or conversion occurred
before January 1, 1999, the portion of the amount includable in gross income
must be included in income ratably over the next four years beginning with the
year in which the transaction occurred. Provided a rollover contribution meets
the requirements of IRAs under Section 408(d)(3) of the Code, a rollover may be
made from a Roth IRA to another Roth IRA.
Under some circumstances, it may not be advisable to roll over, transfer or
convert all or part of a non-Roth IRA to a Roth IRA. Persons considering a
rollover, transfer or conversion should consult their own tax advisor.
"Qualified distributions" from a Roth IRA are excludable from gross income.
A "qualified distribution" is a distribution that satisfies two requirements:
(1) the distribution must be made (a) after the owner of the IRA attains age
59 1/2; (b) after the owner's death; (c) due to the owner's disability; or
(d) for a qualified first time homebuyer distribution within the meaning of
Section 72(t)(2)(F) of the Code; and (2) the distribution must be made in the
year that is at least five tax years after the first year for which a
contribution was made to any Roth IRA established for the owner or five years
after a rollover, transfer, or conversion was made from a traditional IRA to a
Roth IRA. Distributions from a Roth IRA that are not qualified distributions
will be treated as made first from contributions and then from earnings, and
taxed generally in the same manner as distributions from a traditional IRA.
Distributions from a Roth IRA need not commence at age 70 1/2 . However, if
the owner dies before the entire interest in a Roth IRA is distributed, any
remaining interest in the contract must be distributed by December 31 of the
calendar year containing the fifth anniversary of the owner's death subject to
certain exceptions.
REPORTING TO THE IRS
Whenever you are liable for one of the penalty taxes discussed above (6% for
excess contributions, 10% for premature distributions or 50% for
underpayments), you must file Form 5329 with the Internal Revenue Service. The
form is to be attached to your federal income tax return for the tax year in
which the penalty applies. Normal contributions and distributions must be shown
on your income tax return for the year to which they relate.
44
Discovery Select is a variable annuity issued by Pruco Life Insurance Company
of New Jersey, located at 213 Washington Street, Newark, NJ 07102-2992, and is
distributed through Prudential Investment Management Services LLC, Three
Gateway Center, 14th Floor, Newark, NJ 07102-4077, and offered through
Prudential Securities Incorporated, 199 Water Street, New York, NY 10292, and
Pruco Securities Corporation, 751 Broad Street, Newark, NJ 07102-3777. All are
Prudential companies.
Prudential and Pruco Life are each solely responsible for their respective
financial condition and contractual obligations.
Discovery is a registered mark of Prudential.
Prudential Financial is a service mark of Prudential, Newark, NJ and its
affiliates.
Norman Rockwell Illustration (C) The Curtis Publishing Company.
[LOGO] Prudential Financial
The Prudential Insurance Company of America
751 Broad Street
Newark, New Jersey 07102-3777
IFS-A053626
ORD96639NY
Ed. 05/01/2001
PRUCO LIFE INSURANCE COMPANY
OF NEW JERSEY
Supplement, dated February 11, 2009
To
Prospectus, dated May 1, 2001
This supplement should be read and retained with your current prospectus. If you
would like another copy of that prospectus, please call us at 800-752-6342.
Pruco Life Insurance Company of New Jersey ("PLNJ") incorporates by reference
into the prospectus its latest annual report on Form 10-K filed pursuant to
Section 13(a) or Section 15(d) of the Exchange Act since the end of the fiscal
year covered by its latest annual report. In addition, all documents
subsequently filed by PLNJ pursuant to Sections 13(a), 13 (c), 14 or 15(d) of
the Exchange Act also are incorporated into the prospectus by reference. PLNJ
will provide to each person, including any beneficial owner, to whom a
prospectus is delivered, a copy of any or all of the information that has been
incorporated by reference into the prospectus but not delivered with the
prospectus. Such information will be provided upon written or oral request at no
cost to the requester by writing to Prudential Annuities Life Assurance
Corporation, One Corporate Drive, Shelton, CT 06484 or by calling 800-752-6342.
PLNJ files periodic reports as required under the Securities Exchange Act of
1934. The public may read and copy any materials that PLNJ files with the SEC at
the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy, and information statements, and other information
regarding issuers that file electronically with the SEC (see
http://www.sec.gov). Our internet address is http://www.prudentialannuities.com.
