[LOGO] THE PRUDENTIAL
INSURANCE COMPANY
OF AMERICA
agrees to pay the benefits provided under this Contract in accordance with and
subject to its terms.
Contractholder: [ABC Company
Plan: ABC Company Pension Plan
Effective Date: September 1, 19XX
Jurisdiction: New Jersey
Contract Number: GA-XXXX]
[ABC COMPANY ANY TOWN, THE PRUDENTIAL INSURANCE COMPANY
NEW JERSEY] OF AMERICA
[▇▇▇▇ ▇▇▇] [▇▇▇▇▇▇ ▇. ▇▇▇▇]
--------------------------- --------------------------
Title: [President] [Chairman of the Board and
Chief Executive Officer]
Date: [September 1, 19XX] [▇▇▇▇▇ ▇. ▇▇▇▇▇▇]
--------------------------- --------------------------
Secretary
Attest: [▇▇▇▇ ▇▇▇▇▇]
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Date: [September 1, 19XX]
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GROUP ANNUITY CONTRACT
----------------------
THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA APPLICABLE TO THE FIXED
INVESTMENT OPTION. THE APPLICATION OF THIS FORMULA MAY RESULT IN A DOWNWARD [OR
UPWARD] ADJUSTMENT IN CASH VALUES. SECTIONS 6.2 AND 6.3 IDENTIFY WHEN CASH
VALUES ARE AVAILABLE WITHOUT THE APPLICATION OF THE MARKET VALUE ADJUSTMENT
FORMULA.
CONTRIBUTIONS TO THIS GROUP ANNUITY CONTRACT MAY BE INVESTED IN SEPARATE
INVESTMENT ACCOUNTS. ALL BENEFIT PAYMENTS PROVIDED UNDER THIS CONTRACT THAT ARE
BASED ON THE INVESTMENT RESULTS OF A SEPARATE INVESTMENT ACCOUNT ARE VARIABLE,
MAY INCREASE OR DECREASE, AND ARE NOT GUARANTEED AS TO A FIXED AMOUNT.
DC-401-98
[DEFINITIONS PAGE
------------
1.0 Annual Account Charge .................1
1.1 Beneficiary ...........................1
1.2 Business Day ..........................1
1.3 Code ..................................1
1.4 Competing Fund ........................1
1.5 Contractholder ........................1
1.6 Contractholder Account ................1
1.7 Contractholder Fixed Account ..........1
1.8 Contractholder Variable Account .......1
1.9 Contributions .........................2
1.10 Effective Annual Rate .................2
1.11 ERISA .................................2
1.12 Good Order ............................2
1.13 Participant ...........................2
1.14 Participant Account ...................2
1.15 Plan ..................................2
1.16 Plan Investment Fund ..................2
1.17 Prudential ............................2
1.18 Rate Segment ..........................3
1.19 Separate Account ......................3
1.20 Subaccount ............................3
1.21 Transfer Payments .....................3
1.22 Transfer Request ......................3
1.23 Unit ..................................3
1.24 Unit Value ............................3
1.25 Withdrawal ............................3
1.26 Withdrawal Date .......................3
1.27 Withdrawal Value ......................4
RELATIONSHIP BETWEEN PLAN AND CONTRACT
--------------------------------------
2.1 General Understanding .................4
2.2 Statutory Requirements ................4
2.3 Conditions ............................4
CONTRIBUTIONS AND CONTRACTHOLDER ACCOUNT
----------------------------------------
3.1 Contributions .........................4
3.2 Participant Account Segments ..........4
3.3 Contractholder Fixed Account
Interest Rates .......................5
3.4 Contributions from Prior
Prudential Fixed Account Contracts ...5
3.5 Contractholder Variable Account .......5
3.6 Reports ...............................5
VARIABLE INVESTMENT OPTIONS
---------------------------
4.1 Separate Accounts .....................6
4.2 Subaccounts ...........................6
4.3 Voting Rights .........................6
4.4 Modification of Separate
Accounts and Subaccounts .............6
TRANSFER PAYMENTS
-----------------
5.1 Transfer Payments to Plan
Investment Funds .....................7
5.2 Transfer Payment Terms ................8
WITHDRAWALS PAGE
----------
6.1 Withdrawals ...........................8
6.2 Withdrawals for Benefit Payments ......9
6.3 Withdrawals at Termination
of Contract ..........................9
6.4 Withdrawals Subject to a
Market Value Adjustment .............10
6.5 Market Value Adjustment Formula ......10
FORMS OF BENEFITS
-----------------
7.1 General ...............................11
7.2 Terms of Payment of Annuities .........11
7.3 Certificates ..........................11
7.4 Minimum Death Benefit .................11
TERMINATION OF CONTRACT
-----------------------
8.1 Sixty Day Termination .................11
8.2 Termination for Cause .................12
