424B3: Prospectus [Rule 424(b)(3)]
Published on
PRUCO LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
STRATEGIC PARTNERS/SM/ ANNUITY ONE 3 VARIABLE ANNUITY ("SPAO 3")
STRATEGIC PARTNERS/SM/ PLUS 3 VARIABLE ANNUITY ("SP PLUS 3")
STRATEGIC PARTNERS/SM/ FLEXELITE VARIABLE ANNUITY ("SP FLEXELITE")
Supplement dated February 23, 2009
To
Prospectuses dated May 1, 2008, as Supplemented
This supplement should be read and retained with the prospectus and
supplements for your SPAO 3, SPAO Plus 3, and SP Flex-elite Annuity. If you
would like another copy of the prospectus or the supplements, please call us
at 1-888-PRU-2888. The terms used in this supplement are defined in the
Glossary in the prospectus, unless specifically defined in this supplement.
The optional living benefits and optional features described in this
supplement are only being offered in those jurisdictions where we have
received regulatory approval and will be offered subsequently in other
jurisdictions when we receive regulatory approval in those jurisdictions.
This supplement describes new optional living benefits available under each of
the above-referenced Contracts. If you currently own a Contract with a living
benefit, you may terminate your existing benefit rider and elect these new
benefits (subject to our current rules).
This supplement also describes a new optional feature available to current
owners of Highest Daily Lifetime Five Income Benefit, Highest Daily Lifetime
Seven Income Benefit, and Spousal Highest Daily Lifetime Seven Income Benefit
that, if elected, would provide an alternative asset transfer formula for your
benefit. Except as otherwise described in this supplement, all terms and
conditions of your Contract and benefit rider for Highest Daily Lifetime Five
Income Benefit, Highest Daily Lifetime Seven Income Benefit or Spousal Highest
Daily Lifetime Seven Income Benefit apply and do not change.
In addition, this supplement also: (1) discusses that certain optional living
benefits are no longer available (subject to regulatory approval of the
benefits offered in this supplement); (2) discusses information about
Section 403(b) annuity contract exchanges; (3) provides information regarding
purchasing a Contract if you are a beneficiary of an annuity contract that was
owned by a decedent; and (4) provides additional information with respect to
Highest Daily Lifetime Five, Highest Daily Lifetime Seven and Spousal Highest
Daily Lifetime Seven.
SPVASUP4
SUPPLEMENT TABLE OF CONTENTS
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The following line items are added to the prospectus (on page 14 for Pruco
Life ("PL") SPAO 3, page 13 for Pruco Life of New Jersey ("PLNJ") SPAO 3, page
13 for Flexelite, page 14 for PL SPAO Plus 3, and page 13 for PLNJ SPAO Plus
3) section "Summary of Contract Expenses - Insurance and Administrative
Expenses with the Indicated Benefits." The entire table of "Summary of
Contract Expenses" can be found on page 13 PL SPAO 3, page 12 PLNJ SPAO 3,
page 12 Flexelite, page 13 PL SPAO Plus, and page 12 PLNJ SPAO Plus of your
prospectus.
SUMMARY OF CONTRACT EXPENSES
How Charge is Determined
1. Highest Daily Lifetime 7 Plus. Charge for this benefit is assessed against
the Protected Withdrawal Value ("PWV"). As discussed in the description of
the benefit, the charge is taken out of the Sub-accounts. SPAO 3, 0.75% of
PWV is in addition to 1.50% annual charge of amounts invested in the
Sub-accounts. For SP Plus 3, 0.75% of PWV is in addition to 1.50% annual
charge of amounts invested in the Sub-accounts. For both SPAO 3 and SP
Plus 3 Contracts without the Credit, the 0.75% is in addition to 1.40%
annual charge of amounts invested in the Sub-accounts. For SP Flexelite,
0.75% of PWV is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts (or 1.60% annual charge of amounts invested in the
Sub-accounts for contracts sold prior to May 1, 2003, or upon subsequent
state approval).
Spousal Highest Daily Lifetime 7 Plus. Charge for this benefit is assessed
against the Protected Withdrawal Value ("PWV"). As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts.
SPAO 3, 0.90% of PWV is in addition to 1.50% annual charge of amounts
invested in the Sub-accounts. For SP Plus 3, 0.90% of PWV is in addition to
1.50% annual charge of amounts invested in the Sub-accounts. For both SPAO
3 and SP Plus 3 Contracts without the Credit, the 0.90% is in addition to
1.40% annual charge of amounts invested in the Sub-accounts. For SP
Flexelite, 0.90% of PWV is in addition to 1.65% annual charge of amounts
invested in the Sub-accounts (or 1.60% annual charge of amounts invested in
the Sub-accounts for contracts sold prior to May 1, 2003, or upon
subsequent state approval).
2. The Total Annual Charge includes the Insurance Charge assessed against the
average daily net assets allocated to the Sub-accounts. If you elect more
than one optional benefit, the Total Annual Charge would be increased to
include the charge for each optional benefit.
3. We reserve the right to increase the charge to the maximum charge
indicated, upon any step-up or reset under the benefit, or new election of
the benefit.
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EXPENSE EXAMPLES
For Pruco Life of New Jersey SPAO 3 and Pruco Life of New Jersey SP Plus 3
only, we replace the existing expense examples with the following:
Below are examples for each Contract showing what you would pay in expenses at
the end of the stated time periods had you invested $10,000 in the Contract
and your investment has a 5% return each year.
Example 1a: Contract With Credit: Step-Up Guaranteed Minimum Death Benefit,
Spousal Highest Daily Lifetime 7 Plus Benefit, and You Withdraw All Your Assets
This example assumes that:
. You invest $10,000 in the Contract With Credit,
. You choose the Step-Up Guaranteed Minimum Death Benefit,
. You choose the Spousal Highest Daily Lifetime 7 Plus Benefit,
. You allocate all of your assets to the variable investment option having
the maximum total operating expenses,*
. The investment has a 5% return each year,
. The mutual fund's total operating expenses remain the same each year,
. For each optional benefit charge, we deduct the maximum charge rather
than any current charge, and
. You withdraw all your assets at the end of the indicated period.
* Note: Not all portfolios offered are available if you elect certain
optional benefits.
Example 1b: Contract With Credit: Step-Up Guaranteed Minimum Death Benefit,
Spousal Highest Daily Lifetime 7 Plus Benefit, and You Do Not Withdraw Your
Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the
indicated period.
Example 2a: Contract With Credit: Base Death Benefit, and You Withdraw All
Your Assets
This example assumes that:
. You invest $10,000 in the Contract With Credit,
. You do not choose any optional insurance benefit,
. You allocate all of your assets to the variable investment option having
the maximum total operating expenses,*
. The investment has a 5% return each year,
. The mutual fund's total operating expenses remain the same each year,
. For each optional benefit charge, we deduct the maximum charge rather
than any current charge, and
. You withdraw all your assets at the end of the indicated period.
Example 2b: Contract With Credit: Base Death Benefit, and You Do Not Withdraw
Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the
indicated period.
Example 3a: Contract Without Credit: Step-Up Guaranteed Minimum Death Benefit,
Spousal Highest Daily Lifetime 7 Plus Benefit, and You Withdraw All Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you invest in the Contract Without Credit.
Example 3b: Contract Without Credit: Step-Up Guaranteed Minimum Death Benefit,
Spousal Highest Daily Lifetime 7 Plus Benefit, and You Do Not Withdraw Your
Assets
This example makes exactly the same assumptions as Example 1b except that it
assumes that you invest in the Contract Without Credit.
Example 4a: Contract Without Credit: Base Death Benefit; and You Withdraw All
Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you invest in the Contract Without Credit.
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Example 4b: Contract Without Credit: Base Death Benefit; and You Do Not
Withdraw Your Assets
This example makes exactly the same assumptions as Example 2b except that it
assumes that you invest in the Contract Without Credit.
Notes for Expense Examples:
These Examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
Contract With Credit: Step-up Guaranteed Minimum Death Benefit Option, Spousal
Highest Daily Lifetime 7 Plus Benefit
Contract With Credit: Base Death Benefit
Contract Without Credit: Step-up Guaranteed Minimum Death Benefit Option,
Spousal Highest Daily Lifetime 7 Plus Benefit
Contract Without Credit: Base Death Benefit
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I. NEW LIFETIME WITHDRAWAL BENEFITS
We add the following new lifetime withdrawal benefits to the prospectus:
HIGHEST DAILY LIFETIME 7 PLUS/SM/ INCOME BENEFIT (HD 7 Plus)/SM/
Highest Daily Lifetime 7 Plus is offered as a replacement to Highest Daily
Lifetime Seven in those jurisdictions where we have received regulatory
approval. Currently, if you elect Highest Daily Lifetime 7 Plus and
subsequently terminate the benefit, you may elect another lifetime withdrawal
benefit, subject to our current rules. See "Election of and Designations under
the Program" and "Termination of Existing Benefits and Election of New
Benefits" below for details. Please note that if you terminate Highest Daily
Lifetime 7 Plus and elect another lifetime benefit, you lose the guarantees
that you had accumulated under your existing benefit and will begin the new
guarantees under the new benefit you elect based on your Contract Value as of
the date the new benefit becomes active. The income benefit under Highest
Daily Lifetime 7 Plus currently is based on a single "designated life" who is
at least 45 years old on the date that the benefit is acquired. The Highest
Daily Lifetime 7 Plus benefit is not available if you elect any other optional
living benefit, although you may elect any optional death benefit other than
the Highest Daily Value death benefit. As long as your Highest Daily Lifetime
7 Plus Benefit is in effect, you must allocate your Contract Value in
accordance with the then permitted and available investment option(s) with
this program. For a more detailed description of the permitted investment
options, see the "Investment Options" section below and in your prospectus on
page 23 for PL SPAO 3, page 21 for PLNJ SPAO 3, page 22 for Flexelite, page
.23 for PL SPAO Plus 3, and page 21 for PLNJ SPAO Plus 3.
We offer a benefit that guarantees until the death of the single designated
life (the Annuitant) the ability to withdraw an annual amount (the "Annual
Income Amount") equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of Sub-account
performance on the Contract Value, subject to our program rules regarding the
timing and amount of withdrawals. You are guaranteed to be able to withdraw
the Annual Income Amount for the rest of your life ("Lifetime Withdrawals"),
provided that you have not made "excess withdrawals" that have resulted in
your Contract Value being reduced to zero. We also permit you to make a
one-time Non-Lifetime Withdrawal from your Annuity prior to taking Lifetime
Withdrawals under the benefit. Highest Daily Lifetime 7 Plus may be
appropriate if you intend to make periodic withdrawals from your Annuity, and
wish to ensure that Sub-account performance will not affect your ability to
receive annual payments. You are not required to make withdrawals as part of
the benefit - the guarantees are not lost if you withdraw less than the
maximum allowable amount each year under the rules of the benefit. As
discussed below, we require that you participate in our asset transfer program
in order to participate in Highest Daily Lifetime 7 Plus.
Although you are guaranteed the ability to withdraw your Annual Income Amount
for life even if your Contract Value falls to zero, if you take an excess
withdrawal that brings your Contract Value to zero, it is possible that your
Annual Income Amount could also fall to zero. In that scenario, no further
amount would be payable under the Highest Daily Lifetime 7 Plus benefit.
Key Feature - Protected Withdrawal Value
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. The Protected Withdrawal Value is separate from your Contract Value
and not available as cash or a lump sum. On the effective date of the benefit,
the Protected Withdrawal Value is equal to your Contract Value. On each
Business Day thereafter until the date of your first Lifetime Withdrawal
(excluding any Non-Lifetime Withdrawal discussed below), the Protected
Withdrawal Value is equal to the "Periodic Value" described in the next
paragraphs.
The "Periodic Value" initially is equal to the Contract Value on the effective
date of the benefit. On each Business Day thereafter until the first Lifetime
Withdrawal, we recalculate the Periodic Value. We stop determining the
Periodic Value upon your first Lifetime Withdrawal after the effective date of
the benefit. On each Business Day (the "Current Business Day"), the Periodic
Value is equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Business Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Business Day and the Current Business
Day (i.e., one day for successive Business Days, but more than one calendar
day for Business Days that are separated by weekends and/or holidays), plus
the amount of any adjusted Purchase Payment made on the Current Business
Day (the Periodic Value is proportionally reduced for any Non-Lifetime
Withdrawal); and
(2)the Contract Value.
If you have not made a Lifetime Withdrawal on or before the 10/th/, 20/th/, or
25/th/ Anniversary of the effective date of the benefit, your Periodic Value
on the 10/th/, 20/th/, or 25/th/ Anniversary of the benefit effective date is
equal to the greater of:
(1)the Periodic Value described above or,
(2)the sum of (a), (b) and (c) below (proportionally reduced for any
Non-Lifetime Withdrawals):
(a)200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of the Contract Value on the
effective date of the benefit;
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(b)200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of all adjusted Purchase Payments
made within one year following the effective date of the benefit; and
(c)all adjusted Purchase Payments made after one year following the
effective date of the benefit.
On and after the date of your first Lifetime Withdrawal, your Protected
Withdrawal Value is increased by the amount of any subsequent Purchase
Payments, is reduced by withdrawals, including your first Lifetime Withdrawal
(as described below), and may be increased if you qualify for a step-up (as
described below).
Return of Principal Guarantee
If you have not made a Lifetime Withdrawal before the Tenth Anniversary, we
will increase your Contract Value on that Tenth Anniversary (or the next
Business Day, if that anniversary is not a Business Day), if the requirements
set forth in this paragraph are met. On the Tenth Anniversary, we add:
a) your Contract Value on the day that you elected Highest Daily Lifetime 7
Plus proportionally reduced for any Non-Lifetime Withdrawal; and
b) the sum of each Purchase Payment proportionally reduced for any subsequent
Non-Lifetime Withdrawal (including the amount of any associated Credits)
you made during the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Contract Value on the Tenth
Anniversary, we increase your Contract Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Contract Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Contract Value under this
provision will be allocated to each of your variable investment options
(including the AST Investment Grade Bond Sub-account), in the same proportion
that each such Sub-account bears to your total Contract Value, immediately
before the application of the amount. Any such amount will not be considered a
Purchase Payment when calculating your Protected Withdrawal Value, your death
benefit, or the amount of any optional benefit that you may have selected, and
therefore will have no direct impact on any such values at the time we add
this amount. Because the amount is added to Contract Value, it will also be
subject to each charge under your Contract based on Contract Value. This
potential addition to Contract Value is available only if you have elected
Highest Daily Lifetime 7 Plus and if you meet the conditions set forth in this
paragraph. Thus, if you take a withdrawal (other than a Non-Lifetime
Withdrawal) prior to the Tenth Anniversary, you are not eligible to receive
the Return of Principal Guarantee. The Return of Principal Guarantee is
referred to as the Guaranteed Minimum Contract Value Credit in the benefit
rider.
Key Feature - Annual Income Amount under the Highest Daily Lifetime 7 Plus
Benefit
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value. The percentage initially depends on the age of the Annuitant
on the date of the first Lifetime Withdrawal after election of the benefit.
The percentages are: 4% for ages 45 - less than 59 1/2, 5% for ages 59 1/2-74,
6% for ages 75-79, 7% for ages 80-84, and 8% for ages 85 and older. Under the
Highest Daily Lifetime 7 Plus benefit, if your cumulative Lifetime Withdrawals
in a Contract Year are less than or equal to the Annual Income Amount, they
will not reduce your Annual Income Amount in subsequent Contract Years, but
any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Contract Year. If your cumulative Lifetime
Withdrawals in a Contract Year are in excess of the Annual Income Amount
("Excess Income"), your Annual Income Amount in subsequent years will be
reduced (except with regard to required minimum distributions for this
Contract that comply with our rules) by the result of the ratio of the Excess
Income to the Contract Value immediately prior to such withdrawal (see
examples of this calculation below). Reductions are based on the actual amount
of the withdrawal, including any CDSC that may apply. Lifetime Withdrawals of
any amount up to and including the Annual Income Amount will reduce the
Protected Withdrawal Value by the amount of the withdrawal. Withdrawals of
Excess Income will reduce the Protected Withdrawal Value by the same ratio as
the reduction to the Annual Income Amount.
Note that if your withdrawal of the Annual Income Amount in a given Contract
Year exceeds the applicable free withdrawal amount under the Contract (but is
not considered Excess Income), we will not impose any CDSC on the amount of
that withdrawal.