PRUCO LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
STRATEGIC PARTNERS(SM) ADVISOR
STRATEGIC PARTNERS(SM) ANNUITY ONE
STRATEGIC PARTNERS(SM) ANNUITY ONE 3
STRATEGIC PARTNERS(SM) FLEXELITE
STRATEGIC PARTNERS(SM) PLUS
STRATEGIC PARTNERS(SM) PLUS 3
STRATEGIC PARTNERS(SM) SELECT
PRUDENTIAL QUALIFIED VARIABLE INVESTMENT PLAN
PRUDENTIAL VARIABLE INVESTMENT PLAN
Supplement, Dated August 20, 2004 to Prospectuses Dated May 1, 2004
This supplement should be read and retained with the current prospectus for your
annuity contract. If you would like another copy of a current prospectus or a
statement of additional information, please contact us at (888) PRU-2888.
Changes to certain systems under which we administer your annuity will take
effect on or about October 18, 2004. These changes are the result of further
efforts to integrate American Skandia Life Assurance Corporation's operations
into the operations of other subsidiary companies of Prudential Financial, Inc.
The following changes relate primarily to those systems-related changes, but
also include changes that reflect other product and/or disclosure modifications.
This supplement is intended to update certain information in the May 1, 2004
prospectus for the variable annuity you own, and is not intended to be a
prospectus or offer for any other variable annuity listed here that you do not
own.
CHANGES APPLICABLE TO ALL ANNUITIES:
COMPANY TAXES: In Section 6 of the prospectus, under the heading entitled
"Company Taxes," we replace the existing disclosure with the following:
"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 dividends received deductions. We do not pass these tax benefits
through to owners 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 pass through company
income taxes on the taxable corporate earnings created by this annuity. We
reserve the right to change these tax practices."
ASSIGNMENT: In Section 9 of the prospectus, under the heading entitled
"Assignment," we add the following sentence to the end of the first paragraph:
"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."
CHANGES APPLICABLE TO ALL ANNUITIES EXCEPT FOR PRUDENTIAL QUALIFIED VARIABLE
INVESTMENT PLAN AND PRUDENTIAL VARIABLE INVESTMENT PLAN:
TRANSFERS AMONG OPTIONS: In Section 2 of the prospectus, under the heading
entitled "Transfers Among Options," the following sentence is added to the end
of the last paragraph:
"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."
DOLLAR COST AVERAGING: In Section 2 of the prospectus, under the heading
entitled "Dollar Cost Averaging," the references to a $100 minimum transfer
amount and a $100 minimum DCA account balance in the first and third sentences
of the second paragraph are deleted.
SCHEDULED TRANSACTIONS: In Section 2 of the prospectus, the following is added
as a new sub-section immediately following the section entitled
"Auto-Rebalancing":
"Scheduled Transactions
"Scheduled transactions" include transfers under dollar cost averaging, an
asset allocation program, auto-rebalancing, systematic withdrawals, minimum
distributions or annuity payments. Generally, we will process a scheduled
transaction on the next business day when the scheduled transaction falls
on a day that is not a business day. If this practice would result in the
transaction occurring in the subsequent calendar year, then we will process
the transaction on the preceding business day."
CHANGE APPLICABLE TO ALL ANNUITIES EXCEPT FOR PRUCO LIFE & PRUCO LIFE OF NEW
JERSEY STRATEGIC PARTNERS SELECT, PRUDENTIAL QUALIFIED VARIABLE INVESTMENT PLAN
AND PRUDENTIAL VARIABLE INVESTMENT PLAN:
PURCHASE PAYMENTS: In Section 5 of the prospectus, under the heading entitled
"Purchase Payments," the second sentence in the first paragraph is replaced by
the following:
"The minimum initial purchase payment is $10,000. Where allowed by law, you
must get our approval for any initial and additional purchase payment of
$1,000,000 or more."
CHANGES APPLICABLE TO PRUCO LIFE STRATEGIC PARTNERS FLEXELITE ONLY:
GUARANTEED MINIMUM INCOME BENEFIT: In Section 3 of the prospectus, under the
sub-section entitled "Effect of Withdrawals":
(i) The second sentence of the first paragraph is deleted in its entirety.
(ii) The fifth sentence of the first paragraph is replaced by the
following:
"The resulting percentage is multiplied by the GMIB protected value after
subtracting the amount of the withdrawal that does not exceed 5%."
(iii) The following sentence is added to the end of the first paragraph:
"The GMIB roll-up cap is reduced by the sum of all reductions described
above."
(iv) The third and fourth sub-bullets in Example 2 are replaced with the
following:
"The GMIB 200% cap is reduced by the sum of all reductions above ($490,000
- - $2,500 - $8,257.55, or $479,242.45)."
(v) The second bullet in Example 3 is replaced with the following:
"The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000,
from $479,242.45 to $469,242.45)."