8.3 Effect of Termination .................12
8.4 Partial Contract Termination ..........12
CHANGES
-------
9.1 Changes by Agreement ..................13
9.2 Changes by Prudential .................13
9.3 Persons Empowered to Act for Us .......13
GENERAL TERMS
-------------
10.1 Communications ........................13
10.2 Place of Payment ......................13
10.3 Information - Records .................14
10.4 Misstatements .........................14
10.5 Beneficiary ...........................14
10.6 Small Annuities and Amounts;
Natural Persons ......................14
10.7 Divisible Surplus .....................14
10.8 Limit on Assignment ...................15
10.9 Plan Changes ..........................15
10.10 Entire Contract .......................15
10.11 Governing Law .........................15
10.12 Interest on Benefit Payments ..........15
10.13 Contractholder ........................15
10.14 Exclusive Benefit .....................16
DEFERRED SALES CHARGES
----------------------
11.1 Deferred Sales Charge .................16
APPENDIX A Separate Investment Account
SCHEDULES
---------
Schedule A. Forms of Annuity which may
be Purchased
Schedule B. Life - Payment Certain Annuity
Schedule C. Life - Contingent Annuity
Schedule D. Payment Certain Annuity]
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SECTION 1 - DEFINITIONS
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[1.0 ANNUAL ACCOUNT CHARGE
If we or our designee provide services under an administrative services
agreement, we will assess an Annual Account Charge on or about the last
day of each calendar quarter for each Participant for whom an account is
maintained in connection with this Contract. This charge will not exceed
$32 each calendar year per Participant. This charge will be deducted
directly from funds maintained under this Contract, unless paid directly
by the Contractholder.]
1.1 BENEFICIARY
A person designated by a Participant to receive benefits from funds held
under this Contract.
1.2 BUSINESS DAY
A day on which the New York Stock Exchange and Prudential are open for
business.
1.3 CODE
The Internal Revenue Code of 1986, as amended, or any of the
corresponding provisions of prior or subsequent United States revenue
laws.
1.4 COMPETING FUND
An investment option available under the Plan that is [primarily
comprised of high quality fixed income securities with an average
duration of less than or equal to 4.5 years.] For purposes of the
Contract, Competing Funds include but are not limited to [ ].
1.5 CONTRACTHOLDER
The holder of the Contract as shown on the cover page, its successors
and assigns. "You" or "your" means the Contractholder.
1.6 CONTRACTHOLDER ACCOUNT
An account that is equal to the sum of the Contractholder Fixed Account
and the Contractholder Variable Account.
1.7 CONTRACTHOLDER FIXED ACCOUNT
An unallocated account that is equal to the sum of all Contributions
earning a guaranteed rate of interest under Section 3.3 of this Contract
plus interest credits, less all Withdrawals, Transfer Payments, fees and
charges. There are no required Contributions to the Contractholder Fixed
Account.
1.8 CONTRACTHOLDER VARIABLE ACCOUNT
An unallocated account that is equal to the dollar amount of all Units in
the separate accounts or Subaccounts in which you invest, less any fees
or charges.
1
1.9 CONTRIBUTIONS
Payments you make to us as described in Section 3.1. We will grant a
period of 31 days for the payment of any required Contributions under
this Contract.
1.10 EFFECTIVE ANNUAL RATE
A method of crediting interest where the annualized income is expressed
as a compound annual rate of interest. An amount invested for a full year
would increase by a percentage equal to the Effective Annual Rate.
1.11 ERISA
The Employee Retirement Income Security Act of 1974, as amended.
1.12 GOOD ORDER
An instruction received by us, utilizing such forms as we may require,
that is sufficiently complete and clear that we do not need to exercise
any discretion to follow such instruction.
1.13 PARTICIPANT
A natural person on whose behalf funds are contributed or maintained
under the Plan.
1.14 PARTICIPANT ACCOUNT
The dollar value of funds maintained for each person in accordance with
the terms of the Plan. The Participant Account may be invested in the
fixed interest option through the Contractholder Fixed Account, or the
variable separate account options through the Contractholder Variable
Account.