You may use the Systematic Withdrawal program to make withdrawals of the
Annual Income Amount. Any systematic withdrawal will be deemed a Lifetime
Withdrawal under this benefit.
Any Purchase Payment that you make subsequent to the election of Highest Daily
Lifetime 7 Plus will (i) increase the then-existing Annual Income Amount by an
amount equal to a percentage of the Purchase Payment (including the amount of
any associated Credits) based on the age of the Annuitant at the time of the
first Lifetime Withdrawal (the percentages are: 4% for ages 45 - less than
59 1/2, 5% for ages 59 1/2-74, 6% for ages 75-79, 7% for ages 80-84, and 8%
for ages 85 and older) and (ii) increase the Protected Withdrawal Value by the
amount of the Purchase Payment (including the amount of any associated
Credits).
Highest Daily Auto Step-Up
An automatic step-up feature ("Highest Daily Auto Step-Up") is part of Highest
Daily Lifetime 7 Plus. As detailed in this paragraph, the Highest Daily Auto
Step-Up feature can result in a larger Annual Income Amount subsequent to your
first Lifetime
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Withdrawal. The Highest Daily Auto Step-Up starts with the anniversary of the
Contract Date of the Contract (the "Contract Anniversary") immediately after
your first Lifetime Withdrawal under the benefit. Specifically, upon the first
such Contract Anniversary, we identify the Contract Value on each Business Day
within the immediately preceding Contract Year after your first Lifetime
Withdrawal. Having identified the highest daily value (after all daily values
have been adjusted for subsequent purchase payments and withdrawals), we then
multiply that value by a percentage that varies based on the age of the
Annuitant on the Contract Anniversary as of which the step-up would occur. The
percentages are: 4% for ages 45 - less than 59 1/2, 5% for ages 59 1/2-74, 6%
for ages 75-79, 7% for ages 80-84, and 8% for ages 85 and older. If that value
exceeds the existing Annual Income Amount, we replace the existing amount with
the new, higher amount. Otherwise, we leave the existing Annual Income Amount
intact. The Contract Value on the Contract Anniversary is considered the last
daily step-up value of the Contract Year. All daily valuations and annual
step-ups will only occur on a Business Day. In later years (i.e., after the
first Contract Anniversary after the first Lifetime Withdrawal), we determine
whether an automatic step-up should occur on each Contract Anniversary, by
performing a similar examination of the Contract Values that occurred on
Business Days during the year. At the time that we increase your Annual Income
Amount, we also increase your Protected Withdrawal Value to equal the highest
daily value upon which your step-up was based only if that results in an
increase to the Protected Withdrawal Value. Your Protected Withdrawal Value
will never be decreased as a result of an income step-up. If, on the date that
we implement a Highest Daily Auto Step-Up to your Annual Income Amount, the
charge for Highest Daily Lifetime 7 Plus has changed for new purchasers, you
may be subject to the new charge at the time of such step-up. Prior to
increasing your charge for Highest Daily Lifetime 7 Plus upon a step-up, we
would notify you, and give you the opportunity to cancel the automatic step-up
feature. If you receive notice of a proposed step-up and accompanying fee
increase, you should carefully evaluate whether the amount of the step-up
justifies the increased fee to which you will be subject.
If you establish a Systematic Withdrawal program, we will not automatically
increase the withdrawal amount when there is an increase to the Annual Income
Amount.
The Highest Daily Lifetime 7 Plus program does not affect your ability to make
withdrawals under your Contract, or limit your ability to request withdrawals
that exceed the Annual Income Amount. Under Highest Daily Lifetime 7 Plus, if
your cumulative Lifetime Withdrawals in a Contract Year are less than or equal
to the Annual Income Amount, they will not reduce your Annual Income Amount in
subsequent Contract Years, but any such withdrawals will reduce the Annual
Income Amount on a dollar-for-dollar basis in that Contract Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Contract Year, you cannot carry over the unused portion of the Annual
Income Amount to subsequent Contract Years.
Because each of the Protected Withdrawal Value and Annual Income Amount is
determined in a way that is not solely related to Contract Value, it is
possible for the Contract Value to fall to zero, even though the Annual Income
Amount remains.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Daily Auto Step-Up are set forth below. The values shown here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime 7
Plus benefit or any other fees and charges. Assume the following for all three
examples:
. The Contract Date is December 1, 2008
. The Highest Daily Lifetime 7 Plus benefit is elected on March 5, 2009
. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime 7 Plus benefit.
Example of dollar-for-dollar reductions
On November 24, 2009, the Protected Withdrawal Value is $120,000, resulting in
an Annual Income Amount of $6,000 (since the Annuitant is between the ages of
59 1/2 and 74 at the time of the first Lifetime Withdrawal, the Annual Income
Amount is 5% of the Protected Withdrawal Value, in this case 5% of $120,000).
Assuming $2,500 is withdrawn from the Contract on this date, the remaining
Annual Income Amount for that Contract Year (up to and including December 1,
2009) is $3,500. This is the result of a dollar-for-dollar reduction of the
Annual Income Amount ($6,000 less $2,500 = $3,500).
Example of proportional reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on November 27, 2009 and the Contract Value at the time and immediately
prior to this withdrawal is $118,000. The first $3,500 of this withdrawal
reduces the Annual Income Amount for that Contract Year to $0. The remaining
withdrawal amount of $1,500 - reduces the Annual Income Amount in future
Contract Years on a proportional basis based on the ratio of the excess
withdrawal to the Contract Value immediately prior to the excess withdrawal.
(Note that if there are other future withdrawals in that Contract Year, each
would result in another proportional reduction to the Annual Income Amount).
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Here is the calculation:
Example of highest daily auto step-up
On each Contract Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the Annuitant's age on the Contract
Anniversary) of the highest daily value since your first Lifetime Withdrawal
(or last Contract Anniversary in subsequent years), adjusted for withdrawals
and additional Purchase Payments, is higher than the Annual Income Amount,
adjusted for excess withdrawals and additional Purchase Payments (including
the amount of any associated Credits).
Continuing the same example as above, the Annual Income Amount for this
Contract Year is $6,000. However, the excess withdrawal on November 27 reduces
the amount to $5,921.40 for future years (see above). For the next Contract
Year, the Annual Income Amount will be stepped up if 5% (since the designated
life is between 59 1/2 and 74 on the date of the potential step-up) of the
highest daily Contract Value adjusted for withdrawals and Purchase Payments
(including the amount of any associated Credits), is higher than $5,921.40.
Here are the calculations for determining the daily values. Only the
November 25 value is being adjusted for excess withdrawals as the November 30
and December 1 Business Days occur after the excess withdrawal on November 27.
* In this example, the Contract Anniversary date is December 1. The Valuation
Dates are every day following the first Lifetime Withdrawal. In subsequent
Contract Years Valuation Dates will be every day following the Contract
Anniversary. The Contract Anniversary Date of December 1 is considered the
final Valuation Date for the Contract Year.
** In this example, the first daily value after the first Lifetime Withdrawal
is $119,000 on November 25, resulting in an adjusted Annual Income Amount
of $5,950.00. This amount is adjusted on November 27 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Contract Value of $119,000 on November 25 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Contract Year), resulting in an adjusted Contract Value
of $115,500 before the excess withdrawal.
. This amount ($115,500) is further reduced by 1.31% (this is the ratio in
the above example which is the excess withdrawal divided by the Contract
Value immediately preceding the excess withdrawal) resulting in a
Highest Daily Value of $113,986.95.
. The adjusted Annual Income Amount is carried forward to the next
Valuation Date of November 30. At this time, we compare this amount to
5% of the Contract Value on November 30. Since the November 27 adjusted
Annual Income Amount of $5,699.35 is higher than $5,650.00 (5% of
$113,000), we continue to carry $5,699.35 forward to the next and final
Valuation Date of December 1. The Contract Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than
$5,699.35, the adjusted Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value results in the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,921.40 adjusted for excess withdrawals, the Annual Income Amount
for the next Contract Year, starting on December 2, 2009 and continuing
through December 1, 2010, will be stepped-up to $5,950.00.
Non-Lifetime Withdrawal Feature
You may take a one-time non-lifetime withdrawal ("Non-Lifetime Withdrawal")
under Highest Daily Lifetime 7 Plus. It is an optional feature of the benefit
that you can only elect at the time of your first withdrawal. The amount of
the Non-Lifetime Withdrawal cannot be more than the amount that would cause
the Contract to be taken below the minimum Surrender Value after a withdrawal
for your Contract (See "How Can I Access My Money?" in the prospectus on page
92 for PL SPAO 3, page 87 for PLNJ SPAO 3, page 92 for Flexelite, page 94 for
PL SPAO plus 3 and page 84 for PLNJ SPAO Plus 3). This Non-Lifetime Withdrawal
will not establish your initial Annual Income Amount and the Periodic Value
described above will continue to be calculated. However, the total amount of
the withdrawal will proportionally reduce all guarantees associated with the
Highest Daily Lifetime 7 Plus benefit. You must tell us if your withdrawal is
intended to be the Non-Lifetime Withdrawal and not the first
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Lifetime Withdrawal under the Highest Daily Lifetime 7 Plus benefit. If you
don't elect the Non-Lifetime Withdrawal, the first withdrawal you make will be
the first Lifetime Withdrawal that establishes your Protected Withdrawal Value
and Annual Income Amount. Once you elect to take the Non-Lifetime Withdrawal
or Lifetime Withdrawals, no additional Non-Lifetime Withdrawals may be taken.
The Non-Lifetime Withdrawal will proportionally reduce the Protected
Withdrawal Value, the Return of Principal guarantee, and the Periodic Value
guarantees on the tenth, twentieth and twenty-fifth anniversaries of the
benefit effective date, described above, by the percentage the total
withdrawal amount (including any applicable CDSC) represents of the then
current Contract Value immediately prior to the withdrawal.
If you are participating in a Systematic Withdrawal program, the first
withdrawal under the program cannot be classified as the Non-Lifetime
Withdrawal. The first partial withdrawal in payment of any third party
investment advisory service from your Contract also cannot be classified as
the Non-Lifetime Withdrawal.
Example - Non-Lifetime Withdrawal (proportional reduction)
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges. It is intended to illustrate the
proportional reduction of the Non-Lifetime Withdrawal under this benefit.
Assume the following:
. The Contract Date is December 1, 2008
. The Highest Daily Lifetime 7 Plus benefit is elected on March 5, 2009
. The Contract Value at benefit election was $105,000
. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime 7 Plus benefit.
. No previous withdrawals have been taken under the Highest Daily Lifetime
7 Plus benefit.
On May 2, 2009, the Protected Withdrawal Value is $125,000, the 10/th/ benefit
year minimum Periodic Value guarantee is $210,000, the 10/th/ benefit year
Return of Principal guarantee is $105,000, the 20/th/ benefit year minimum
Periodic Value guarantee is $420,000, the 25/th/ benefit year minimum Periodic
Value guarantee is $630,000 and the Contract Value is $120,000. Assuming
$15,000 is withdrawn from the Contract on May 2, 2009 and is designated as a
Non-Lifetime Withdrawal, all guarantees associated with the Highest Daily
Lifetime 7 Plus benefit will be reduced by the ratio the total withdrawal
amount represents of the Contract Value just prior to the withdrawal being
taken.
Here is the calculation:
Required Minimum Distributions
Withdrawals that exceed the Annual Income Amount, but which you are required
to take as a required minimum distribution for this Contract, will not reduce
the Annual Income Amount for future years. No additional Annual Income Amounts
will be available in a Contract Year due to required minimum distributions
unless the required minimum distribution amount is greater than the Annual
Income Amount. Any withdrawal you take that exceeds the Annual Income Amount
in Contract Years that your required minimum distribution amount is not
greater than the Annual Income Amount will be treated as an Excess Withdrawal
under the benefit. If the required minimum distribution (as calculated by us
for your Contract and not previously withdrawn in the current calendar year)
is greater than the Annual Income Amount, an amount equal to the remaining
Annual Income Amount plus the difference between the required minimum
distribution amount not previously withdrawn in the current calendar year and
the Annual Income Amount will be available in the current Contract Year
without it being considered an excess withdrawal.
Example - required minimum distributions
The following example is purely hypothetical and is intended to illustrate a
scenario in which the required minimum distribution amount in a given Contract
Year is greater than the Annual Income Amount. In the event that a required
minimum distribution is calculated in a calendar year that crosses more than
one Contract Year and you choose to satisfy the entire required minimum
distribution for that calendar year in the next Contract Year, the
distribution taken in the next Contract Year will reduce your Annual Income
Amount in that Contract Year on a dollar for dollar basis. If the required
minimum distribution not taken in the prior Contract Year is greater than the
Annual Income Amount as guaranteed by the benefit in the current Contract
Year, the total required minimum distribution amount may be taken without
being treated as an excess withdrawal.
10
Annual Income Amount = $5,000
Remaining Annual Income Amount = $3,000
Required Minimum Distribution = $6,000
The amount you may withdraw in the current Contract Year without it being
treated as an Excess Withdrawal is $4,000. ($3,000 + ($6,000 - $5,000) =
$4,000).
If the $4,000 withdrawal is taken, the remaining Annual Income Amount will be
zero and the remaining required minimum distribution amount of $2,000 may be
taken in the subsequent Contract Year (when your Annual Income Amount is reset
to $5,000) without proportionally reducing all of the guarantees associated
with the Highest Daily Lifetime 7 Plus benefit as described above.
The amount you may withdraw in the subsequent Contract Year if you choose not
to satisfy the RMD in the current Contract Year (assuming the Annual Income
Amount in the subsequent Contract Year is $5000.00), without being treated as
an Excess Withdrawal is $6000.00. This withdrawal must comply with all IRS
guidelines in order to satisfy the Required Minimum Distribution for the
current calendar year.
Benefits Under Highest Daily Lifetime 7 Plus
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative Lifetime Withdrawals in an Contract Year that are less than or
equal to the Annual Income Amount or as a result of the fee that we assess
for Highest Daily Lifetime 7 Plus, and amounts are still payable under
Highest Daily Lifetime 7 Plus, we will make an additional payment, if any,
for that Contract Year equal to the remaining Annual Income Amount for the
Contract Year. If you have not begun taking Lifetime Withdrawals and your
Contract Value is reduced to zero as a result of the fee we assess for
Highest Daily Lifetime 7 Plus, we will calculate the Annual Income Amount
as if you made your first Lifetime Withdrawal on the date the Contract
Value was reduced to zero and Lifetime Withdrawals will begin on the next
Contract Anniversary. If this were to occur, you are not permitted to make
additional purchase payments to your Contract. Thus, in these scenarios,
the remaining Annual Income Amount would be payable even though your
Contract Value was reduced to zero. In subsequent Contract Years we make
payments that equal the Annual Income Amount as described in this section.
We will make payments until the death of the single Designated Life. To the
extent that cumulative withdrawals in the Contract Year that reduced your
Contract Value to zero are more than the Annual Income Amount, the Highest
Daily Lifetime 7 Plus benefit terminates, and no additional payments are
made. However, if a withdrawal in the latter scenario was taken to satisfy
a required minimum distribution under the Annuity, then the benefit will
not terminate, and we will continue to pay the Annual Income Amount in
subsequent Contract Years until the death of the Designated Life.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is an Annual Income
Amount due in subsequent Contract Years, you can elect one of the following
two options:
(1)apply your Contract Value to any Annuity option available; or
(2)request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. If this
option is elected, the Annual Income Amount will not increase after
annuity payments have begun. We will make payments until the death of
the single Designated Life. We must receive your request in a form
acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
Annuity. The amount that will be applied to provide such Annuity payments
will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2)the Contract Value.
.. If no Lifetime Withdrawal was ever taken, we will calculate the Annual
Income Amount as if you made your first Lifetime Withdrawal on the date the
annuity payments are to begin.
.. Please note that payments that we make under this benefit after the
Contract Anniversary coinciding with or next following the annuitant's
95/th/ birthday will be treated as annuity payments.
Other Important Considerations
.. Withdrawals under the Highest Daily Lifetime 7 Plus benefit are subject to
all of the terms and conditions of the Annuity, including any applicable
CDSC for the Non-Lifetime Withdrawal as well as withdrawals that exceed the
Annual Income Amount.
.. Withdrawals made while the Highest Daily Lifetime 7 Plus Benefit is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity.