HYPOTHETICAL ILLUSTRATIONS: In Appendix B of the prospectus, we replace the
existing disclosure with the following to reflect recent changes to the fees of
the asset allocation portfolios of The Prudential Series Fund, Inc:
HYPOTHETICAL ILLUSTRATIONS
The illustrations set out in the following tables depict hypothetical values
based on the following salient assumptions:
We assume that (i) the contract was issued to a male who was 60 years old
on the contract date, (ii) he made a single purchase payment of $100,000 on the
contract date, and (iii) he took no withdrawals during the time period
illustrated.
To calculate the contract values illustrated on the following pages, we
start with certain hypothetical rates of return (i.e., gross rates of return
equal to 0%, 6% and 10% annually). The hypothetical gross rates of return are
first reduced by the arithmetic average fees of the mutual funds underlying the
variable investment options. To compute the arithmetic average of the fees of
the underlying mutual funds, we added the investment management fees, other
expenses, and any 12b-1 fees of each underlying mutual fund and then divided
that sum by the number of mutual funds within the annuity product. In other
words, we assumed hypothetically that values are allocated equally among the
variable investment options. If you allocated the contract value unequally among
the variable investment options, that would affect the amount of mutual fund
fees that you bear indirectly, and thereby would influence the values under the
annuity contract. Based on the fees of the underlying mutual funds as of
December 31, 2003 (not giving effect to the expense reimbursements or expense
waivers that are described in the prospectus fee table, and for certain
portfolios reflecting expense adjustments), the arithmetic average fund fees
were equal to 1.11% annually. If we did take expense reimbursements and waivers
into account here, that would have lowered the arithmetic average, and thereby
increased the illustrated values. The hypothetical gross rates of return are
next reduced by the insurance and administrative charge associated with the
selected death benefit option. Finally, the contract value is reduced by the
annual charges for the optional benefits that are illustrated as well as by the
contract maintenance charge.
The hypothetical gross rates of return of 0%, 6% and 10% annually, when
reduced by the arithmetic average mutual fund fees and the insurance and
administrative charge, correspond to net annual rates of return of -3.04%, 2.78%
and 6.66%, respectively. These net rates of return do not reflect the contract
maintenance charge or the charges for optional benefits. If those charges were
reflected in the above-referenced net returns, then the net returns would be
lower.
An 'N/A' in these columns indicates that the benefit cannot be exercised in
that year.
A '0' in certain columns within these illustrations indicates that the
benefit has no value. For example, with respect to the Income Appreciator
Benefit, there are no earnings within the contract under a 0% assumed rate of
return. Because IAB is a percentage of earnings, the IAB benefit value would be
'0' in that scenario.
The values that you actually realize under a contract will be different
from what is depicted here if any of the assumptions we make here differ from
your circumstances. We will provide you with a personalized illustration upon
request.
Please see your prospectus for the meaning of the terms used here and for a
description of how the various illustrated features operate.
STRATEGIC PARTNERS FLEXELITE
$100,000 Single contribution and no withdrawals
Male, issue age 60
Benefits:
No Credit Election
Greater of Roll-Up and Step-Up Guaranteed Minimum Death Benefit
Earnings Appreciator Benefit
Guaranteed Minimum Income Benefit
Income Appreciator Benefit
10% Assumed Rate Of Return
6% Assumed Rate Of Return
0% Assumed Rate Of Return
The hypothetical investment results are illustrative only and should not be
deemed a representation of past or future investment results. Actual investment
results may be more or less than those shown and will depend on a number of
factors, including investment allocations made by the owner. The contract values
and guaranteed benefits for a contract would be different from the ones shown if
the actual gross rate of investment return averaged 0%, 6% or 10% over a period
of years, but also fluctuated above or below the average for individual contract
years. We can make no representation that these hypothetical investment results
can be achieved for any one year or continued over any period of time. In fact,
for any given period of time, the investment results could be negative.
Explanation of Headings
Contract Value - The projected total value of the annuity at the end of the
period indicated, after all fees other than withdrawal charges have been
deducted.
Surrender Value - The projected cash value of the annuity at the end of the
period indicated.
Death Benefit Value - Greater of the contract value or purchase payments
(adjusted for withdrawals) compounded at 5% annually up to the later of age 80
or 5 years from issue (for age 80-85 at issue, 3% annual roll-up for 5 years) or
the highest contract value (the "step-up") on any contract anniversary up to the
later of age 80 or the fifth contract anniversary adjusted for withdrawals (age
80-84 at issue will have only one step-up on the third contract anniversary) is
payable to the beneficiary(s) on death of owner or joint owner. See the
prospectus for more complete information.
Earnings Appreciator Benefit (EAB) - A supplemental death benefit based on 40%
of earnings if issue age is 0-70, 25% for age 71-75; 15% for age 76-79, subject
to a cap equal to 300% of purchase payments multiplied by the applicable benefit
percentage. See prospectus for more complete information.