1.15 PLAN
A plan adopted by you that provides Participants with coverage under an
annuity contract intended to meet the requirements of Section 401 of the
Code. The Plan is mentioned for reference purposes only and is shown on
the cover page. "Plan" shall include such other plans of the
Contractholder or plans maintained for other employers as the parties
agree. The terms of this Contract shall apply separately with respect to
each plan maintained thereunder. We are not a party to the Plan.
1.16 PLAN INVESTMENT FUND
An investment fund available under the Plan as of the Effective Date or
of which we are later notified.
1.17 PRUDENTIAL
The Prudential Insurance Company of America or, with regard to
recordkeeping or administrative matters, our designee as communicated to
the Contractholder. "We," "us," or "our" means Prudential or our
designee.
2
1.18 RATE SEGMENT
A section of the Contractholder Fixed Account that credits the same rate
of interest for the same time period for Contributions and accumulated
interest thereon.
1.19 SEPARATE ACCOUNT
An Account established by Prudential and maintained primarily for one or
more group annuity contracts. The Separate Account will hold assets
acquired with the proceeds of Contributions.
1.20 SUBACCOUNT
A subdivision of a Separate Account, the assets of which are invested in
a corresponding portfolio of a fund or portfolio of securities.
1.21 TRANSFER PAYMENTS
An amount transferred by or on behalf of Participants among Plan
Investment Funds.
1.22 TRANSFER REQUEST
A request by you or your designee pursuant to elections by Participants,
received by us in Good Order to make a Transfer Payment.
1.23 UNIT
You are credited with units in each Separate Account or Subaccount in
which you invest. The number of Units credited to the account is
determined by dividing each Contribution made to a Separate Account or
Subaccount by the applicable Unit Value for the Business Day on which the
Contribution is received by us in Good Order.
1.24 UNIT VALUE
The dollar value of an interest in a Separate Account or Subaccount. The
Unit Value of each Separate Account or Subaccount will be determined each
Business Day, and will measure changes in the value of the Separate
Account's or Subaccounts assets minus its outstanding liabilities, fees
and expenses. The Unit Value is determined before giving effect to
additions to and withdrawals or transfers from a Separate Account or
Subaccount for that day.
1.25 WITHDRAWAL
A payment from the Contractholder Account that is not a Transfer Payment.
1.26 WITHDRAWAL DATE
The Business Day we receive notice from you in Good Order to make a
Withdrawal as described further in Section 6.
3
1.27 WITHDRAWAL VALUE
The dollar value of any Withdrawal less any charges or fees incurred,
including any applicable market value adjustment.
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SECTION 2 - RELATIONSHIP BETWEEN PLAN AND CONTRACT
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2.1 GENERAL UNDERSTANDING
You will make Contributions as provided in this Contract. However, the
existence of this Contract does not cause us to be a party to or a
fiduciary of the Plan. We make no representation and assume no liability
as to the sufficiency of Contributions or the Contractholder Account for
the benefits to be provided under the Plan. You are solely responsible for
the selection of this Contract as a suitable funding vehicle for the Plan.
2.2 STATUTORY REQUIREMENTS
This Contract is issued in conjunction with a 401 Plan. We reserve the
right to administer this Contract in accordance with the provisions of
Code Section 401 and its regulations and rules, the eligible rollover
distribution rules of Code Section 401(a)(31), and other applicable
provisions of the Code.
2.3 CONDITIONS
The continuation of this Contract is conditioned upon there being no
change in the Plan or its investment policy that, in our judgment, would
materially disrupt the level of Contributions or increase Withdrawals
compared to prior periods.
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SECTION 3 - CONTRIBUTIONS AND CONTRACTHOLDER ACCOUNT
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3.1 CONTRIBUTIONS
You will remit as Contributions to this Contract all or a portion of funds
contributed to the Plan unless we agree otherwise in writing or unless
such remittance is to end according to the terms of this Contract.
Contributions may include rollovers of amounts held by Participants under
other tax-qualified retirement plans or funds transferred from Plan
Investment Funds. You may direct that contributions be allocated to the
Contractholder Fixed Account and/or the Contractholder Variable Account.
3.2 PARTICIPANT ACCOUNT SEGMENTS
We may maintain the fixed interest portion of Participant Accounts in two
or more Rate Segments The dollar value of any Segment is equal to the sum
of all Contributions and interest credited to it, less all Withdrawals and
Transfer Payments withdrawn from it.
4
3.3 CONTRACTHOLDER FIXED ACCOUNT INTEREST RATES
We will notify you in advance of each interest rate we set under this
Contract. Each interest rate is an Effective Annual Rate. Interest is
credited to Contributions on a daily basis.