.. You can make withdrawals from your Annuity while your Contract Value is
greater than zero without purchasing the Highest Daily Lifetime 7 Plus
benefit. The Highest Daily Lifetime 7 Plus benefit provides a guarantee
that if your Contract Value is
11
reduced to zero (subject to our program rules regarding time and amount of
withdrawals), you will be able to receive your Annual Income Amount in the
form of periodic benefit payments.
.. Upon inception of the benefit, 100% of your Contract Value must be
allocated to the Permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Contract Value to or from
the AST Investment Grade Bond Portfolio Sub-account (see description below)
if you elect this benefit. A summary description of the AST Investment
Grade Bond Portfolio appears within the prospectus section entitled "What
Are The Investment Objectives and Policies of The Portfolios?". Upon the
initial transfer of your Contract Value into the AST Investment Grade Bond
Portfolio, we will send a prospectus for that Portfolio to you, along with
your confirmation statement. In addition, you can find a copy of the AST
Investment Grade Bond Portfolio prospectus by going to
www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the Highest Daily Lifetime 7 Plus
asset transfer program will not count toward the maximum number of free
transfers allowable under an Annuity.
.. We currently limit the Sub-accounts to which you may allocate Contract
Value if you participate in this benefit. (See "See What Investment Options
Can I Choose" in the prospectus on page 23 for PL SPAO 3, page page 21 for
PLNJ SPAO 3, page 22 for Flexelite, page 23 for PL SPAO Plus 3, and page 21
for PLNJ SPAO Plus 3). Moreover, if you are invested in prohibited
investment options and seek to elect the benefit, we will ask you to
reallocate to permitted investment options as a prerequisite to electing
the benefit.
.. The maximum charge for Highest Daily Lifetime 7 Plus is 1.50% annually of
the greater of Contract Value and the Protected Withdrawal Value (PWV). The
current charge is 0.75% annually of the greater of Contract Value and the
Protected Withdrawal Value. We deduct this fee at the end of each benefit
quarter, where each such quarter is part of a year that begins on the
effective date of the benefit or an anniversary thereafter. Thus, on each
such quarter-end (or the next Business Day, if the quarter-end is not a
Business Day), we deduct 0.1875% of the greater of the prior day's Contract
Value or the prior day's Protected Withdrawal Value at the end of the
quarter. We deduct the fee pro rata from each of your Sub-accounts
including the AST Investment Grade Bond Portfolio Sub-account. Since this
fee is based on the greater of the Contract Value or the Protected
Withdrawal Value, the fee for Highest Daily Lifetime 7 Plus may be greater
than it would have been, had it been based on the Contract Value alone. If
the fee to be deducted exceeds the Contract Value at the benefit quarter,
we will charge the remainder of the Contract Value for the benefit and
continue the benefit as described above.
Election of and Designations under the Program
For Highest Daily Lifetime 7 Plus, there must be either a single Owner who is
the same as the Annuitant, or if the Annuity is entity owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 45 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime 7 Plus. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime 7 Plus, except if (a) the new Owner has
the same taxpayer identification number as the previous owner, (b) ownership
is transferred from a custodian to the Annuitant, or vice versa or
(c) ownership is transferred from one entity to another entity that is
satisfactory to us.
Highest Daily Lifetime 7 Plus can be elected at the time that you purchase
your Annuity or after the Contract Date, subject to our eligibility rules and
restrictions. If you elect Highest Daily Lifetime 7 Plus and terminate it, you
can re-elect it, subject to our current rules. Additionally, if you currently
own an Annuity with a living benefit, you may terminate your existing benefit
rider and elect the benefits offered in this supplement, subject to our
current rules (See "Termination of Existing Benefits and Election of New
Benefits" below). Please note that if you terminate a living benefit and elect
a new living benefit, you lose the guarantees that you had accumulated under
your existing benefit and will begin the new guarantees under the new benefit
you elect based on your Contract Value as of the date the new benefit becomes
active. We reserve the right to waive, change and/or further limit the
election frequency in the future.
Termination of the Program
You may terminate Highest Daily Lifetime 7 Plus at any time by notifying us.
If you terminate the benefit, any guarantee provided by the benefit will
terminate as of the date the termination is effective, and certain
restrictions on re-election will apply. The benefit automatically terminates:
(i) upon your termination of the benefit, (ii) upon your surrender of the
Annuity, (iii) upon your election to begin receiving annuity payments
(although if you have elected to receive the Annual Income Amount in the form
of Annuity payments, we will continue to pay the Annual Income Amount),
(iv) upon our receipt of due proof of the death of the Annuitant, (v) if both
the Contract Value and Annual Income Amount equal zero, or (vi) if you cease
to meet our requirements as described in "Election of and Designations under
the Program".
Upon termination of Highest Daily Lifetime 7 Plus other than upon the death of
the Annuitant, we impose any accrued fee for the benefit (i.e., the fee for
the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts
that are held in the variable investment options, and (ii) transfer all
amounts held in the AST Investment Grade Bond Portfolio Sub-account to your
variable investment options, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e. in the same
proportion as the current balances in your variable investment options).
12
If a surviving spouse elects to continue the Annuity, the Highest Daily
Lifetime 7 Plus benefit terminates. The spouse may elect the benefit subject
to the restrictions discussed above.
How Highest Daily Lifetime 7 Plus Transfers Contract Value Between Your
Permitted Sub-accounts and the AST Investment Grade Bond Sub-Account
As indicated above, we limit the Sub-accounts to which you may allocate
Contract Value if you elect Highest Daily Lifetime 7 Plus. For purposes of
this benefit, we refer to those permitted Sub-accounts as the "Permitted
Sub-accounts". An integral part of Highest Daily Lifetime 7 Plus is the
pre-determined mathematical formula used to transfer Contract Value between
the Permitted Sub-Accounts and a specified bond fund within the Advanced
Series Trust (the "AST Investment Grade Bond Sub-Account"). The AST Investment
Grade Bond Sub-account is available only with this benefit, and thus you may
not allocate Purchase Payments to or make transfers to or from the AST
Investment Grade Bond Sub-account. The mathematical formula monitors your
Contract Value daily and, if dictated by the formula, systematically transfers
amounts between the Permitted Sub-accounts you have chosen and the AST
Investment Grade Bond Sub-account. The formula is set forth below.
Speaking generally, the formula, which is applied each Business Day, operates
as follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
income amount. Note that 5% is used in the formula, irrespective of the
Annuitant's attained age. Then it produces an estimate of the total amount
targeted in our allocation model, based on the projected income amount and
factors set forth in the formula. In the formula, we refer to that value as
the "Target Value" or "L". If you have already made a withdrawal, your
projected income amount (and thus your Target Value) would take into account
any automatic step-up, any subsequent Purchase Payments, and any excess
withdrawals. Next, the formula subtracts from the Target Value the amount held
within the AST Investment Grade Bond Sub-account on that day, and divides that
difference by the amount held within the Permitted Sub-accounts. That ratio,
which essentially isolates the amount of your Target Value that is not offset
by amounts held within the AST Investment Grade Bond Sub-account, is called
the "Target Ratio" or "r". If, on each of three consecutive Business Days, the
Target Ratio is greater than 83% but less than or equal to 84.5%, the formula
will, on such third Business Day, make a transfer from the Permitted
Sub-accounts in which you are invested (subject to the 90% cap discussed
below) to the AST Investment Grade Bond Sub-account. Once a transfer is made,
the three consecutive Business Days begin again. If, however, on any Business
Day, the Target Ratio is above 84.5%, it will make a transfer from the
Permitted Sub-accounts (subject to the 90% cap) to the AST Investment Grade
Bond Sub-account. If the Target Ratio falls below 78% on any Business Day,
then a transfer from the AST Investment Grade Bond Sub-account to the
Permitted Sub-accounts will occur.
The formula will not execute a transfer to the AST Investment Grade Bond
Sub-account that results in more than 90% of your Contract Value being
allocated to the AST Investment Grade Bond Sub-account ("90% cap"). Thus, on
any Business Day, if the formula would require a transfer to the AST
Investment Grade Bond Sub-account that would result in more than 90% of the
Contract Value being allocated to the AST Investment Grade Bond Sub-account,
only the amount that results in exactly 90% of the Contract Value being
allocated to the AST Investment Grade Bond Sub-account will be transferred.
Additionally, future transfers into the AST Investment Grade Bond Sub-account
will not be made (regardless of the performance of the AST Investment Grade
Bond Sub-account and the Permitted Sub-accounts) at least until there is first
a transfer out of the AST Investment Grade Bond Sub-account. Once this
transfer occurs out of the AST Investment Grade Bond Sub-account, future
amounts may be transferred to or from the AST Investment Grade Bond
Sub-account if dictated by the formula (subject to the 90% cap). At no time
will the formula make a transfer to the AST Investment Grade Bond Sub-account
that results in greater than 90% of your Contract Value being allocated to the
AST Investment Grade Bond Sub-account. However, it is possible that, due to
the investment performance of your allocations in the AST Investment Grade
Bond Sub-account and your allocations in the Permitted Sub-accounts you have
selected, your Contract Value could be more than 90% invested in the AST
Investment Grade Bond Sub-account.
If you make additional purchase payments to your Contract while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the AST Investment Grade Bond Sub-account at least until there is
first a transfer out of the AST Investment Grade Bond Sub-account, regardless
of how much of your Contract Value is in the Permitted Sub-accounts. This
means that there could be scenarios under which, because of the additional
purchase payments you make, less than 90% of your entire Contract Value is
allocated to the AST Investment Grade Bond Sub-account, and the formula will
still not transfer any of your Contract Value to the AST Investment Grade Bond
Sub-account (at least until there is first a transfer out of the AST
Investment Grade Bond Sub-account). For example,
. March 19, 2009 - a transfer is made to the AST Investment Grade Bond
Sub-account that results in the 90% cap being met and now $90,000 is
allocated to the AST Investment Grade Bond Sub-account and $10,000 is
allocated to the Permitted Sub-accounts.
. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the AST Investment Grade Bond Sub-account
to the Permitted Sub-accounts since the cap went into effect on
March 19, 2009.
. On March 20, 2009 (and at least until first a transfer is made out of
the AST Investment Grade Bond Sub-account under the formula) - the
$10,000 payment is allocated to the Permitted Sub-accounts and on this
date you have 82% in the AST Investment Grade Bond Sub-account and 18%
in the Permitted Sub-accounts (such that $20,000 is allocated to the
Permitted Sub-accounts and $90,000 to the AST Investment Grade Bond
Sub-account).
13
. Once there is a transfer out of the AST Investment Grade Bond
Sub-account (of any amount), the formula will operate as described
above, meaning that the formula could transfer amounts to or from the
AST Investment Grade Bond Sub-account if dictated by the formula
(subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and be
removed multiple times while you participate in the benefit. We will continue
to monitor your Contract Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST Investment Grade Bond Sub-account as dictated by the
mathematical formula.
As you can glean from the formula, poor or flat investment performance of your
Contract Value may result in a transfer of a portion of your Contract Value in
the Permitted Sub-accounts to the AST Investment Grade Bond Sub-account
because such poor investment performance will tend to increase the Target
Ratio. Because the amount allocated to the AST Investment Grade Bond
Sub-account and the amount allocated to the Permitted Sub-accounts each is a
variable in the formula, the investment performance of each affects whether a
transfer occurs for your Contract. In deciding how much to transfer, we use
another formula, which essentially seeks to re-balance amounts held in the
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account so that
the Target Ratio meets a target, which currently is equal to 80%. Once you
elect Highest Daily Lifetime 7 Plus, the values we use to compare to the
Target Ratio will be fixed. For newly-issued Annuities that elect Highest
Daily Lifetime 7 Plus and existing Annuities that elect Highest Daily Lifetime
7 Plus in the future, however, we reserve the right to change such values.
Additionally, on each monthly Contract Anniversary (if the monthly Contract
Anniversary does not fall on a Business Day, the next Business Day will be
used), following all of the above described daily calculations, a transfer may
be made from the AST Investment Grade Bond Sub-account to the Permitted
Sub-accounts. Any such transfer will be based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata (i.e.
in the same proportion as the current balances in your variable investment
options). This transfer will automatically occur provided that the Target
Ratio, as described above, would be less than 83% after the transfer. The
formula will not execute a transfer if the Target Ratio after this transfer
would occur would be greater than or equal to 83%.
The amount of the transfer will be equal to the lesser of:
a) The total value of all your Contract Value in the AST Investment Grade Bond
Sub-account, or
b) An amount equal to 5% of your total Contract Value.
While you are not notified when your Contract reaches a transfer trigger under
the formula, you will receive a confirmation statement indicating the transfer
of a portion of your Contract Value either to or from the AST Investment Grade
Bond Sub-account. The formula by which the transfer operates is designed
primarily to mitigate some of the financial risks that we incur in providing
the guarantee under Highest Daily Lifetime 7 Plus.
Depending on the results of the calculations of the mathematical formula, we
may, on any Business Day:
. Not make any transfer between the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account; or
. If a portion of your Contract Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options); or
. Transfer a portion of your Contract Value in the Permitted Sub-accounts
pro rata to the AST Investment Grade Bond Sub-account.
The amount and timing of transfers to and from the AST Investment Grade Bond
Sub-account pursuant to the mathematical formula depends upon a number of
factors unique to YOUR Contract (and is not necessarily directly correlated
with the securities markets, bond markets, or interest rates, in general)
including:
. The difference between your Contract Value and your Protected Withdrawal
Value;
. How long you have owned Highest Daily Lifetime 7 Plus or Spousal Highest
Daily Lifetime 7 Plus;
. The performance of the Permitted Sub-accounts you have chosen;
. The performance of the AST Investment Grade Bond Sub-account;
. The amount allocated to each of the Permitted Sub-accounts you have
chosen;
. The amount allocated to the AST Investment Grade Bond Sub-account;
. Additional Purchase Payments, if any, you make to your Contract; and
. Withdrawals, if any, you take from your Contract (withdrawals are taken
pro rata from your Contract Value).
At any given time, some, most or none of your Contract Value will be allocated
to the AST Investment Grade Bond Sub-account, as dictated by the formula.
The more of your Contract Value allocated to the AST Investment Grade Bond
Sub-account under the formula, the greater the impact of the performance of
that Sub-account in determining whether (and how much) your Contract Value is
transferred back to
14
the Permitted Sub-accounts. Further, it is possible under the formula that, if
a significant portion of your Contract Value is allocated to the AST
Investment Grade Bond Sub-account and that Sub-account has good performance
but the performance of your Permitted Sub-accounts is negative, that the
formula might transfer your Contract Value to the Permitted Sub-accounts.
Similarly, the more you have allocated to the Permitted Sub-accounts, the
greater the impact of the performance of those Permitted Sub-accounts will
have on any transfer to the AST Investment Grade Bond Sub-account.
If you make additional Purchase Payments to your Contract, they will be
allocated according to your allocation instructions. Once they are allocated
to your Contract, they will also be subject to the mathematical formula
described above and therefore may be transferred to the AST Investment Grade
Bond Portfolio, if dictated by the formula.
Any Contract Value in the AST Investment Grade Bond Sub-account will not be
available to participate in the investment experience of the Permitted
Sub-accounts regardless of whether there is a subsequent Sub-account decline
or recovery until it is transferred out of the AST Investment Grade Bond
Sub-account.
TRANSFER FORMULA FOR HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT AND SPOUSAL
HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT
TRANSFERS OF CONTRACT VALUE BETWEEN YOUR PERMITTED SUB-ACCOUNTS AND THE AST
INVESTMENT GRADE BOND SUB-ACCOUNT
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULAS:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime 7 Plus/Spousal Highest Daily Lifetime 7 Plus
benefit (the "Effective Date") and is not changed for the life of the
guarantee. Currently, it is 83%.
. Cu\\s\\ - the secondary upper target is established on the effective
date of the Highest Daily Lifetime 7 Plus/Spousal Highest Daily Lifetime
7 Plus benefit (the "Effective Date") and is not changed for the life of
the guarantee. Currently it is 84.5%
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 78%.
. L - the target value as of the current Business Day.
. r - the target ratio.
. a - factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee.
. V\\V\\ - the total value of all Permitted Sub-accounts in the Contract.
. V\\F\\ the total value of all elected Fixed Rate Options in the Contract.
. B - the total value of the AST Investment Grade Bond Portfolio
Sub-account.