IAB Value - Percentage of earnings in the contract upon IAB activation based on
the length of time the contract is in force: 7-9 years, 15%; 10-14 years, 20%;
15+ years, 25%. See prospectus for more complete information.
Amount Available to Annuitize - The contract value plus the IAB value. See
prospectus for more complete information.
GMIB Protected Value - Purchase payments (adjusted for withdrawals) compounded
at 5% annually up to the later of age 80 or 7 years from issue or last reset,
subject to a 200% cap. See prospectus for more complete information.
GMIB Guaranteed Annual Payout for Single Life Annuity with 10-year Period
Certain - The payout determined by applying the GMIB protected value (and IAB
value if IAB is elected) to the GMIB guaranteed annuity purchase rates contained
in the contract. The payout represents the minimum payout to be received when
annuitizing the contract based on the illustrated assumptions. See prospectus
for more complete information.
Projected Contract Annual Annuity Payout for Single Life Annuity with 10-year
Period Certain - The hypothetical annuity payout based on the projected contract
value (and IAB value if IAB is elected) calculated using the minimum payout
rates guaranteed under the contract ("Guaranteed Minimum Payout Rates"). See
prospectus for more complete information.
If the GMIB benefit is elected, the greater of the following would be paid at
annuitization -
(1) The GMIB Guaranteed Payout, or
(2) The annuity payout available under the contract that is calculated
based on the adjusted contract value at annuitization and the better
of the Guaranteed Minimum Annuity Payout Rates or the Current Annuity
Payout Rates in effect at the time of annuitization. To show how the
GMIB rider works relative to the annuity payout available under the
contract we included the Projected Contract Annuity Payout column
which shows hypothetical annuity payouts based on the projected
contract values and the Guaranteed Minimum Payout Rates. We did not
illustrate any hypothetical annuity payouts based on Current Annuity
Payout Rates because these rates are subject to change at any time;
however, historically the annuity payout provided under such Current
Annuity Payout Rates have been significantly higher than the annuity
payout that would be provided under Guaranteed Minimum Annuity Payout
Rates.
CHANGES APPLICABLE TO PRUCO LIFE STRATEGIC PARTNERS ANNUITY ONE 3 AND STRATEGIC
PARTNERS PLUS 3 ONLY:
GUARANTEED MINIMUM INCOME BENEFIT: In Section 3 of the prospectus, under the
sub-section entitled "Effect of Withdrawals":
(i) The second sentence of the first paragraph is deleted in its entirety.
(ii) The fifth sentence of the first paragraph is replaced by the
following:
"The resulting percentage is multiplied by the GMIB protected value after
subtracting the amount of the withdrawal that does not exceed 5%."
(iii) The following sentence is added to the end of the first paragraph:
"The GMIB roll-up cap is reduced by the sum of all reductions
described above."
(vi) The third and fourth sub-bullets in Example 2 are replaced with the
following:
"The GMIB 200% cap is reduced by the sum of all reductions above
($490,000 - $2,500 - $8,257.55, or $479,242.45)."
(vii) The second bullet in Example 3 is replaced with the following:
"The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000,
from $479,242.45 to $469,242.45)."
CHANGES APPLICABLE TO PRUCO LIFE STRATEGIC PARTNERS ANNUITY ONE 3 ONLY:
HYPOTHETICAL ILLUSTRATIONS: In Appendix B of the prospectus, we replace the
existing disclosure with the following to reflect recent changes to the fees of
the asset allocation portfolios of The Prudential Series Fund, Inc:
HYPOTHETICAL ILLUSTRATIONS
The illustrations set out in the following tables depict hypothetical values
based on the following salient assumptions:
We assume that (i) the contract was issued to a male who was 60 years old
on the contract date, (ii) he made a single purchase payment of $100,000 on the
contract date, and (iii) he took no withdrawals during the time period
illustrated.
To calculate the contract values illustrated on the following pages, we
start with certain hypothetical rates of return (i.e., gross rates of return
equal to 0%, 6% and 10% annually). The hypothetical gross rates of return are
first reduced by the arithmetic average fees of the mutual funds underlying the
variable investment options. To compute the arithmetic average of the fees of
the underlying mutual funds, we added the investment management fees, other
expenses, and any 12b-1 fees of each underlying mutual fund and then divided
that sum by the number of mutual funds within the annuity product. In other
words, we assumed hypothetically that values are allocated equally among the
variable investment options. If you allocated the contract value unequally among
the variable investment options, that would affect the amount of mutual fund
fees that you bear indirectly, and thereby would influence the values under the
annuity contract. Based on the fees of the underlying mutual funds as of
December 31, 2003 (not giving effect to the expense reimbursements or expense
waivers that are described in the prospectus fee table, and for certain
portfolios reflecting expense adjustments), the arithmetic average fund fees
were equal to 1.11% annually. If we did take expense reimbursements and waivers
into account here, that would have lowered the arithmetic average, and thereby
increased the illustrated values. The hypothetical gross rates of return are
next reduced by the insurance and administrative charge associated with the
selected death benefit option. Finally, the contract value is reduced by the
annual charges for the optional benefits that are illustrated as well as by the
contract maintenance charge.