(a) CURRENT QUARTERLY INTEREST RATE
All Contributions received during the current calendar quarter will be
allocated to the same Rate Segment and will be credited with interest at
the current quarterly interest rate. This rate is set prior to the
beginning of each calendar quarter, and remains in effect on all
Contributions received during that quarter throughout the remainder of the
current calendar year and all of the following calendar year.
(b) RENEWAL INTEREST RATE
After the expiration of a current quarterly interest rates, we will set a
renewal interest rate for that Rate Segment to apply to Contributions (and
interest thereon) that previously were credited that current quarterly
interest rate. We may set one renewal interest rate to replace each
expiring current quarterly interest rate. The renewal interest rate will
be reset by us [annually].
(c) CONTRACTUAL ANNUAL MINIMUM INTEREST RATE
Each interest rate set under Section 3.3 for the years shown below will
not be less than the following:
Calendar Year Rate
------------- ----
[1998 and each year thereafter 3.0%]
3.4 CONTRIBUTIONS FROM PRIOR PRUDENTIAL FIXED ACCOUNT CONTRACTS
If you contribute amounts to the Contractholder Fixed Account from the
fixed rate investment of a predecessor Prudential group annuity contract,
such amounts will be invested within Rate Segments that correspond to the
investment segments or portions, if any, under the prior contract.
3.5 CONTRACTHOLDER VARIABLE ACCOUNT
Contributions to the Contractholder Variable Account may be made to any of
the Separate Accounts or Subaccounts listed in Appendix A.
3.6 REPORTS
We will make a [quarterly] report to you of the financial activity within
the Contractholder Account.
5
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SECTION 4 - VARIABLE INVESTMENT OPTIONS
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4.1 SEPARATE ACCOUNTS
The Separate Accounts in which this Contract participates, and their
primary investments, are described in Appendix A. Assets held in each
Separate Account, except assets representing Prudential surplus, if any,
are not chargeable with liabilities arising out of any other business of
Prudential. The total market value of the assets held in each Separate
Account at all times will be at least equal to the total reserve liability
required by law for all payments or values which vary in dollar amount to
reflect the investment results of each Separate Account.
To the extent that applicable laws and regulations permit, investments for
each Separate Account will be free of all limitations applicable to other
investments by Prudential. Prudential restricts use of its Separate
Accounts to certain plans. These plans include those which meet the
requirements for qualification under Section 401 of the Code. If, at any
time, we are informed that your Plan does not meet applicable
requirements, we will (1) notify you and (2) cancel your Contractholder
Variable Account. The dollar value of your canceled account will, within
seven Business Days thereafter, be transferred to you, your trustee, or
your financial institution that you designate. After that, no
Contributions may be made to the Separate Account under this Contract
until the Plan again satisfies applicable qualification requirements.
4.2 SUBACCOUNTS
A Separate Account may consist of Subaccounts. The income, gains and
losses, realized or unrealized, from the assets allocated to a Subaccount
are credited to or charged against each Subaccount, without regard to
other income, gains or losses of the Prudential.
Those Subaccounts currently available under this Contract are listed in
Appendix A. Each Subaccount invests exclusively in shares of a
corresponding fund or a portfolio of securities. Shares of a fund are
purchased and redeemed for a Subaccount at their net asset value. Any
amounts of income, dividends and gains distributed from the shares of a
fund are reinvested in additional shares of that fund at net asset value.
The dollar amounts of values and benefits of this Contract provided by a
Separate Account vary as a function of the investment performance of the
Subaccounts. You bear the investment risk for Subaccount value in the
selected Subaccounts.
4.3 VOTING RIGHTS
Certain Separate Accounts hold securities that have voting rights. We
normally exercise these rights. However we reserve the right to solicit
Contractholders for instruction as to how to vote some or all of the
securities in these Accounts.
4.4 MODIFICATION OF SEPARATE ACCOUNTS AND SUBACCOUNTS
We may from time to time change material features of, or close, certain
Separate Accounts or Subaccounts. Any changes will be made only if
permitted by applicable law and regulations.
6
Also, when required by law, we will obtain the approval of Contractholders
of the changes and the approval of any appropriate regulatory authority.
For example, we may combine Separate Accounts or Subaccounts, or provide
additional Subaccounts, transfer part or all of the assets of a Separate
Account or Subaccount to another Separate Account of Subaccount, make any
changes necessary to comply with, or obtain and continue any exemptions
from the Investment Company Act of 1940 (the 1940 Act), and make any other
necessary technical changes to this Contract to conform with any action
this provision permits us to take.