. P - Income Basis. Prior to the first Lifetime Withdrawal, the Income
Basis is equal to the Protected Withdrawal Value calculated as if the
first Lifetime Withdrawal were taken on the date of calculation. After
the first Lifetime Withdrawal, the Income Basis is equal to the greater
of (1) the Protected Withdrawal Value on the date of the first Lifetime
Withdrawal, increased for additional Purchase Payments, including the
amount of any associated Credits, and adjusted proportionally for excess
withdrawals*, and (2) any highest daily Contract Value occurring on or
after the date of the first Lifetime Withdrawal and prior to or
including the date of this calculation increased for additional Purchase
Payments including the amount of any associated Credits, and adjusted
for Lifetime Withdrawals.
. T - the amount of a transfer into or out of the AST Investment Grade
Bond Portfolio Sub-account.
. T\\M\\ - the amount of a monthly transfer out of the AST Investment
Grade Bond Portfolio.
* Note: Lifetime Withdrawals of less than or equal to the Annual Income
Amount do not reduce the Income Basis.
15
Daily Calculations
TARGET VALUE CALCULATION:
On each Business Day, a target value (L) is calculated, according to the
following formula. If the variable Contract Value (V\\V\\ + V\\F\\) is equal
to zero, no calculation is necessary.
Transfer Calculation:
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines when a transfer is required:
. If on the third consecutive Business Day r (greater than) Cu and r
(less or =) Cu\\s\\ or if on any day r (greater than) Cu\\s\\, and
subject to the 90% cap rule described above, assets in the Permitted
Sub-accounts are transferred to the AST Investment Grade Bond
Portfolio Sub-account.
. If r (less than) Cl, and there are currently assets in the AST
Investment Grade Bond Portfolio Sub-account (B (greater than) 0),
assets in the AST Investment Grade Bond Portfolio Sub-account are
transferred to the Permitted Sub-accounts according to most recent
allocation instructions.
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines the transfer amount:
Monthly Calculation
On each monthly anniversary of the Contract Date and following the daily
Transfer Calculation above, the following formula determines if a transfer
from the AST Investment Grade Bond Sub-account to the Permitted Sub-Accounts
will occur:
If, after the daily Transfer Calculation is performed,
{Min (B, .05 * (V\\V\\ + V\\F\\ + B))} (less than) (Cu * (V\\V\\ + V\\F\\) - L
+ B) / (1 - C\\u\\), then
16
"a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
* The values set forth in this table are applied to all ages.
** In all subsequent years and months thereafter, the Contract factor is 4.06
Additional Tax Considerations
If you purchase a Contract as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your Contract beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Contract Year that required minimum distributions due from your Contract are
greater than such amounts. In addition, the amount and duration of payments
under the Contract payment and death benefit provisions may be adjusted so
that the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distribution provisions under the tax
law. Please note, however, that any withdrawal (except the Non-Lifetime
Withdrawal) you take prior to the Tenth Anniversary, even if withdrawn to
satisfy required minimum distribution rules, will cause you to lose the
ability to receive the Return of Principal Guarantee and the guaranteed amount
described above under "Key Feature - Protected Withdrawal Value".
As indicated, withdrawals made while this benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Contract. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this benefit
here. However, we do note that if you participate in Highest Daily Lifetime 7
Plus through a non-qualified contract, as with all withdrawals, once all
Purchase Payments are returned under the Annuity, all subsequent withdrawal
amounts will be taxed as ordinary income.
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS/SM/ INCOME BENEFIT (SHD7 Plus)/SM/
Spousal Highest Daily Lifetime 7 Plus is the spousal version of Highest Daily
Lifetime 7 Plus. This version is only being offered in those jurisdictions
where we have received regulatory approval and will be offered subsequently in
other jurisdictions when we
17
receive regulatory approval in those jurisdictions. Currently, if you elect
Spousal Highest Daily Lifetime 7 Plus and subsequently terminate the benefit,
you may elect another lifetime withdrawal benefit, subject to our current
rules. See "Termination of Existing Benefits and Election of New Benefits".
Please note that if you terminate Spousal Highest Daily Lifetime 7 Plus and
elect another benefit, you lose the guarantees that you had accumulated under
your existing benefit and will begin the new guarantees under the new benefit
you elect based on your Contract Value as of the date the new benefit becomes
active. Spousal Highest Daily Lifetime 7 Plus must be elected based on two
Designated Lives, as described below. The youngest Designated Life must be at
least 50 years old and the oldest Designated Life must be at least 55 years
old when the benefit is elected. Spousal Highest Daily Lifetime 7 Plus is not
available if you elect any other optional benefit. As long as your Spousal
Highest Daily Lifetime 7 Plus Benefit is in effect, you must allocate your
Contract Value in accordance with the then permitted and available investment
option(s) with this program. For a more detailed description of permitted
investment options, see the "Investment Options" section below and in your
prospectus on page 23 for PL SPAO 3, page 21 for PLNJ SPAO 3, page 22 for
Flexelite, page 23 for PLNJ SPAO Plus 3, and page 21 for PLNJ SPAO Plus3.
We offer a benefit that guarantees until the later death of two natural
persons who are each other's spouses at the time of election of the benefit
and at the first death of one of them (the "Designated Lives", and each, a
"Designated Life") the ability to withdraw an annual amount (the "Annual
Income Amount") equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of Sub-account
performance on the Contract Value, subject to our program rules regarding the
timing and amount of withdrawals. You are guaranteed to be able to withdraw
the Annual Income Amount for the lives of the Designated Lives ("Lifetime
Withdrawals") provided you have not made "excess withdrawals" that have
resulted in your Contract Value being reduced to zero. We also permit a
one-time Non-Lifetime Withdrawal from your Contract prior to taking Lifetime
Withdrawals under the benefit. The benefit may be appropriate if you intend to
make periodic withdrawals from your Contract, wish to ensure that Sub-account
performance will not affect your ability to receive annual payments, and wish
either spouse to be able to continue the Spousal Highest Daily Lifetime 7 Plus
benefit after the death of the first spouse. You are not required to make
withdrawals as part of the program - the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. As discussed below, we require that you participate in our asset
transfer program in order to participate in Spousal Highest Daily Lifetime 7
Plus.
Although you are guaranteed the ability to withdraw your Annual Income Amount
for life even if your Contract Value falls to zero, if you take an excess
withdrawal that brings your Contract Value to zero, it is possible that your
Annual Income Amount could also fall to zero. In that scenario, no further
amount would be payable under Spousal Highest Daily Lifetime 7 Plus.
Key Feature - Protected Withdrawal Value
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. The Protected Withdrawal Value is separate from your Contract Value
and not available as cash or a lump sum. On the effective date of the benefit,
the Protected Withdrawal Value is equal to your Contract Value. On each
Business Day thereafter until the date of your first Lifetime Withdrawal
(excluding any Non-Lifetime Withdrawal discussed below), the Protected
Withdrawal Value is equal to the "Periodic Value" described in the next
paragraph.
The "Periodic Value" initially is equal to the Contract Value on the effective
date of the benefit. On each Business Day thereafter until the first Lifetime
Withdrawal, we recalculate the Periodic Value. We stop determining the
Periodic Value upon your first Lifetime Withdrawal after the effective date of
the benefit. On each Business Day (the "Current Business Day"), the Periodic
Value is equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Business Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Business Day and the Current Business
Day (i.e., one day for successive Business Days, but more than one calendar
day for Business Days that are separated by weekends and/or holidays), plus
the amount of any adjusted Purchase Payment made on the Current Business
Day (the Periodic Value is proportionally reduced for any Non-Lifetime
Withdrawal); and
(2)the Contract Value.
If you have not made a Lifetime Withdrawal on or before the 10/th/, 20/th/, or
25/th/ Anniversary of the effective date of the benefit, your Periodic Value
on the 10/th/, 20/th/, or 25/th/ Anniversary of the benefit effective date is
equal to the greater of:
(1)the Periodic Value described above or,
(2)the sum of (a), (b) and (c) (proportionally reduced for any Non-Lifetime
Withdrawal):
(a)200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of the Contract Value on the
effective date of the benefit;
(b)200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of all adjusted Purchase Payments
made within one year following the effective date of the benefit; and
(c)All adjusted Purchase Payments made after one year following the
effective date of the benefit.
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On and after the date of your first Lifetime Withdrawal, your Protected
Withdrawal Value is increased by the amount of any subsequent Purchase
Payments, is reduced by withdrawals, including your first Lifetime Withdrawal
(as described below), and may be increased if you qualify for a step-up (as
described below).
Return of Principal Guarantee
If you have not made a Lifetime Withdrawal before the Tenth Anniversary, we
will increase your Contract Value on that Tenth Anniversary (or the next
Business Day, if that anniversary is not a Business Day), if the requirements
set forth in this paragraph are met. On the Tenth Anniversary, we add:
a) your Contract Value on the day that you elected Spousal Highest Daily
Lifetime 7 Plus proportionally reduced for any Non-Lifetime Withdrawal; and
b) the sum of each Purchase Payment proportionally reduced for any subsequent
Non-Lifetime Withdrawal (including the amount of any associated Credits)
you made during the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Contract Value on the Tenth
Anniversary, we increase your Contract Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Contract Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Contract Value under this
provision will be allocated to each of your variable investment options
(including the AST Investment Grade Bond Sub-account used with this benefit),
in the same proportion that each such Sub-account bears to your total Contract
Value, immediately before the application of the amount. Any such amount will
not be considered a Purchase Payment when calculating your Protected
Withdrawal Value, your death benefit, or the amount of any optional benefit
that you may have selected, and therefore will have no direct impact on any
such values at the time we add this amount. Because the amount is added to
your Contract Value, it will also be subject to each charge under your
Contract based on Contract Value. This potential addition to Contract Value is
available only if you have elected Spousal Highest Daily Lifetime 7 Plus and
if you meet the conditions set forth in this paragraph. Thus, if you take a
withdrawal, including a required minimum distribution, (other than a
Non-Lifetime Withdrawal) prior to the Tenth Anniversary, you are not eligible
to receive the Return of Principal Guarantee. The Return of Principal
Guarantee is referred to as the Guaranteed Minimum Contract Value Credit in
the benefit rider.
Key Feature - Annual Income Amount under the Spousal Highest Daily Lifetime 7
Plus Benefit
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value. The percentage initially depends on the age of the youngest
Designated Life on the date of the first Lifetime Withdrawal after election of
the benefit. The percentages are: 4% for ages 50 - less than 59 1/2, 5% for
ages 50 1/2-79, 6% for ages 80 to 84, 7% for ages 85 to 89, and 8% for ages 90
and older. We use the age of the youngest Designated Life even if that
Designated Life is no longer a participant under the Contract due to death or
divorce. Under the Spousal Highest Daily Lifetime 7 Plus benefit, if your
cumulative Lifetime Withdrawals in an Contract Year are less than or equal to
the Annual Income Amount, they will not reduce your Annual Income Amount in
subsequent Contract Years, but any such withdrawals will reduce the Annual
Income Amount on a dollar-for-dollar basis in that Contract Year. If your
cumulative Lifetime Withdrawals in an Contract Year are in excess of the
Annual Income Amount for any Contract Year ("Excess Income"), your Annual
Income Amount in subsequent years will be reduced (except with regard to
required minimum distributions for this Contract that comply with our rules)
by the result of the ratio of the Excess Income to the Contract Value
immediately prior to such withdrawal (see examples of this calculation below).
Reductions are based on the actual amount of the withdrawal, including any
CDSC that may apply. Lifetime Withdrawals of any amount up to and including
the Annual Income Amount will reduce the Protected Withdrawal Value by the
amount of the withdrawal. Withdrawals of Excess Income will reduce the
Protected Withdrawal Value by the same ratio as the reduction to the Annual
Income Amount.
Note that if your withdrawal of the Annual Income Amount in a given Contract
Year exceeds the applicable free withdrawal amount under the Contract (but is
not considered Excess Income), we will not impose any CDSC on the amount of
that withdrawal.
You may use the Systematic Withdrawal program to make withdrawals of the
Annual Income Amount. Any systematic withdrawal will be deemed a Lifetime
Withdrawal under this benefit.
Any Purchase Payment that you make subsequent to the election of Spousal
Highest Daily Lifetime 7 Plus will (i) increase the then-existing Annual
Income Amount by an amount equal to a percentage of the Purchase Payment
(including the amount of any associated Credit) based on the age of the
younger Annuitant at the time of the first Lifetime Withdrawal (the
percentages are: 4% for ages 50 - less than 59 1/2, 5% for ages 59 1/2-79, 6%
for ages 80-84, 7% for ages 85-89, and 8% for ages 90 and older), and
(ii) increase the Protected Withdrawal Value by the amount of the Purchase
Payment (including the amount of any associated Credit).
Highest Daily Auto Step-Up
An automatic step-up feature ("Highest Daily Auto Step-Up") is part of this
benefit. As detailed in this paragraph, the Highest Daily Auto Step-Up feature
can result in a larger Annual Income Amount subsequent to your first Lifetime
Withdrawal. The Highest Daily Step-Up starting with the anniversary of the
Contract Date of the Contract (the "Contract Anniversary") immediately
19
after your first Lifetime Withdrawal under the benefit. Specifically, upon the
first such Contract Anniversary, we identify the Contract Value on each
Business Day within the immediately preceding Contract Year after your first
Lifetime Withdrawal. Having identified the highest daily value (after all
daily values have been adjusted for subsequent purchase payments and
withdrawals), we then multiply that value by a percentage that varies based on
the age of the youngest Designated Life on the Contract Anniversary as of
which the step-up would occur. The percentages are 4% for ages 50 - less than
59 1/2, 5% for ages 59 1/2-79, 6% for ages 80-84, 7% for ages 85-89, and 8%
for ages 90 and older. If that value exceeds the existing Annual Income
Amount, we replace the existing amount with the new, higher amount. Otherwise,
we leave the existing Annual Income Amount intact. The Contract Value on the
Contract Anniversary is considered the last daily step-up value of the
Contract Year. In later years (i.e., after the first Contract Anniversary
after the first Lifetime Withdrawal), we determine whether an automatic
step-up should occur on each Contract Anniversary by performing a similar
examination of the Contract Values that occurred on Business Days during the
year. At the time that we increase your Annual Income Amount, we also increase
your Protected Withdrawal Value to equal the highest daily value upon which
your step-up was based only if that results in an increase to the Protected
Withdrawal Value. Your Protected Withdrawal Value will never be decreased as a
result of an income step-up. If, on the date that we implement a Highest Daily
Auto Step-Up to your Annual Income Amount, the charge for Spousal Highest
Daily Lifetime 7 Plus has changed for new purchasers, you may be subject to
the new charge at the time of such step-up. Prior to increasing your charge
for Spousal Highest Daily Lifetime 7 Plus upon a step-up, we would notify you,
and give you the opportunity to cancel the automatic step-up feature. If you
receive notice of a proposed step-up and accompanying fee increase, you should
carefully evaluate whether the amount of the step-up justifies the increased
fee to which you will be subject.
If you establish a Systematic Withdrawal program, we will not automatically
increase the withdrawal amount when there is an increase to the Annual Income
Amount.
The Spousal Highest Daily Lifetime 7 Plus program does not affect your ability
to make withdrawals under your Annuity, or limit your ability to request
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime 7 Plus, if your cumulative Lifetime Withdrawals in an Contract Year
are less than or equal to the Annual Income Amount, they will not reduce your
Annual Income Amount in subsequent Contract Years, but any such withdrawals
will reduce the Annual Income Amount on a dollar-for-dollar basis in that
Contract Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Contract Year, you cannot carry-over the unused portion of the Annual
Income Amount to subsequent Contract Years.
Because each of the Protected Withdrawal Value and Annual Income Amount is
determined in a way that is not solely related to Contract Value, it is
possible for the Contract Value to fall to zero, even though the Annual Income
Amount remains.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Daily Auto Step-Up are set forth below. The values shown here are purely
hypothetical, and do not reflect the charges for the Spousal Highest Daily
Lifetime 7 Plus benefit or any other fees and charges. Assume the following
for all three examples:
. The Contract Date is December 1, 2008
. The Spousal Highest Daily Lifetime 7 Plus benefit is elected on March 5,
2009
. The younger Designated Life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime 7 Plus benefit.
Example of dollar-for-dollar reductions
On November 24, 2009, the Protected Withdrawal Value is $120,000, resulting in
an Annual Income Amount of $6,000 (since the youngest designated life is
between the ages of 59 1/2 and 79 at the time of the first Lifetime
Withdrawal, the Annual Income Amount is 5% of the Protected Withdrawal Value,
in this case 5% of $120,000). Assuming $2,500 is withdrawn from the Contract
on this date, the remaining Annual Income Amount for that Contract Year (up to
and including December 1, 2009) is $3,500. This is the result of a
dollar-for-dollar reduction of the Annual Income Amount ($6,000 less $2,500 =
$3,500).