The hypothetical gross rates of return of 0%, 6% and 10% annually, when
reduced by the arithmetic average mutual fund fees and the insurance and
administrative charge, correspond to net annual rates of return of -2.80%, 3.03%
and 6.92%, respectively. These net rates of return do not reflect the contract
maintenance charge or the charges for optional benefits. If those charges were
reflected in the above-referenced net returns, then the net returns would be
lower.
An 'N/A' in these columns indicates that the benefit cannot be exercised in
that year.
A '0' in certain columns within these illustrations indicates that the
benefit has no value. For example, with respect to the Income Appreciator
Benefit, there are no earnings within the contract under a 0% assumed rate of
return. Because IAB is a percentage of earnings, the IAB benefit value would be
'0' in that scenario.
The values that you actually realize under a contract will be different
from what is depicted here if any of the assumptions we make here differ from
your circumstances. We will provide you with a personalized illustration upon
request.
Please see your prospectus for the meaning of the terms used here and for a
description of how the various illustrated features operate.
STRATEGIC PARTNERS ANNUITY ONE 3
$100,000 Single contribution and no withdrawals
Male, issue age 60
Benefits:
Contract Without Credit
Greater of Roll-Up and Step-Up Guaranteed Minimum Death Benefit
Earnings Appreciator Benefit
Guaranteed Minimum Income Benefit
Income Appreciator Benefit
10% Assumed Rate Of Return
6% Assumed Rate Of Return
0% Assumed Rate Of Return
The hypothetical investment results are illustrative only and should not be
deemed a representation of past or future investment results. Actual investment
results may be more or less than those shown and will depend on a number of
factors, including investment allocations made by the owner. The contract values
and guaranteed benefits for a contract would be different from the ones shown if
the actual gross rate of investment return averaged 0%, 6% or 10% over a period
of years, but also fluctuated above or below the average for individual contract
years. We can make no representation that these hypothetical investment results
can be achieved for any one year or continued over any period of time. In fact,
for any given period of time, the investment results could be negative.
Explanation of Headings
Contract Value - The projected total value of the annuity at the end of the
period indicated, after all fees other than withdrawal charges have been
deducted.
Surrender Value - The projected cash value of the annuity at the end of the
period indicated.
Death Benefit Value - Greater of the contract value or purchase payments
(adjusted for withdrawals) compounded at 5% annually up to the later of age 80
or 5 years from issue (for age 80-85 at issue, 3% annual roll-up for 5 years) or
the highest contract value (the "step-up") on any contract anniversary up to the
later of age 80 or the fifth contract anniversary adjusted for withdrawals (age
80-84 at issue will have only one step-up on the third contract anniversary) is
payable to the beneficiary(s) on death of owner or joint owner. See the
prospectus for more complete information.
Earnings Appreciator Benefit (EAB) - A supplemental death benefit based on 40%
of earnings if issue age is 0-70, 25% for age 71-75; 15% for age 76-79, subject
to a cap equal to 300% of purchase payments multiplied by the applicable benefit
percentage. See prospectus for more complete information.
IAB Value - Percentage of earnings in the contract upon IAB activation based on
the length of time the contract is in force: 7-9 years, 15%; 10-14 years, 20%;
15+ years, 25%. See prospectus for more complete information.
Amount Available to Annuitize - The contract value plus the IAB value. See
prospectus for more complete information.
GMIB Protected Value - Purchase payments (adjusted for withdrawals) compounded
at 5% annually up to the later of age 80 or 7 years from issue or last reset,
subject to a 200% cap. See prospectus for more complete information.
GMIB Guaranteed Annual Payout for Single Life Annuity with 10-year Period
Certain - The payout determined by applying the GMIB protected value (and IAB
value if IAB is elected) to the GMIB guaranteed annuity purchase rates contained
in the contract. The payout represents the minimum payout to be received when
annuitizing the contract based on the illustrated assumptions. See prospectus
for more complete information.