Example of proportional reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on November 27, 2009 and the Contract Value at the time and immediately
prior to this withdrawal is $118,000. The first $3,500 of this withdrawal
reduces the Annual Income Amount for that Contract Year to $0. The remaining
withdrawal amount of $1,500 - reduces the Annual Income Amount in future
Contract Years on a proportional basis based on the ratio of the excess
withdrawal to the Contract Value immediately prior to the excess withdrawal.
(Note that if there were other withdrawals in that Contract Year, each would
result in another proportional reduction to the Annual Income Amount).
20
Here is the calculation:
Example of highest daily auto step-up
On each Contract Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the youngest designated life's age on the
Contract Anniversary) of the highest daily value since your first Lifetime
Withdrawal (or last Contract Anniversary in subsequent years), adjusted for
withdrawals and additional Purchase Payments, is higher than the Annual Income
Amount, adjusted for excess withdrawals and additional Purchase Payments
(including the amount of any associated Credits).
Continuing the same example as above, the Annual Income Amount for this
Contract Year is $6,000. However, the excess withdrawal on November 27 reduces
the amount to $5,921.40 for future years (see above). For the next Contract
Year, the Annual Income Amount will be stepped up if 5% (since the youngest
Designated Life is between 59 1/2 and 79 on the date of the potential step-up)
of the highest daily Contract Value adjusted for withdrawals and Purchase
Payments (including credits), is higher than $5921.40. Here are the
calculations for determining the daily values. Only the November 25 value is
being adjusted for excess withdrawals as the November 30 and December 1
Business Days occur after the excess withdrawal on November 27.
* In this example, the Contract Anniversary date is December 1. The Valuation
Dates are every day following the first Lifetime Withdrawal. In subsequent
Contract Years Valuation Dates will be every day following the Contract
Anniversary. The Contract Anniversary Date of December 1 is considered the
final Valuation Date for the Contract Year.
** In this example, the first daily value after the first Lifetime Withdrawal
is $119,000 on November 25, resulting in an adjusted Annual Income Amount
of $5,950.00. This amount is adjusted on November 27 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Contract Value of $119,000 on November 25 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Contract Year), resulting in an adjusted Contract Value
of $115,500 before the excess withdrawal.
. This amount ($115,500) is further reduced by 1.31% (this is the ratio in
the above example which is the excess withdrawal divided by the Contract
Value immediately preceding the excess withdrawal) resulting in a
Highest Daily Value of $113,986.95.
. The adjusted Annual Income Amount is carried forward to the next
Valuation Date of November 30. At this time, we compare this amount to
5% of the Contract Value on November 30. Since the November 27 adjusted
Annual Income Amount of $5,699.35 is higher than $5,650.00 (5% of
$113,000), we continue to carry $5,699.35 forward to the next and final
Valuation Date of December 1. The Contract Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than
$5,699.35, the adjusted Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value results in the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,921.40 adjusted for excess withdrawals, the Annual Income Amount
for the next Contract Year, starting on December 2, 2009 and continuing
through December 1, 2010, will be stepped-up to $5,950.00.
Non-Lifetime Withdrawal Feature
You may take a one-time non-lifetime withdrawal ("Non-Lifetime Withdrawal")
under Spousal Highest Daily Lifetime 7 Plus. It is an optional feature of the
benefit that you can only elect at the time of your first withdrawal. The
amount of the Non-Lifetime Withdrawal cannot be more than the amount that
would cause the Contract to be taken below the minimum Surrender Value after a
withdrawal for your Contract (See "How Can I Access My Money?" in the
prospectus on page 92 for PL SPAO 3, page 84 for PLNJ SPAO 3, page 92 for
Flexelite, page 94 for PL SPAO Plus 3 and page 87 for PLNJ SPAO Plus 3). This
Non-Lifetime Withdrawal will not establish your initial Annual Income Amount
and the Periodic Value described above will continue to be calculated.
However, the total amount of the withdrawal will proportionally reduce all
guarantees associated with the Spousal Highest Daily Lifetime 7 Plus benefit.
You must tell us if your withdrawal is intended to be the Non-Lifetime
Withdrawal and not the first lifetime withdrawal under the Spousal Highest
Daily Lifetime 7 Plus benefit. If you don't elect the Non-Lifetime
21
Withdrawal, the first Lifetime withdrawal you make will be the first Lifetime
Withdrawal that establishes your Protected Withdrawal Value and Annual Income
Amount. Once you elect the Non-Lifetime Withdrawal or Lifetime Withdrawals, no
additional Non-Lifetime withdrawals may be taken.
The Non-Lifetime Withdrawal will proportionally reduce the Protected
Withdrawal Value, the Return of Principal guarantee and the Periodic Value
guarantees on the tenth, twentieth and twenty-fifth anniversaries of the
benefit effective date, described above, by the percentage the total
withdrawal amount (including any applicable CDSC) represents of the then
current Contract Value immediately prior to the time of the withdrawal.
If you are participating in a Systematic Withdrawal program, the first
withdrawal under the program cannot be classified as the Non-Lifetime
Withdrawal. The first partial withdrawal in payment of any third party
investment advisory service from your Contract also cannot be classified as
the Non-Lifetime Withdrawal.
Example - Non-Lifetime Withdrawal (proportional reduction)
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges. It is intended to illustrate the
proportional reduction of the Non-Lifetime Withdrawal under this benefit.
Assume the following:
. The Contract Date is December 1, 2008
. The Spousal Highest Daily Lifetime 7 Plus benefit is elected on March 5,
2009
. The Contract Value at benefit election was $105,000
. The younger Designated Life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime 7 Plus benefit.
. No previous withdrawals have been taken under the Spousal Highest Daily
Lifetime 7 Plus benefit.
On May 2, 2009, the Protected Withdrawal Value is $125,000, the 10/th/ benefit
year minimum Periodic Value guarantee is $210,000, the 10/th/ benefit year
Return of Principal guarantee is $105,000, the 20/th/ benefit year minimum
Periodic Value guarantee is $420,000, the 25/th/ benefit year minimum Periodic
Value guarantee is $630,000 and the Contract Value is $120,000. Assuming
$15,000 is withdrawn from the Contract on May 2, 2009 and is designated as a
Non-Lifetime Withdrawal, all guarantees associated with the Spousal Highest
Daily Lifetime 7 Plus benefit will be reduced by the ratio the total
withdrawal amount represents of the Contract Value just prior to the
withdrawal being taken.
Here is the calculation:
Required Minimum Distributions
Withdrawals that exceed the Annual Income Amount, but which you are required
to take as a required minimum distribution for this Contract, will not reduce
the Annual Income Amount for future years. No additional Annual Income Amounts
will be available in a Contract Year due to required minimum distributions
unless the required minimum distribution amount is greater than the Annual
Income Amount. Any withdrawal you take that exceeds the Annual Income Amount
in Contract Years that your required minimum distribution amount is not
greater than the Annual Income Amount will be treated as an Excess Withdrawal
under the benefit. If the required minimum distribution (as calculated by us
for your Contract and not previously withdrawn in the current calendar year)
is greater than the Annual Income Amount, an amount equal to the remaining
Annual Income Amount plus the difference between the required minimum
distribution amount not previously withdrawn in the current calendar year and
the Annual Income Amount will be available in the current Contract Year
without it being considered an excess withdrawal.
Example - Required Minimum Distributions
The following example is purely hypothetical and is intended to illustrate a
scenario in which the required minimum distribution amount in a given Contract
Year is greater than the Annual Income Amount. In the event that a required
minimum distribution is calculated in a calendar year that crosses more than
one Contract Year and you choose to satisfy the entire required minimum
distribution for that calendar year in the next Contract Year, the
distribution taken in the next Contract Year will reduce your Annual Income
Amount in that Contract Year on a dollar for dollar basis. If the required
minimum distribution not taken in the prior Contract Year is greater than the
Annual Income Amount as guaranteed by the benefit in the current Contract
Year, the total required minimum distribution amount may be taken without
being treated as an excess withdrawal.
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Annual Income Amount = $5,000
Remaining Annual Income Amount = $3,000
Required Minimum Distribution = $6,000
The amount you may withdraw in the current Contract Year without it being
treated as an Excess Withdrawal is $4,000. ($3,000 + ($6,000 - $5,000) =
$4,000).
If the $4,000 withdrawal is taken, the remaining Annual Income Amount will be
zero and the remaining required minimum distribution amount of $2,000 may be
taken in the subsequent Contract Year (when your Annual Income Amount is reset
to $5,000) without proportionally reducing all guarantees associated with the
Spousal Highest Daily Lifetime 7 Plus benefit as described above.
The amount you may withdraw in the subsequent Contract Year if you choose not
to satisfy the RMD in the current Contract Year (assuming the Annual Income
Amount in the subsequent Contract Year is $5000.00), without being treated as
an Excess Withdrawal is $6000.00. This withdrawal must comply with all IRS
guidelines in order to satisfy the Required Minimum Distribution for the
current calendar year.
Benefits Under Spousal Highest Daily Lifetime 7 Plus
.. To the extent that your Contract Value was reduced to zero as a result of
cumulative Lifetime Withdrawals in a Contract Year that are equal to or
less than the Annual Income Amount or as a result of the fee that we assess
for Spousal Highest Daily Lifetime 7 Plus, and amounts are still payable
under Spousal Highest Daily Lifetime 7 Plus, we will make an additional
payment, if any, for that Contract Year equal to the remaining Annual
Income Amount for the Contract Year. If you have not begun taking Lifetime
Withdrawals and your Contract Value is reduced to zero as a result of the
fee we assess for Spousal Highest Daily Lifetime 7 Plus, we will calculate
the Annual Income Amount as if you made your first Lifetime Withdrawal on
the date the Contract Value was reduced to zero and Lifetime Withdrawals
will begin on the next Contract Anniversary. If this were to occur, you are
not permitted to make additional purchase payments to your Contract. Thus,
in these scenarios, the remaining Annual Income Amount would be payable
even though your Contract Value was reduced to zero. In subsequent Contract
Years we make payments that equal the Annual Income Amount as described in
this section. We will make payments until the death of the first of the
Designated Lives to die, and will continue to make payments until the death
of the second Designated Life as long as the Designated Lives were spouses
at the time of the first death. To the extent that cumulative withdrawals
in the Contract Year that reduced your Contract Value to zero are more than
the Annual Income Amount, the Spousal Highest Daily Lifetime 7 Plus benefit
terminates, and no additional payments will be made. However, if a
withdrawal in the latter scenario was taken to satisfy a required minimum
distribution under the Contract the benefit will not terminate, and we will
continue to pay the Annual Income Amount in subsequent Contract Years until
the death of the second Designated Life provided the Designated lives were
spouses at the death of the first Designated Life.
.. If Contract payments are to begin under the terms of your Contract, or if
you decide to begin receiving Contract payments and there is an Annual
Income Amount due in subsequent Contract Years, you can elect one of the
following two options:
(1)apply your Contract Value to any Contract option available; or
(2)request that, as of the date Contract payments are to begin, we make
Contract payments each year equal to the Annual Income Amount. We
will make payments until the first of the Designated Lives to die,
and will continue to make payments until the death of the second
Designated Life as long as the Designated Lives were spouses at the
time of the first death. If, due to death of a Designated Life or
divorce prior to annuitization, only a single Designated Life
remains, then Contract payments will be made as a life contract for
the lifetime of the Designated Life. We must receive your request in
a form acceptable to us at our office.
In the absence of an election when mandatory annuity payments are to begin, we
will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with ten payments certain, by applying the
greater of the annuity rates then currently available or the annuity rates
guaranteed in your Contract. The amount that will be applied to provide such
Contract payments will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the joint and
survivor or single (as applicable) life fixed annuity rates then
currently available or the joint and survivor or single (as
applicable) life fixed annuity rates guaranteed in your Contract; and
(2)the Contract Value.
.. If no Lifetime Withdrawal was ever taken, we will calculate the Annual
Income Amount as if you made your first Lifetime Withdrawal on the date the
annuity payments are to begin.
.. Please note that payments that we make under this benefit after the
Contract Anniversary coinciding with or next following the older of the
owner or Annuitant's 95/th/ birthday, will be treated as annuity payments.
Other Important Considerations
.. Withdrawals under the Spousal Highest Daily Lifetime 7 Plus benefit are
subject to all of the terms and conditions of the Contract, including any
applicable CDSC for the Non-Lifetime Withdrawal as well as withdrawals that
exceed the Annual Income Amount.
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.. Withdrawals made while the Spousal Highest Daily Lifetime 7 Plus benefit is
in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Contract.
.. You can make withdrawals from your Contract while your Contract Value is
greater than zero without purchasing the Spousal Highest Daily Lifetime 7
Plus benefit. The Spousal Highest Daily Lifetime 7 Plus benefit provides a
guarantee that if your Contract Value is reduced to zero (subject to
program rules regarding the timing and amount of withdrawals), you will be
able to receive your Annual Income Amount in the form of periodic benefit
payments.
.. Upon inception of the benefit, 100% of your Contract Value must be
allocated to the Permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Contract Value to or from
the AST Investment Grade Bond Portfolio Sub-account (as described below) if
you elect this benefit. A summary description of the AST Investment Grade
Bond Portfolio appears within the prospectus section entitled "What Are The
Investment Objectives and Policies of The Portfolios?". Upon the initial
transfer of your Contract Value into the AST Investment Grade Bond
Portfolio, we will send a prospectus for that Portfolio to you, along with
your confirmation statement. In addition, you can find a copy of the AST
Investment Grade Bond Portfolio prospectus by going to
www.prudentialannuities.com.
.. You can make withdrawals from your Contract without purchasing the Spousal
Highest Daily Lifetime 7 Plus benefit. The Spousal Highest Daily Lifetime 7
Plus benefit provides a guarantee that if your Contract Value declines due
to Sub-account performance, you will be able to receive your Annual Income
Amount in the form of periodic benefit payments.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the Spousal Highest Daily Lifetime
7 Plus asset transfer program will not count toward the maximum number of
free transfers allowable under a Contract.
.. We currently limit the Sub-accounts to in which you may allocate Contract
Value if you participate in this benefit (see "What Investment Options Can
I Choose?" below and in the prospectus on page 23 for PL SPAO 3, page 21
for PLNJ SPAO 3, page 22 for Flexelite, page 23 for PL SPAO Plus 3 and page
21 for PLNJ SPAO Plus 3). Moreover, if you are invested in prohibited
investment options and seek to elect the benefit, we will ask you to
reallocate to permitted investment options as a prerequisite to electing
the benefit.
.. The maximum fee for Spousal Highest Daily Lifetime 7 Plus is 1.50% annually
of the greater of Contract Value and the Protected Withdrawal Value. The
current fee for Spousal Highest Daily Lifetime 7 Plus is 0.90% annually of
the greater of Contract Value and the Protected Withdrawal Value. We deduct
this fee at the end of each benefit quarter, where each such quarter is
part of a year that begins on the effective date of the benefit or an
anniversary thereafter. Thus, on each such quarter-end (or the next
Business Day, if the quarter-end is not a Business Day), we deduct 0.225%
of the greater of the prior day's Contract Value, or the prior day's
Protected Withdrawal Value at the end of the quarter. We deduct the fee pro
rata from each of your Sub-accounts including the AST Investment Grade Bond
Sub-account. Since this fee is based on the greater of the Contract Value
and the Protected Withdrawal Value, the fee for Spousal Highest Daily
Lifetime 7 Plus may be greater than it would have been, had it been based
on the Contract Value alone. If the fee to be deducted exceeds the Contract
Value, we will reduce the Contract Value to zero, and continue the benefit
as described above.
Election of and Designations under the Benefit
Spousal Highest Daily Lifetime 7 Plus can only be elected based on two
Designated Lives. Designated Lives must be natural persons who are each
other's spouses at the time of election of the program and at the death of the
first of the Designated Lives to die. Currently, Spousal Highest Daily
Lifetime 7 Plus only may be elected where the Owner, Annuitant, and
Beneficiary designations are as follows:
.. One Contract Owner, where the Annuitant and the Owner are the same person
and the beneficiary is the Owner's spouse. The youngest Owner/Annuitant and
the beneficiary must be at least 50 years old and the oldest must be at
least 55 years old at the time of election; or
.. Co-Contract Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. The youngest Owner must
be at least 50 years old and the oldest owner must be at least 55 years old
at the time of election; or
.. One Contract Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. The youngest of the Annuitant and the Contingent Annuitant must
be at least 50 years old and the oldest must be at least 55 years old at
the time of election.