Projected Contract Annual Annuity Payout for Single Life Annuity with 10-year
Period Certain - The hypothetical annuity payout based on the projected contract
value (and IAB value if IAB is elected) calculated using the minimum payout
rates guaranteed under the contract ("Guaranteed Minimum Payout Rates"). See
prospectus for more complete information.
If the GMIB benefit is elected, the greater of the following would be paid at
annuitization -
(1) The GMIB Guaranteed Payout, or
(2) The annuity payout available under the contract that is calculated
based on the adjusted contract value at annuitization and the better
of the Guaranteed Minimum Annuity Payout Rates or the Current Annuity
Payout Rates in effect at the time of annuitization. To show how the
GMIB rider works relative to the annuity payout available under the
contract we included the Projected Contract Annuity Payout column
which shows hypothetical annuity payouts based on the projected
contract values and the Guaranteed Minimum Payout Rates. We did not
illustrate any hypothetical annuity payouts based on Current Annuity
Payout Rates because these rates are subject to change at any time;
however, historically the annuity payout provided under such Current
Annuity Payout Rates have been significantly higher than the annuity
payout that would be provided under Guaranteed Minimum Annuity Payout
Rates.
CHANGES APPLICABLE TO PRUCO LIFE OF NEW JERSEY STRATEGIC PARTNERS ANNUITY ONE 3
AND STRATEGIC PARTNERS PLUS 3 ONLY:
GUARANTEED MINIMUM INCOME BENEFIT: In Section 3 of the prospectus, under the
sub-section entitled "Effect of Withdrawals":
(i) the second sentence of the first paragraph is deleted in its entirety.
(ii) the fifth sentence of the first paragraph is replaced by the
following:
"The resulting percentage is multiplied by the GMIB protected value after
subtracting the amount of the withdrawal that does not exceed 5%."
(iii) the following sentence is added to the end of the first paragraph:
"The GMIB roll-up cap is reduced by the sum of all reductions described
above."
(viii) the third and fourth sub-bullets in Example 2 are replaced with the
following:
"The GMIB 200% cap is reduced by the sum of all reductions above ($490,000
- - $2,500 - $8,258.85, or $479,241.15)."
(ix) the second bullet in Example 3 is replaced with the following:
"The GMIB 200% cap is reduced by the amount withdrawn (i.e., by $10,000,
from $479,241.15 to $469,241.15)."
CHANGES APPLICABLE TO PRUCO LIFE OF NEW JERSEY STRATEGIC PARTNERS ANNUITY ONE 3
ONLY:
HYPOTHETICAL ILLUSTRATIONS: In Appendix B of the prospectus, we replace the
existing disclosure with the following to reflect recent changes to the fees of
the asset allocation portfolios of The Prudential Series Fund, Inc:
HYPOTHETICAL ILLUSTRATIONS
The illustrations set out in the following tables depict hypothetical values
based on the following salient assumptions:
We assume that (i) the contract was issued to a male who was 60 years old
on the contract date, (ii) he made a single purchase payment of $100,000 on the
contract date, and (iii) he took no withdrawals during the time period
illustrated.
To calculate the contract values illustrated on the following pages, we
start with certain hypothetical rates of return (i.e., gross rates of return
equal to 0%, 6% and 10% annually). The hypothetical gross rates of return are
first reduced by the arithmetic average fees of the mutual funds underlying the
variable investment options. To compute the arithmetic average of the fees of
the underlying mutual funds, we added the investment management fees, other
expenses, and any 12b-1 fees of each underlying mutual fund and then divided
that sum by the number of mutual funds within the annuity product. In other
words, we assumed hypothetically that values are allocated equally among the
variable investment options. If you allocated the contract value unequally among
the variable investment options, that would affect the amount of mutual fund
fees that you bear indirectly, and thereby would influence the values under the
annuity contract. Based on the fees of the underlying mutual funds as of
December 31, 2003 (not giving effect to the expense reimbursements or expense
waivers that are described in the prospectus fee table, and for certain
portfolios reflecting expense adjustments), the arithmetic average fund fees
were equal to 1.11% annually. If we did take expense reimbursements and waivers
into account here, that would have lowered the arithmetic average, and thereby
increased the illustrated values. The hypothetical gross rates of return are
next reduced by the insurance and administrative charge associated with the
selected death benefit option. Finally, the contract value is reduced by the
annual charges for the optional benefits that are illustrated as well as by the
contract maintenance charge.
The hypothetical gross rates of return of 0%, 6% and 10% annually, when
reduced by the arithmetic average mutual fund fees and the insurance and
administrative charge, correspond to net annual rates of return of -2.70%, 3.13%
and 7.03%, respectively. These net rates of return do not reflect the contract
maintenance charge or the charges for optional benefits. If those charges were
reflected in the above-referenced net returns, then the net returns would be
lower.