We do not permit a change of Owner under this benefit, except as follows:
(a)if one Owner dies and the surviving spousal Owner assumes the Contract, or
(b)if the Contract initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary under
this benefit. If the Designated Lives divorce, the Spousal Highest Daily
Lifetime 7 Plus benefit may not be divided as part of the divorce
settlement or judgment. Nor may the divorcing spouse who retains ownership
of the Contract appoint a new Designated Life upon re-marriage.
24
Spousal Highest Daily Lifetime 7 Plus can be elected at the time that you
purchase your Contract or after the Contract Date, subject to our eligibility
rules and restrictions. See "Termination of Existing Benefits and Election of
New Benefits" below for information pertaining to elections, terminations and
re-election of benefits. We reserve the right to waive, change and/or further
limit the election frequency in the future. Please note that if you terminate
a living benefit and elect a new living benefit, you lose the guarantees that
you had accumulated under your existing benefit and will begin the new
guarantees under the new benefit you elected based on your Contract Value as
of the date the new benefit becomes active.
Termination of the Benefit
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election may
apply (as described above). The benefit automatically terminates: (i) if upon
the death of the first Designated Life, the surviving Designated Life opts to
take the death benefit under the Contract (thus, the benefit does not
terminate solely because of the death of the first Designated Life), (ii) upon
the death of the second Designated Life, (iii) upon your termination of the
benefit, (iv) upon your surrender of the Contract, (v) upon your election to
begin receiving annuity payments (although if you have elected to take
contract payments in the form of the Annual Income Amount, we will continue to
pay the Annual Income Amount), (vi) if both the Contract Value and Annual
Income Amount equal zero, or (vii) if you cease to meet our requirements as
described in "Election of and Designations under the Program".
Upon termination of Spousal Highest Daily Lifetime 7 Plus other than upon
death of a Designated Life, we impose any accrued fee for the benefit (i.e.,
the fee for the pro-rated portion of the year since the fee was last
assessed), and thereafter we cease deducting the charge for the benefit. With
regard to your investment allocations, upon termination we will: (i) leave
intact amounts that are held in the variable investment options, and
(ii) transfer all amounts held in the AST Investment Grade Bond Portfolio
Sub-account to your variable investment options based on your existing
allocation instructions or (in the absence of such instructions) or (in the
absence of such instructions pro rata) (i.e. in the same proportion as the
current balances in your variable investment options).
How Spousal Highest Daily Lifetime 7 Plus Transfers Contract Value between
Your Permitted Sub-accounts and the AST Investment Grade Bond Sub-account
See "How Highest Daily Lifetime 7 Plus Transfers Contract Value Between Your
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account" on page
13 of this Supplement for information regarding this component of the benefit.
Additional Tax Considerations
If you purchase an Contract as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your Contract beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Contract Year that required minimum distributions due from your Contract are
greater than such amounts. In addition, the amount and duration of payments
under the Contract payment and death benefit provisions may be adjusted so
that the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distribution provisions under the tax
law. Please note, however, that any withdrawal (except the Non-Lifetime
Withdrawal) you take prior to the Tenth Anniversary, even if withdrawn to
satisfy required minimum distribution rules, will cause you to lose the
ability to receive the Return of Principal Guarantee and the guaranteed amount
described above under "KEY FEATURE - Protected Withdrawal Value".
As indicated, withdrawals made while this benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Contract. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this benefit
here. However, we do note that if you participate in Spousal Highest Daily
Lifetime 7 Plus through a non-qualified contract, as with all withdrawals,
once all Purchase Payments are returned under the Contract, all subsequent
withdrawal amounts will be taxed as ordinary income.
The following is added on page 53 for PL SPAO 3, page 47 for PLNJ SPAO 3, page
53 for Flexelite, page 55 for PL SPAO Plus 3 and page 49 for PLNJ SPAO Plus 3
in your prospectus under "Lifetime Withdrawal Benefits":
Termination of Existing Benefits and Election of New Benefits
If you currently own a Contract with an optional living benefit that is
terminable, you may terminate the benefit rider and elect one of the benefits
described in this supplement, subject to availability of the benefit at that
time and our then current rules. There is currently no waiting period to elect
any living benefit once a living benefit is terminated provided that the
benefit being elected is available for election post-issue. We reserve the
right to waive, change and/or further limit availability and election
frequencies in the future. Check with your financial professional regarding
the availability of re-electing or electing a benefit and any waiting period.
The benefit you re-elect or elect may be more expensive than the benefit you
are terminating. Note that once you terminate an existing benefit, you lose
the guarantees that you had accumulated under your existing benefit and will
begin the new guarantees under the new benefit you elect based on your
Contract Value as of the date the new benefit becomes active. You should
carefully consider whether terminating your existing benefit and electing a
new benefit is appropriate for you.
25
INVESTMENT OPTIONS
We add the following information to your prospectus on page 23 of PL SPAO 3,
page 21 of PLNJ SPAO 3, page 22 of Flexelite, page 23 of PL SPAO Plus 3 and
page 21 of PLNJ SPAO Plus 3 under "What Investment Options Can I Choose?".
.. We add the following immediately before the chart setting forth the
Investment Objectives and Policies of each Portfolio:
Certain optional living benefits (e.g., Highest Daily Lifetime 7 Plus) employ
a pre-determined mathematical formula, under which money is transferred
between your chosen variable sub-accounts and a bond portfolio (e.g., the AST
Investment Grade Bond Portfolio). You should be aware that the operation of
the mathematical formula could impact the expenses and performance of the
variable sub-accounts used with the optional living benefits (the "Permitted
Funds"). Specifically, because transfers to and from the Permitted Funds can
be frequent and the amount transferred can vary, the Permitted Funds could
experience the following effects, among others: (a) they may be compelled to
hold a larger portion of assets in highly liquid securities than they
otherwise would, which could diminish performance if the highly liquid
securities under perform other securities (e.g., equities) that otherwise
would have been held (b) they may experience higher portfolio turnover, which
generally will increase the Permitted Funds' expenses and (c) if they are
compelled by the mathematical formula to sell securities that are
thinly-traded, such sales could have a significant impact on the price of such
securities. Please consult the prospectus for the Permitted Fund for complete
information about these effects.
26
NEW OPTIONAL FEATURE FOR HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT, HIGHEST
DAILY LIFETIME SEVEN INCOME BENEFIT AND SPOUSAL HIGHEST DAILY LIFETIME SEVEN
INCOME BENEFIT
1. In the section entitled "What Are the Lifetime Withdrawal Benefits--Highest
Daily Lifetime Five/(SM)/ Income Benefit", we add and amend certain
information contained in that section of the prospectus (page 62 for PL SPAO
3, page 56 for PLNJ SPAO 3, page 63 for Flexelite, page 64 for PL SPAO Plus 3
and page 58 for PLNJ SPAO Plus 3) as follows:
OPTIONAL FEATURE FOR HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT
If you currently own a Contract and have elected, as of the date of this
Supplement, the Highest Daily Lifetime Five Income Benefit, you can elect this
feature which utilizes a new asset transfer formula. The new formula is
described below and will replace the "Transfer Calculation" portion of the
asset transfer formula currently used in connection with your benefit on a
prospective basis. This election may only be made once and may not be revoked
once elected. The new asset transfer formula is added to Appendix C in your
prospectus and is provided below.
Under the new formula, the formula will not execute a transfer to the Benefit
Fixed Rate Account that results in more than 90% of your Contract Value being
allocated to the Benefit Fixed Rate Account ("90% cap" or "90% cap rule").
Thus, on any Business Day, if the formula would require a transfer into the
Benefit Fixed Rate Account that would result in more than 90% of the Contract
Value being allocated to the Benefit Fixed Rate Account, only the amount that
results in exactly 90% of the Contract Value being allocated to the Benefit
Fixed Rate Account will be transferred. Additionally, future transfers into
the Benefit Fixed Rate Account will not be made (regardless of the performance
of the Benefit Fixed Rate Account and the Permitted Sub-accounts) at least
until there is first a transfer out of the Benefit Fixed Rate Account. Once
this transfer occurs out of the Benefit Fixed Rate Account, future amounts may
be transferred to or from the Benefit Fixed Rate Account if dictated by the
formula (subject to the 90% cap). At no time will the formula make a transfer
to the Benefit Fixed Rate Account that results in greater than 90% of your
Contract Value being allocated to the Benefit Fixed Rate Account. However, it
is possible that, due to the investment performance of your allocations in the
Benefit Fixed Rate Account and your allocations in the Permitted Sub-accounts
you have selected, your Contract Value could be more than 90% invested in the
Benefit Fixed Rate Account.
If you make additional purchase payments to your Contract while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the Benefit Fixed Rate Account at least until there is first a
transfer out of the Benefit Fixed Rate Account, regardless of how much of your
Contract Value is in the Permitted Sub-accounts. This means that there could
be scenarios under which, because of the additional purchase payments you
make, less than 90% of your entire Contract Value is allocated to the Benefit
Fixed Rate Account, and the formula will still not transfer any of your
Contract Value to the Benefit Fixed Rate Account (at least until there is
first a transfer out of the Benefit Fixed Rate Account). For example:
. March 19, 2009 - a transfer is made to the Benefit Fixed Rate Account
that results in the 90% cap being met and now $90,000 is allocated to
the Benefit Fixed Rate Account and $10,000 is allocated to the Permitted
Sub-accounts.
. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the Benefit Fixed Rate Account to the
Permitted Sub-accounts since the cap went into effect on March 19, 2009.
. As of March 20, 2009 (and at least until first a transfer is made out of
the Benefit Fixed Rate Account under the formula) - the $10,000 payment
is allocated to the Permitted Sub-accounts and now you have 82% in the
Benefit Fixed Rate Account and 18% in the Permitted Sub-accounts (such
that $20,000 is allocated to the Permitted Sub-accounts and $90,000 is
allocated to the Benefit Fixed Rate Account).
. Once there is a transfer out of the Benefit Fixed Rate Account (of any
amount), the formula will operate as described above, meaning that the
formula could transfer amounts to or from the Benefit Fixed Rate Account
if dictated by the formula (subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and
may be removed multiple times while you participate in the benefit. We will
continue to monitor your Contract Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the Benefit Fixed Rate Account as dictated by the mathematical
formula. Once you elect this feature, the new transfer formula described above
and set forth below will be the asset transfer formula for your Contract.
In the event that more than ninety percent (90%) of your Contract Value is
allocated to the Benefit Fixed Rate Account and you have elected this feature,
up to ten percent (10%) of your Contract Value currently allocated to the
Benefit Fixed Rate Account will be transferred to your Permitted Sub-accounts,
such that after the transfer, 90% of your Contract Value on the date of the
transfer is in the Benefit Fixed Rate Account. The transfer to the Permitted
Sub-accounts will be based on your existing allocation instructions or (in the
absence of such existing instructions) pro rata (i.e., in the same proportion
as the current balances in your variable investment options). Amounts taken
out of the Benefit Fixed Rate Account will be withdrawn for this purpose on a
last-in, first-out basis (an amount renewed into a new guarantee period under
the Benefit Fixed Rate Account will be deemed a new investment for purposes of
this last-in, first- our rule). It is possible that additional transfers might
occur after this initial transfer if dictated by the formula. The amounts of
such additional transfer(s) will vary.
27
Once the 90% cap rule is met, future transfers into the Benefit Fixed Rate
Account will not be made (regardless of the performance of the Benefit Fixed
Rate Account and the Permitted Sub-accounts) at least until there is first a
transfer out of the Benefit Fixed Rate Account. Once this transfer occurs out
of the Benefit Fixed Rate Account, future amounts may be transferred to or
from the Benefit Fixed Rate Account if dictated by the formula (subject to the
90% cap).
Important Considerations When Electing this Feature:
. At any given time, some, most or none of your Contract Value may be
allocated to the Benefit Fixed Rate Account.
. Please be aware that because of the way the new 90% cap asset transfer
formula operates, it is possible that more than or less than 90% of your
Contract Value may be allocated to the Benefit Fixed Rate Account.
. Because the charge for Highest Daily Lifetime Five is assessed against
the average daily net assets of the Sub-accounts, that charge will be
assessed against all assets transferred into the Permitted Sub-accounts.
. If this feature is elected, any Contract Value transferred to the
Permitted Sub-accounts is subject to the investment performance of those
Sub-accounts. Your Contract Value can go up or down depending of the
performance of the Permitted Sub-accounts you select.
ASSET TRANSFER FORMULA FOR CONTRACTS WITH 90% CAP FEATURE
The "Terms and Definitions referenced in this Calculation Formula" and the
"Target Value Calculation" provided below remain unchanged and are included
herein for ease of reference.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current Business Day.
. r - the target ratio.
. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee. The factors that we use currently are derived from the
a2000 Individual Annuity Mortality Table with an assumed interest rate
of 3%. Each number in the table "a" factors (which appears on page C-3
in your prospectus) represents a factor, which when multiplied by the
Highest Daily Annual Income Amount, projects our total liability for the
purpose of asset transfers under the guarantee.
. Q - age based factors used in calculating the target value. These
factors are established on the Effective Date and are not changed for
the life of the guarantee. The factor is currently set equal to 1.
. V - the total value of all Permitted Sub-accounts in the Contract.
. F - the total value of all Benefit Fixed Rate Account allocations.
. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the
first withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily
Annual Income Amount, the quarterly step-up amount times the annual
income percentage, and the Contract Value times the annual income
percentage.
. T - the amount of a transfer into or out of the Benefit Fixed Rate
Account.
. I% - annual income amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee.
Currently, this percentage is equal to 5%.
TARGET VALUE CALCULATION:
On each Business Day, a target value (L) is calculated, according to the
following formula. If the variable Contract Value (V) is equal to zero, no
calculation is necessary.
If you elect this feature, the following replaces the "Transfer Calculation"
section in Appendix C (on page C-1 of your prospectus).
28
Transfer Calculation:
The following formula, which is set on the effective date of this feature and
is not changed for the life of the guarantee, determines when a transfer is
required: On the effective date of this feature (and only on the effective
date of this feature), the following asset transfer calculation is performed
to determine the amount of Contract Value allocated to the Benefit Fixed Rate
Account:
If T is greater than $0 as described above, then no additional transfer
calculations are performed on the effective date.
On each Business Day thereafter (including the effective date of this feature
provided F/(V + F) (less than)=.90), the following asset transfer calculation
is performed
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to the Benefit Fixed Rate Account (subject to the 90%
cap rule described above).
. If r (less than) C\\l\\ and there are currently assets in the
Benefit Fixed Rate Account (F (greater than) 0), assets in the
Benefit Fixed Rate Account are transferred to the Permitted
Sub-accounts.
The following formula, which is set on the effective date of this feature and
is not changed for the life of the guarantee, determines the transfer amount:
2. In the section entitled "What Are Lifetime Withdrawal Benefits" - Highest
Daily Lifetime Seven/(SM)/ Income Benefit and Spousal Highest Daily Lifetime
Seven/(SM)/ Income Benefit", we add and amend certain information contained in
that section of the prospectus (pages 69 and 75 of PL SPAO 3, pages 63 and 69
of PLNJ SPAO 3, pages 69 and 76 of Flexelite, pages 70 and 77 of PL SPAO Plus
3 and pages 65 and 71 of PLNJ SPAO Plus 3 as follows:
OPTIONAL FEATURE FOR HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT AND SPOUSAL
HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT
If you currently own a Contract and have elected, as of the date of this
Supplement, the Highest Daily Lifetime Seven Income Benefit or Spousal Highest
Daily Lifetime Seven Income Benefit, you can elect this feature which utilizes
a new asset transfer formula. The new formula is described below and will
replace the "Transfer Calculation" portion of the asset transfer formula
currently used in connection with your benefit on a prospective basis. This
election may only be made once and may not be revoked once elected. The new
asset transfer formula is added to Appendix D in your prospectus (on page D-1)
and is provided below.