An 'N/A' in these columns indicates that the benefit cannot be exercised in
that year.
A '0' in certain columns within these illustrations indicates that the
benefit has no value. For example, with respect to the Income Appreciator
Benefit, there are no earnings within the contract under a 0% assumed rate of
return. Because IAB is a percentage of earnings, the IAB benefit value would be
'0' in that scenario.
The values that you actually realize under a contract will be different
from what is depicted here if any of the assumptions we make here differ from
your circumstances. We will provide you with a personalized illustration upon
request.
Please see your prospectus for the meaning of the terms used here and for a
description of how the various illustrated features operate.
STRATEGIC PARTNERS ANNUITY ONE 3
$100,000 Single contribution and no withdrawals
Male, issue age 60
Benefits:
Contract Without Credit
Step-Up Guaranteed Minimum Death Benefit
Guaranteed Minimum Income Benefit
Income Appreciator Benefit
10% Assumed Rate Of Return
6% Assumed Rate Of Return
0% Assumed Rate Of Return
The hypothetical investment results are illustrative only and should not be
deemed a representation of past or future investment results. Actual investment
results may be more or less than those shown and will depend on a number of
factors, including investment allocations made by the owner. The contract values
and guaranteed benefits for a contract would be different from the ones shown if
the actual gross rate of investment return averaged 0%, 6% or 10% over a period
of years, but also fluctuated above or below the average for individual contract
years. We can make no representation that these hypothetical investment results
can be achieved for any one year or continued over any period of time. In fact,
for any given period of time, the investment results could be negative.
Explanation of Headings
Contract Value - The projected total value of the annuity at the end of the
period indicated, after all fees other than withdrawal charges have been
deducted.
Surrender Value - The projected cash value of the annuity at the end of the
period indicated.
Death Benefit Value - Value of base death benefit or GMDB, as indicated.
IAB Value - Percentage of earnings in the contract upon IAB activation based on
the length of time the contract is in force: 7-9 years, 15%; 10-14 years, 20%;
15+ years, 25%. See prospectus for more complete information.
Amount Available to Annuitize - The contract value plus the IAB value. See
prospectus for more complete information.
GMIB Protected Value - Purchase payments (adjusted for withdrawals) compounded
at 5% annually up to the later of age 80 or 7 years from issue or last reset,
subject to a 200% cap. See prospectus for more complete information.
GMIB Guaranteed Annual Payout for Single Life Annuity with 10-year Period
Certain - The payout determined by applying the GMIB protected value (and IAB
value if IAB is elected) to the GMIB guaranteed annuity purchase rates contained
in the contract. The payout represents the minimum payout to be received when
annuitizing the contract based on the illustrated assumptions. See prospectus
for more complete information.
Projected Contract Annual Annuity Payout for Single Life Annuity with 10-year
Period Certain - The hypothetical annuity payout based on the projected contract
value (and IAB value if IAB is elected) calculated using the minimum payout
rates guaranteed under the contract ("Guaranteed Minimum Payout Rates"). See
prospectus for more complete information.
If the GMIB benefit is elected, the greater of the following would be paid at
annuitization -
(1) The GMIB Guaranteed Payout, or
(2) The annuity payout available under the contract that is calculated
based on the adjusted contract value at annuitization and the better
of the Guaranteed Minimum Annuity Payout Rates or the Current Annuity
Payout Rates in effect at the time of annuitization. To show how the
GMIB rider works relative to the annuity payout available under the
contract we included the Projected Contract Annuity Payout column
which shows hypothetical annuity payouts based on the projected
contract values and the Guaranteed Minimum Payout Rates. We did not
illustrate any hypothetical annuity payouts based on Current Annuity
Payout Rates because these rates are subject to change at any time;
however, historically the annuity payout provided under such Current
Annuity Payout Rates have been significantly higher than the annuity
payout that would be provided under Guaranteed Minimum Annuity Payout
Rates.
CHANGE APPLICABLE TO PRUCO LIFE STRATEGIC PARTNERS SELECT ONLY:
WAIVER OF WITHDRAWAL CHARGE FOR CRITICAL CARE: In Section 6 of the prospectus,
under the heading entitled "Waiver of Withdrawal Charge For Critical Care" in
the first sentence, the reference to "owner or a joint owner" is amended to
refer instead to "annuitant, or if deceased, co-annuitant, respectively."
CHANGE APPLICABLE TO PRUCO LIFE & PRUCO LIFE OF NEW JERSEY STRATEGIC PARTNERS
SELECT AND PRUDENTIAL VARIABLE INVESTMENT PLAN ONLY:
PURCHASE PAYMENTS: In Section 5 of the prospectus, under the section entitled
"Purchase Payments," the third sentence in the first paragraph is replaced by
the following:
"Where allowed by law, you must get our approval for any initial and
additional purchase payment of $1,000,000 or more."