Under the new formula, the formula will not execute a transfer to the AST
Investment Grade Bond Sub-account that results in more than 90% of your
Contract Value being allocated to the AST Investment Grade Bond Sub-account
("90% cap" or "90% cap rule"). Thus, on any Business Day, if the formula would
require a transfer to the AST Investment Grade Bond Sub-account that would
result in more than 90% of the Contract Value being allocated to the AST
Investment Grade Bond Sub-account, only the amount that results in exactly 90%
of the Contract Value being allocated to the AST Investment Grade Bond
Sub-account will be transferred. Additionally, future transfers into the AST
Investment Grade Bond Sub-account will not be made (regardless of the
performance of the AST Investment Grade Bond Sub-account and the Permitted
Sub-accounts) at least until there is first a transfer out of the AST
Investment Grade Bond Sub-account. Once this transfer occurs out of the AST
Investment Grade Bond Sub-account, future amounts may be transferred to or
from the AST Investment Grade Bond Sub-account if dictated by the formula
(subject to the 90% cap). At no time will the formula make a transfer to the
AST Investment Grade Bond Sub-account that results in greater than 90% of your
Contract Value being allocated to the AST Investment Grade Bond Sub-account.
However, it is possible that, due to the investment performance of your
allocations in the AST Investment Grade Bond Sub-account and your allocations
in the Permitted Sub-accounts you have selected, your Contract Value could be
more than 90% invested in the AST Investment Grade Bond Sub-account.
If you make additional purchase payments to your Contract while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the AST Investment Grade Bond Sub-account at least until there is
first a transfer out of the AST Investment Grade Bond Sub-account, regardless
of how much of your Contract Value is in the Permitted Sub-accounts. This means
29
that there could be scenarios under which, because of the additional purchase
payments you make, less than 90% of your entire Contract Value is allocated to
the AST Investment Grade Bond Sub-account, and the formula will still not
transfer any of your Contract Value to the AST Investment Grade Bond
Sub-account (at least until there is first a transfer out of the AST
Investment Grade Bond Sub-account). For example,
. March 19, 2009 - a transfer is made that results in the 90% cap being
met and now $90,000 is allocated to the AST Investment Grade Bond
Sub-account and $10,000 is allocated to the Permitted Sub-accounts.
. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the AST Investment Grade Bond Sub-account
to the Permitted Sub-accounts since the cap went into effect on
March 19, 2009.
. As of March 20, 2009 (and at least until first a transfer is made out of
the AST Investment Grade Bond Sub-account under the formula) - the
$10,000 payment is allocated to the Permitted Sub-accounts and now you
have 82% in the AST Investment Grade Bond Sub-account and 18% in the
Permitted Sub-accounts (such that $20,000 is allocated to the Permitted
Sub-accounts and $90,000 is allocated to the AST Investment Grade Bond
Sub-account).
. Once there is a transfer out of the AST Investment Grade Bond
Sub-account (of any amount), the formula will operate as described
above, meaning that the formula could transfer amounts to or from the
AST Investment Grade Bond Sub-account if dictated by the formula
(subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and
may be removed multiple times while you participate in the benefit. We will
continue to monitor your Contract Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST Investment Grade Bond Sub-account as dictated by the
mathematical formula. Once you elect this feature, the new transfer formula
described above and set forth below will be the asset transfer formula for
your Contract.
In the event that more than ninety percent (90%) of your Contract Value is
allocated to the AST Investment Grade Bond Sub-account and you have elected
this feature, up to ten percent (10%) of your Contract Value currently
allocated to the AST Investment Grade Bond Sub-account will be transferred to
your Permitted Sub-accounts, such that after the transfer, 90% of your
Contract Value on the date of the transfer is in the AST Investment Grade Bond
Sub-account. The transfer to the Permitted Sub-accounts will be based on your
existing allocation instructions or (in the absence of such existing
instructions) pro rata (i.e., in the same proportion as the current balances
in your variable investment options). It is possible that additional transfers
might occur after this initial transfer if dictated by the formula. The
amounts of such additional transfer(s) will vary. If on the date this feature
is elected 100% of your Contract Value is allocated to the AST Investment
Grade Bond Sub-account, a transfer of an amount equal to 10% of your Contract
Value will be made to your Permitted Sub-accounts. It is possible that an
additional transfer to the Permitted Sub-accounts could occur the following
Business Day, and in some instances (based on the formula) this additional
transfer could be large.
Once the 90% cap rule is met, future transfers into the AST Investment Grade
Bond Sub-account will not be made (regardless of the performance of the AST
Investment Grade Bond Sub-account and the Permitted Sub-accounts) at least
until there is first a transfer out of the AST Investment Grade Bond
Sub-account. Once this transfer occurs out of the AST Investment Grade Bond
Sub-account, future amounts may be transferred to or from the AST Investment
Grade Bond Sub-account if dictated by the formula (subject to the 90% cap).
Important Considerations When Electing this Feature:
. At any given time, some, most or none of your Contract Value may be
allocated to the AST Investment Grade Bond Sub-account.
. Please be aware that because of the way the new 90% cap asset transfer
formula operates, it is possible that more than or less than 90% of your
Contract Value may be allocated to the AST Investment Grade Bond
Sub-account.
. If this feature is elected, any Contract Value transferred to the
Permitted Sub-accounts is subject to the investment performance of those
Sub-accounts. Your Contract Value can go up or down depending of the
performance of the Permitted Sub-accounts you select.
ASSET TRANSFER FORMULA FOR CONTRACTS WITH 90% CAP FEATURE
Transfer Calculation if you elected Highest Daily Lifetime Seven or Spousal
Highest Daily Lifetime Seven on or after July 21, 2008:
The "Terms and Definitions referenced in the Calculation Formula" and the
"Target Value Calculation" provided below remain unchanged and are included
herein for ease of reference.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Seven benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
30
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current Business Day.
. r - the target ratio.
. a - factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee (see page D-1 of your prospectus for the "a" factors)
. V\\V\\ - the total value of all Permitted Sub-accounts in the Contract.
. V\\F\\ - the total value of all elected Fixed Rate Options in the
Contract.
. B - the total value of the AST Investment Grade Bond Portfolio
Sub-account.
. P - Income Basis. Prior to the first withdrawal, the Income Basis is the
Protected Withdrawal Value calculated as if the first withdrawal were
taken on the date of calculation. After the first withdrawal, the Income
Basis is equal to the greater of (1) the Protected Withdrawal Value at
the time of the first withdrawal, adjusted for additional purchase
payments including the amount of any associated Credits, and adjusted
proportionally for excess withdrawals*, (2) any highest quarterly value
increased for additional purchase payments including the amount of any
associated Credits, and adjusted for withdrawals, and (3) the Contract
Value.
. T - the amount of a transfer into or out of the AST Investment Grade
Bond Portfolio Sub-account.
* Note: withdrawals of less than the Annual Income Amount do not reduce the
Income Basis.
TARGET VALUE CALCULATION:
On each Business Day, a target value (L) is calculated, according to the
following formula. If the Contract Value (V\\V\\ + V\\F\\) is equal to zero,
no calculation is necessary.
If you elect this feature, the following replaces the "Transfer Calculation"
section in Appendix D (page D-1) of your prospectus.
The following formula, which is set on the effective date of this feature and
is not changed for the life of the guarantee, determines when a transfer is
required:
On the effective date of this feature (and only on the effective date of this
feature), the following asset transfer calculation is performed to determine
the amount of Contract Value allocated to the AST Investment Grade Bond
sub-account:
If T is greater than $0 as described above, then no additional transfer
calculations are performed on the effective date and future transfers to the
AST Investment Grade Bond Sub-account will not occur at least until there is
first a transfer out of the AST Investment Grade Bond Sub-account.
On each Business Day thereafter (including the effective date of this feature
provided B/(V\\v\\ + V\\f\\ + B) (less than)=.90), the following asset
transfer calculation is performed
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to the AST Investment Grade Bond Portfolio Sub-account
(subject to the 90% cap rule described above).
. If r (less than) C\\l\\, and there are currently assets in the AST
Investment Grade Bond Portfolio Sub-account (B (greater than) 0),
assets in the AST Investment Grade Bond Portfolio Sub-account are
transferred to the Permitted Sub-accounts according to most recent
allocation instructions.
31
The following formula, which is set on the Benefit Effective Date and is not
changed for the life of the guarantee, determines the transfer amount:
Transfer Calculation if you elected Highest Daily Lifetime Seven or Spousal
Highest Daily Lifetime Seven prior to July 21, 2008:
The "Terms and Definitions referenced in the Calculation Formula" and the
"Target Value Calculation" provided above remain unchanged and are included
herein for ease of reference.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Seven benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is
not changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current Business Day.
. r - the target ratio.
. a - factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of
the guarantee (see Appendix D of your prospectus for the "a" factors)
. V - the total value of all Permitted Sub-accounts in the contract.
. B - the total value of the AST Investment Grade Bond Portfolio
Sub-account.
. P - Income Basis. Prior to the first withdrawal, the Income Basis is the
Protected Withdrawal Value calculated as if the first withdrawal were
taken on the date of calculation. After the first withdrawal, the Income
Basis is equal to the greater of (1) the Protected Withdrawal Value at
the time of the first withdrawal, adjusted for additional purchase
payments including the amount of any associated Credits, and adjusted
proportionally for excess withdrawals*, (2) any highest quarterly value
increased for additional purchase payments including the amount of any
associated Credits, and adjusted for withdrawals, and (3) the Contract
Value.
. T - the amount of a transfer into or out of the AST Investment Grade
Bond Portfolio Sub-account
* Note: withdrawals of less than the Annual Income Amount do not reduce the
Income Basis.
TARGET VALUE CALCULATION:
On each Business Day, a target value (L) is calculated, according to the
following formula. If the variable contract value (V) is equal to zero, no
calculation is necessary.
If you elect this feature, the following replaces the "Transfer Calculation"
section in Appendix D (page D-1) of your Contract prospectus.
The following formula, which is set on the effective date of this feature and
is not changed for the life of the guarantee, determines when a transfer is
required:
On the effective date of this feature (and only on the effective date of this
feature), the following asset transfer calculation is performed to determine
the amount of Contract Value allocated to the AST Investment Grade Bond
Sub-account:
32
If T is greater than $0 as described above, then no additional transfer
calculations are performed on the effective date.
On each Business Day thereafter (including the effective date of this feature
provided B/(V+B) (less than)=.90), the following asset transfer calculation is
performed
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to AST Investment Grade Bond Sub-account.
. If r (less than) C\\l\\ and there are currently assets in the AST
Investment Grade Bond Sub-account (F (greater than) 0), assets in
the AST Investment Grade Bond Sub-account are transferred to the
Permitted Sub-accounts.
The following formula, which is set on the Effective Date of this feature and
is not changed for the life of the guarantee, determines the transfer amount:
33
OTHER INFORMATION
Discontinuance of Certain Optional Living Benefits.
1. As of the date of this supplement and subject to regulatory approval of
Highest Daily Lifetime 7 Plus Income Benefit or Spousal Highest Daily Lifetime
7 Plus Income Benefit in your state, you may no longer elect the following
income benefits: Highest Daily Lifetime Seven Income Benefit, and Spousal
Highest Daily Lifetime Seven Income Benefit. In addition, as of the date of
this supplement, you may no longer elect the Guaranteed Minimum Income Benefit
(GMIB). Check with your financial professional regarding availability of these
benefits in your state.
2. We add the following paragraph to page 97 of PL SPAO 3, page 89 of PLNJ
SPAO 3, page 97 of Flexelite, page 98 of PL SPAO Plus 3 and page 91 of PLNJ
SPAO Plus 3 of the prospectus section "Tax Considerations - Types of
Tax-favored Plans"
Caution: Recent IRS regulations may affect the taxation of 403(b) tax deferred
annuity contract exchanges that occur after September 24, 2007.
Certain transactions, often called "Revenue Ruling 90-24" exchanges or
transfers, are a common non-taxable method to exchange one tax deferred
annuity contract for another. The IRS has issued regulations that may impose
restrictions on your ability make such an exchange. The regulations are
generally effective in 2009 but there is great uncertainty about their
application to contract exchanges that take place during the period following
September 24, 2007 and before January 1, 2009 (the "gap period"). Because of
this uncertainty, it is possible that an exchange that takes place during the
gap period may cause you to incur taxation on the value of the contract. But
it is also possible that such an exchange will not have adverse tax
consequences. We have asked the IRS to provide more guidance on this critical
issue. In the meantime, before you request an exchange during the gap period
you should consult with your tax advisor. We began accepting such transfers on
or about November 24, 2008 but only if we have entered into an
information-sharing agreement, or its functional equivalent, with the
applicable employer or its agent. In addition, in order to comply with the
regulations, starting on or about January 1, 2009 we will only process certain
transactions (e.g, transfers, withdrawals, hardship distributions and, if
applicable, loans) with employer approval. This means that if you request one
of these transactions we will not consider your request to be in good order,
and will not therefore process the transaction, until we receive the
employer's approval in written or electronic form.
3. The following is added to page 85 of PL SPAO 3, page 79 of PLNJ SPAO 3,
page 86 of Flexelite, Page 87 of PL SPAO Plus 3 and page 81 of PLNJ SPAO Plus
3 of your prospectus at the end of the section entitled "How Can I Purchase a
Strategic Partners Annuity One 3 Contract (PL), How Can I Purchase a Strategic
Partners Annuity One 3 Contract (PLNJ)," How Can I Purchase a Strategic
Partners FLEXELITE Contract, How Can I Purchase a Strategic Partners Annuity
Plus 3 Contract (PL), or How Can I Purchase a Strategic Partners Annuity Plus
3 Contract (PLNJ)
"Beneficiary" Annuity
You may purchase an Contract if you are a beneficiary of a contract that was
owned by a decedent, subject to the following requirements. You may transfer
the proceeds of the decedent's contract into a Contract described in the
prospectus and continue receiving the distributions that are required by the
tax laws. This transfer option is only available for purchase of an IRA, Roth
IRA, or a non-qualified contract, for distributions based on lives age 70 or
under. This transfer option is also not available if the proceeds are being
transferred from a contract issued by us or one of our affiliates and the
contract offers a "Beneficiary Continuation Option".
Upon purchase, the Contract will be issued in the name of the decedent for
your benefit. We will calculate your required distributions based on the
applicable life expectancy in the year of the decedent's death, using Table 1
in IRS Publication 590. You must take distributions at least annually. For
IRAs and Roth IRAs, distributions must begin by December 31 of the year
following the year of the decedent's death. If you are the surviving spouse
beneficiary, distributions may be deferred until the decedent would have
attained age 70 1/2, however if you choose to defer distributions, you are
responsible for complying with the distribution requirements under the Code,
and you must notify us when you would like distributions to begin. For
additional information regarding the tax considerations applicable to
beneficiaries of an IRA or Roth IRA, see "Required Distributions Upon Your
Death for Qualified Annuity Contracts" in the Tax Considerations section of
your prospectus.
For non-qualified Contracts, distributions must begin within one year of the
decedent's death. For additional information regarding the tax considerations
applicable to beneficiaries of a non-qualified Contract see "Required
Distributions Upon Your Death for Nonqualified Contract Contracts" in the Tax
Consideration section of your prospectus.
You may choose to take more than your required distribution. You may take
withdrawals in excess of your required distributions, however your withdrawal
may be subject to the Contingent Deferred Sales Charge. Any withdrawals reduce
the required distribution for the year. All applicable charges will be
assessed against your Contract, such as the Insurance Charge and the Annual
Maintenance Fee.
34
The Contract may provide a basic Death Benefit upon death, and you may name a
"successor" who may either receive the Death Benefit as a lump sum or continue
receiving distributions after your death under the Beneficiary Continuation
Option.
Please note the following additional limitations:
. No additional Purchase Payments are permitted. You may only make a
one-time initial Purchase Payment transferred to us directly from
another contract or eligible account. You may not make your Purchase
Payment as an indirect rollover.
. You may not elect any optional living or death benefits.
. You may not annuitize the Contract; no contract options are available.
. You may participate only in the following programs: Auto-Rebalancing,
Dollar Cost Averaging (but not Enhanced Dollar Cost Averaging), and
Systematic Withdrawals.
. You may not assign or change ownership of the Contract, and you may not
change or designate another life upon which distributions are based. A
"beneficiary annuity" may not be co-owned.
. If the Contract is funded by means of transfer from another "beneficiary
annuity" with another company, we require that the sending company or
the beneficial owner provide certain information in order to ensure that
applicable required distributions have been made prior to the transfer
of the contract proceeds to us. We further require appropriate
information to enable us to accurately determine future distributions
from the Contract. Please note we are unable to accept a transfer of
another "beneficiary annuity" where taxes are calculated based on an
exclusion amount or an exclusion ratio of earnings to original
investment. We are also unable to accept a transfer of a contract that
has annuitized.
. The beneficial owner of the Contract can be an individual, grantor
trust, or, for an IRA or Roth IRA, a qualified trust. In general, a
qualified trust (1) must be valid under state law; (2) must be
irrevocable or became irrevocable by its terms upon the death of the IRA
or Roth IRA owner; and (3) the beneficiaries of the trust who are
beneficiaries with respect to the trust's interest in this Contract must
be identifiable from the trust instrument and must be individuals. A
qualified trust must provide us with a list of all beneficiaries to the
trust (including contingent and remainder beneficiaries with a
description of the conditions on their entitlement), all of whom must be
individuals, as of September 30/th/ of the year following the year of
death of the IRA or Roth IRA owner, or date of Contract application if
later. The trustee must also provide a copy of the trust document upon
request. If the beneficial owner of the Contract is a grantor trust,
distributions must be based on the life expectancy of the grantor. If
the beneficial owner of the Contract is a qualified trust, distributions
must be based on the life expectancy of the oldest beneficiary under the
trust.
. If this Beneficiary Contract is transferred to another company as a
tax-free exchange with the intention of qualifying as a beneficiary
annuity with the receiving company, we may require certifications from
the receiving company that required distributions will be made as
required by law.
. If you are transferring proceeds as beneficiary of an annuity that is
owned by a decedent, we must receive your transfer request at least 45
days prior to your first required distribution. If, for any reason, your
transfer request impedes our ability to complete your first distribution
by the required date, we will be unable to accept your transfer request.
4. We replace the section of the prospectus (page 67 of PL SPAO 3, page 61 of
PLNJ SPAO 3, page 67 of Flexelite, page 69 of PL SPAO Plus 3 and page 58 of
PLNJ SPAO Plus 3) entitled "Asset Transfer Component of Highest Daily Lifetime
Five" with the following:
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate
Contract Value if you elect Highest Daily Lifetime Five. For purposes of this
benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Five, we require that you participate in our specialized asset transfer
program, under which we may transfer Contract Value between the Permitted
Sub-accounts and a fixed interest rate account that is part of our general
account (the "Benefit Fixed Rate Account"). We determine whether to make a
transfer, and the amount of any transfer, under a non-discretionary formula,
discussed below. The Benefit Fixed Rate Account is available only with this
benefit, and you may not allocate Purchase Payments or transfer Contract Value
to or from the Benefit Fixed Rate Account. The interest rate that we pay with
respect to the Benefit Fixed Rate Account is reduced by an amount that
corresponds generally to the charge that we assess against your variable
Sub-accounts for Highest Daily Lifetime Five. The Benefit Fixed Rate Account
is not subject to the Investment Company Act of 1940 or the Securities Act of
1933.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your Contract Value daily and, if necessary, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate
Account. Any transfer would be made in accordance with a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to the prospectus). Speaking generally, the formula,
which we apply each Business Day, operates as follows. The formula starts by
identifying your Protected Withdrawal Value for that day and then multiplies
that figure by 5%, to produce a projected (i.e., hypothetical) Highest Daily
Annual Income Amount. Then, using our actuarial tables, we produce an estimate
of the total amount we would target in our allocation model, based on the
projected Highest Daily Annual Income Amount each year for the rest of your
life. In the formula, we refer to that value as the "Target Value" or "L". If
you have already made a withdrawal, your projected Highest Daily Annual Income
Amount (and thus your Target Value) would take into account any automatic
step-up that was scheduled to occur according to the step-up formula described
above. Next, the formula subtracts from the Target Value the amount held
within the Benefit Fixed Rate Account on that day, and divides that difference
by
35
the amount held within the Permitted Sub-accounts. That ratio, which
essentially isolates the amount of your Target Value that is not offset by
amounts held within the Benefit Fixed Rate Account, is called the "Target
Ratio" or "r". If the Target Ratio exceeds a certain percentage (currently
83%) it means essentially that not enough Target Value is offset by assets
within the Benefit Fixed Rate Account, and therefore we will transfer an
amount from your Permitted Sub-accounts to the Benefit Fixed Rate Account.
Conversely, if the Target Ratio falls below a certain percentage (currently
77%), then a transfer from the Benefit Fixed Rate Account to the Permitted
Sub-accounts would occur. Note that the formula is calculated with reference
to the Highest Daily Annual Income Amount, rather than with reference to the
Annual Income Amount. If you elect the new asset transfer formula calculation
offered in this supplement, see the discussion above regarding the 90% cap
rule.
As you can glean from the formula, poor investment performance of your
Contract Value may result in a transfer of a portion of your variable Contract
Value to the Benefit Fixed Rate Account, because such poor investment
performance will tend to increase the Target Ratio. Moreover, "flat"
investment returns of your Contract Value over a period of time also could
result in the transfer of your Contract Value to the Benefit Fixed Rate
Account. Because the amount allocated to the Benefit Fixed Rate Account and
the amount allocated to the Permitted Sub-accounts each is a variable in the
formula, the investment performance of each affects whether a transfer occurs
for your Contract. In deciding how much to transfer, we use another formula,
which essentially seeks to re-balance amounts held in the Permitted
Sub-accounts and the Benefit Fixed Rate Account so that the Target Ratio meets
a target, which currently is equal to 80%. Once you elect Highest Daily
Lifetime Five, the ratios we use will be fixed. For newly issued annuities
that elect Highest Daily Lifetime Five and existing annuities that elect
Highest Daily Lifetime Five, however, we reserve the right to change the
ratios.
While you are not notified when your Contract reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Contract Value either to or from the Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer between the Permitted Sub-accounts and the Benefit
Fixed Rate Account; or
.. If a portion of your Contract Value was previously allocated to the Benefit
Fixed Rate Account, transfer all or a portion of those amounts to the
Permitted Sub-accounts, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e., in the same
proportion as the current balances in your variable investment options).
Amounts taken out of the Benefit Fixed Rate Account will be withdrawn for
this purpose on a last-in, first-out basis (an amount renewed into a new
guarantee period under the Benefit Fixed Rate Account will be deemed a new
investment for purposes of this last-in, first-out rule); or
.. Transfer all or a portion of your Contract Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest that
you earn on such transferred amount will be equal to the annual rate that
we have set for that day, and we will credit the daily equivalent of that
annual interest until the earlier of one year from the date of the transfer
or the date that such amount in the Benefit Fixed Rate Account is
transferred back to the Permitted Sub-accounts.
Therefore, at any given time, some, none, or all of your Contract Value may be
allocated to the Benefit Fixed Rate Account. If your entire Contract Value is
transferred to the Benefit Fixed Rate Account, then based on the way the
formula operates, the formula will not transfer amounts out of the Benefit
Fixed Rate Account to the Permitted Sub-accounts and the entire Contract Value
would remain in the Benefit Rate Fixed Account. If you make additional
Purchase Payments to your Contract, they will be allocated to the Sub-accounts
according to your allocation instructions. Such additional Purchase Payments
may or may not cause the formula to transfer money in or out of the Benefit
Fixed Rate Account. Once the Purchase Payments are allocated to your Contract,
they will also be subject to the mathematical formula, which may result in
immediate transfers to or from the Benefit Fixed Rate Account, if dictated by
the formula. The amounts of any such transfers will vary, as dictated by the
formula, and will depend on the factors listed below.
The amount that is transferred to and from the Benefit Fixed Rate Account
pursuant to the mathematical formula depends upon a number of factors unique
to your Contract (and is not necessarily directly correlated with the
securities markets, bond markets, or interest rates, in general) including:
.. How long you have owned Highest Daily Lifetime Five;
.. The performance of the Permitted Sub-accounts you have chosen;
.. The performance of the Benefit Fixed Rate Account (i.e., the amount of
interest credited to the Benefit Fixed Rate Account);
.. The amount allocated to each of the Permitted Sub-accounts you have chosen;
.. The amount allocated to the Benefit Fixed Rate Account;
.. Additional Purchase Payments, if any, you make to your Contract;
.. Withdrawals, if any, you take from your Contract (withdrawals are taken pro
rata from your Contract Value).
Any Contract Value in the Benefit Fixed Rate Account will not be available to
participate in the investment experience of the Permitted Sub-accounts if
there is a recovery until it is moved out of the Benefit Fixed Rate Account.
36
The more of your Contract Value allocated to the Benefit Fixed Rate Account
under the formula, the greater the impact of the performance of the Benefit
Fixed Rate Account in determining whether (and how much) of your Contract
Value is transferred back to the Permitted Sub-accounts. Further, it is
possible under the formula, that if a significant portion your Contract Value
is allocated to the Benefit Fixed Rate Account and that Account has good
performance but the performance of your Permitted Sub-accounts is negative,
that the formula might transfer your Contract Value to the Permitted
Sub-accounts. Thus, the converse is true too (the more you have allocated to
the Permitted Sub-accounts, the greater the impact of the performance of those
Sub-accounts will have on any transfer to the Benefit Fixed Rate Account).
5. We replace the sections of the prospectus (page 74 and 81 for PL SPAO 3,
page 68 and 75 for PLNJ SPAO 3, page 74 and 81 for Flexelite, page 76 and 83
for PL SPAO Plus 3 and 70 and 77 for PLNJ SPAO Plus 3) entitled "Asset
Transfer Component of Highest Daily Lifetime Seven" and "Asset Transfer
Component of Spousal Highest Daily Lifetime Seven" (as applicable) with the
following:
Asset Transfer Component of Highest Daily Lifetime Seven and Spousal Highest
Daily Lifetime Seven
As indicated above, we limit the Sub-accounts to which you may allocate
Contract Value if you elect Highest Daily Lifetime Seven/Spousal Highest Daily
Lifetime Seven. For purposes of the benefit, we refer to those permitted
Sub-accounts as the "Permitted Sub-accounts". As a requirement of
participating in Highest Daily Lifetime Seven/Spousal Highest Daily Lifetime
Seven, we require that you participate in our specialized asset transfer
program, under which we may transfer Contract Value between the Permitted
Sub-accounts and a specified bond fund within the Advanced Series Trust (the
"AST Investment Grade Bond Sub-account"). We determine whether to make a
transfer, and the amount of any transfer, under a non-discretionary
mathematical formula, discussed below. The AST Investment Grade Bond
Sub-account is available only with this benefit, and you may not allocate
Purchase Payments to or transfer Contract Value to or from the AST Investment
Grade Bond Sub-account. Under the asset transfer component of Highest Daily
Lifetime Seven/Spousal Highest Daily Lifetime Seven, we monitor your Contract
Value daily and, if dictated by the formula, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the AST Investment
Grade Bond Sub-account. Any transfer would be made in accordance with a
formula, which is set forth in the Appendices to this prospectus.
Speaking generally, the formula, which we apply each Business Day, operates as
follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
income amount. Note that we use 5% in the formula, irrespective of the
Annuitant's attained age. Then we produce an estimate of the total amount we
would target in our allocation model, based on the projected income amount and
factors set forth in the formula. In the formula, we refer to that value as
the "Target Value" or "L". If you have already made a withdrawal, your
projected income amount (and thus your Target Value) would take into account
any automatic step-up, any subsequent purchase payments, and any excess
withdrawals. Next, the formula subtracts from the Target Value the amount held
within the AST Investment Grade Bond Sub-account on that day, and divides that
difference by the amount held within the Permitted Sub-accounts. That ratio,
which essentially isolates the amount of your Target Value that is not offset
by amounts held within the AST Investment Grade Bond Sub-account, is called
the "Target Ratio" or "r". If the Target Ratio exceeds a certain percentage
(currently 83%), it means essentially that not enough Target Value is offset
by assets within the AST Investment Grade Bond Sub-account, and therefore we
will transfer an amount from your Permitted Sub-accounts to the AST Investment
Grade Bond Sub-account. Conversely, if the Target Ratio falls below a certain
percentage (currently 77%), then a transfer from the AST Investment Grade Bond
Sub-account to the Permitted Sub-accounts would occur. If you elect the new
asset transfer formula calculation offered in this supplement, see the
discussion above regarding the 90% cap rule.
As you can glean from the formula, poor investment performance of your
Contract Value may result in a transfer of a portion of your variable Contract
Value to the AST Investment Grade Bond Sub-account because such poor
investment performance will tend to increase the Target Ratio.
Moreover, "flat" investment returns of your Contract Value over a period of
time also could result in the transfer of your Contract Value from the
Permitted Sub-accounts to the AST Investment Grade Bond Sub-account. Because
the amount allocated to the AST Investment Grade Bond Sub-account and the
amount allocated to the Permitted Sub-accounts each is a variable in the
formula, the investment performance of each affects whether a transfer occurs
for your Contract. In deciding how much to transfer, we use another formula,
which essentially seeks to re-balance amounts held in the Permitted
Sub-accounts and the AST Investment Grade Bond Sub-account so that the Target
Ratio meets a target, which currently is equal to 80%. Once you elect Highest
Daily Lifetime Seven/Spousal Highest Daily Lifetime Seven, the ratios we use
will be fixed. For newly-issued Contracts that elect Highest Daily Lifetime
Seven/Spousal Highest Daily Lifetime Seven and existing Contracts that elect
Highest Daily Lifetime Seven/Spousal Highest Daily Lifetime Seven, however, we
reserve the right to change the ratios.
While you are not notified when your Contract reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Contract Value either to or from the AST Investment Grade Bond
Sub-account. The formula by which the reallocation triggers operate is
designed primarily to mitigate the financial risks that we incur in providing
the guarantee under Highest Daily Lifetime Seven/Spousal Highest Daily
Lifetime Seven.
37
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer between the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account; or
.. If a portion of your Contract Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options).; or
.. Transfer all or a portion of your Contract Value in the Permitted
Sub-accounts pro rata to the AST Investment Grade Bond Sub-account.
Therefore, at any given time, some, none, or all of your Contract Value may be
allocated to the AST Investment Grade Bond Sub-account. If your entire
Contract Value is transferred to the AST Investment Grade Bond Sub-account,
then based on the way the formula operates, the formula will not transfer
amounts out of the AST Investment Grade Bond Sub-account to the Permitted
Sub-accounts and the entire Contract Value would remain in the AST Investment
Grade Bond Sub-account. If you make additional Purchase Payments to your
Contract, they will be allocated to the Sub-accounts according to your
allocation instructions. Such additional Purchase Payments may or may not
cause the formula to transfer money in or out of the AST Investment Grade Bond
Sub-account. Once the Purchase Payments are allocated to your Contract, they
will also be subject to the mathematical formula, which may result in
immediate transfers to or from the AST Investment Grade Bond Sub-accounts, if
dictated by the formula. The amounts of any such transfers will vary (and in
some instances, the transfers could be large), as dictated by the formula, and
will depend on the factors listed below.
The amount that is transferred to and from the AST Investment Grade Bond
Sub-account pursuant to the mathematical formula depends upon a number of
factors unique to your Contract (and is not necessarily directly correlated
with the securities markets, bond markets, or interest rates, in general)
including:
.. How long you have owned Highest Daily Lifetime Seven/Spousal Highest Daily
Lifetime Seven;
.. The performance of the Permitted Sub-accounts you have chosen;
.. The performance of the AST Investment Grade Bond Sub-account;
.. The amount allocated to each of the Permitted Sub-accounts you have chosen;
.. The amount allocated to the AST Investment Grade Bond Sub-account;
.. Additional Purchase Payments, if any, you make to your Contract;
.. Withdrawals, if any, you take from your Contract (withdrawals are taken pro
rata from your Contract Value).
Any Contract Value in the AST Investment Grade Bond Sub-account will not be
available to participate in the investment experience of the Permitted
Sub-accounts if there is a recovery until it is moved out of the AST
Investment Grade Bond Sub-account.
The more of your Contract Value allocated to the AST Investment Grade Bond
Sub-account under the formula, the greater the impact of the performance of
that Sub-account in determining whether (and how much) of your Contract Value
is transferred back to the Permitted Sub-accounts. Further, it is possible
under the formula, that if a significant portion your Contract Value is
allocated to the AST Investment Grade Bond Sub-account and that Sub-account
has good performance but the performance of your Permitted Sub-accounts is
negative, that the formula might transfer your Contract Value to the Permitted
Sub-accounts. Thus, the converse is true too (the more you have allocated to
the Permitted Sub-accounts, the greater the impact of the performance of those
Sub-accounts will have on any transfer to the AST Investment Grade Bond
Sub-account).
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