CHANGE APPLICABLE TO PRUDENTIAL QUALIFIED VARIABLE INVESTMENT PLAN AND
PRUDENTIAL VARIABLE INVESTMENT PLAN ONLY:
SCHEDULED TRANSACTIONS: In Section 2 of the prospectus, under the section
entitled "Dollar Cost Averaging," the following is added to the last sentence of
the fourth paragraph:
"If processing the transfer on the next business day would result in the
transaction occurring in the subsequent calendar year, then we will process the
transaction on the preceding business day. "
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees
In this registration statement, Pruco Life Insurance Company of New Jersey is
registering $40 million of securities and paying a filing fee of $1,572.00
therefor.
Federal Taxes
Pruco Life Insurance Company of New Jersey estimated the federal tax effect
associated with the deferred acquisition costs attributable to receipt of $1
million of purchase payments over a two year period to be approximately $74,000
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 $0 because
the variable annuity with which this market value adjustment option is
associated is no longer offered or sold.
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 $2500.00 in connection with each filing of this
registration statement with the Commission.
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 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)Form of Distribution Agreement between Prudential Annuities Distributors,
Inc. and Pruco Life Insurance Company of New Jersey. (Note 1)
(4)Discovery Select Variable Annuity Contract (Note 2)
(5)Opinion of Counsel as to legality of the securities being registered. (Note
8)
(23)Written consent of PricewaterhouseCoopers LLP, Independent accountants
(Note 8)
(24)(a) Power of Attorney for James J. Avery. (Note 4)
(b) Power of Attorney for Helen M. Galt. (Note 5)
(c) Power of Attorney for Bernard J. Jacob. (Note 6)
(d) Power of Attorney for Scott D. Kaplan. (Note 3)
(e) Power of Attorney for Stephen Pelletier. (Note 8)
(f) Power of Attorney for Tucker I. Marr. (Note 3)
(g) Power of Attorney for Scott G. Slyster. (Note 7)
- --------
(Note1) Incorporated by reference to Post-Effective Amendment No. 9, Form N-4,
Registration No. 333-131035, Filed December 18, 2007 on behalf of Pruco
Life of New Jersey Flexible Premium Variable Annuity Account.
(Note2) Incorporated by reference to Registration Statement No. 333-18053 filed
on Form S-1 filed December 17, 1996, on behalf of Pruco Life Insurance
Company of New Jersey.
(Note3) Incorporated by reference to Post-Effective Amendment No. 1, Form N-4,
Registration No. 333-131035, filed October 6, 2006 on behalf of Pruco Life
of New Jersey Flexible Premium Variable Annuity Account.
(Note4) Incorporated by reference to Post-Effective Amendment No. 10, Form S-1,
Registration No. 33-20018, filed April 9, 1998 on behalf of Pruco Life of
New Jersey Flexible Premium Variable Annuity Account.
(Note5) Incorporated by reference to Post-Effective Amendment No. 5, Form S-6,
Registration No. 333-85117, filed June 28, 2001 on behalf of Pruco Life of
New Jersey Flexible Premium Variable Annuity Account.
(Note6) Incorporated by reference to Post-Effective Amendment No. 6, Form S-3,
Registration No. 333-62246, filed April 19, 2006 on behalf of Pruco Life
of New Jersey Flexible Premium Variable Annuity Account.
(Note7) Incorporated by reference to Post-Effective Amendment No. 7, Form N-6,
Registration No. 333-112809, filed April 18, 2008 on behalf of Pruco Life
of New Jersey Flexible Premium Variable Annuity Account.
(Note8) Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10 (a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to the 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 12/th/ day of February 2009.
Signature and Title
*
- --------------------------
JAMES J. AVERY JR.
VICE CHAIRMAN AND DIRECTOR Date: February 12, 2009
*
- --------------------------
TUCKER I. MARR
CHIEF ACCOUNTING OFFICER
*
- --------------------------
BERNARD J. JACOB
DIRECTOR
*
- --------------------------
SCOTT G. SLEYSTER
DIRECTOR
*
- --------------------------
HELEN M. GALT
DIRECTOR
*
- --------------------------
STEPHEN PELLETIER
DIRECTOR
EXHIBIT INDEX
Exhibit No.
- -----------
5 Opinion of Counsel
23 Written Consent of PricewaterhouseCoopers LLP, Independent
Registered Public Accounting Firm
24 Powers of attorney for Director, Stephen Pelletier.