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SECTION 5 - TRANSFER PAYMENTS
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5.1 TRANSFER PAYMENTS TO PLAN INVESTMENT FUNDS
You may, pursuant to elections by Participants, subject to any
restrictions in the Plan, direct us to make Transfer Payments from the
Contractholder Fixed Account or Variable Accounts to any Plan Investment
Fund made available under the Plan. Transfers will be made under the terms
of Section 5.1(a) and 5.1(b).
Prudential may, upon notice to the Contract-Holder and Participants, limit
the frequency of Transfer Payments. The action will take effect on the
date of the notice. In the event that a Participant Transfer is made as a
result of a communication by the Contractholder, Employer, agent or broker
to the Participant, which communication in Prudential's reasonable
judgment advised Participants to transfer or withdraw their funds held
under this Contract, the Transfer will be treated as a Contractholder
Withdrawal under Section 6.4. If such communication is not provided to
Prudential upon written request, Prudential reserves the right to consider
the communication as one which advises Participants to transfer or
withdraw their funds held under this Contract.
(a) DIRECT TRANSFERS TO A COMPETING FUND
Transfer Payments directly between the Contractholder Fixed Account
under this Contract and a Competing Fund as defined in Section [1.4]
may not be made without Prudential's consent.
(b) INDIRECT TRANSFERS TO A COMPETING FUND
Indirect transfers between the Contractholder Fixed Account under this
Contract and a Competing Fund may be made, provided the amount to be
transferred is first transferred to a fund which is not a Competing
Fund and such amount is held in a non-Competing Fund for a period of
at least 90 days before being transferred to a Competing Fund. Amounts
transferred from the Contractholder Fixed Account to a non-Competing
Fund may be transferred back into the Contractholder Fixed Account
after being held in the non-competing fund for at least 90 days.
In the event of unusual volatility in the financial markets,
Prudential may, in its discretion, eliminate or reduce the 90-day
restriction of this Section 5.1(b) for all Contractholders within this
class of contracts. The 90-day provision may be prospectively
reinstated by Prudential upon written notice to the Contractholder.
7
We reserve the right, upon 30 days notice and in our sole discretion, to
determine whether any investment option under the Plan is or becomes a
Competing Fund.
5.2 TRANSFER PAYMENT TERMS
Transfer Payments will be made from the Contractholder Fixed Account and
the Contractholder Variable Account. Transfer payments from the
Contractholder Fixed Account will be made on a pro rata basis from all
Rate Segments. Each payment will be in full settlement of our liability
for the Transfer Payment. Transfer Payments from the Contractholder Fixed
Account will be effective on the Business Day we receive the Transfer
Request in Good Order. Transfer Payments from the Contractholder Variable
Account will be at the Unit Value of the applicable Subaccount(s) at the
close of the Business Day we receive the Transfer Request in Good Order.
You agree to provide for the recordkeeping of investment funds available
under the Plan on a Participant-level basis, and to furnish us with such
information as we may reasonably require in connection with Transfer
Requests. We reserve the right to monitor the Participant-level investment
activity in order to enforce these transfer provisions. We will notify you
immediately upon receipt of a Transfer Request that is inconsistent with
the Transfer Payment conditions then in effect.
We may, upon notice to you, limit the frequency of Transfer Payments. This
action will take effect on the date of the notice. Any such limit will
allow transfers as least as frequently as [quarterly].
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SECTION 6 - WITHDRAWALS
================================================================================
6.1 WITHDRAWALS
You may make Withdrawals from the Contract. Withdrawals from the
Contractholder Fixed Account for purposes listed in Sections 6.2 and 6.3
will not be subject to the market value adjustment described in Section
6.5. However, we may apply this adjustment if, at the time you request the
Withdrawal, the terms of your Plan are materially different from the terms
or manner of administration in effect on this Contract's effective date,
and such amendment or change adversely affects our rights or liabilities
under this Contract. Withdrawals from the Contractholder Fixed Account
will be made on a pro-rata basis from all Rate Segments applicable to a
Participant under the Contract.
Payment to the Participant ordinarily will be made within seven days of
our receipt of a properly completed payment request. If any Withdrawal
payment under this section is not made within 10 Business Days, interest
on the delayed payment will be credited (starting as of the first day
following receipt of the Withdrawal request) at the rate applicable to new
contributions under Section 3.3 on the date the Withdrawal request is
received.
If more than one employer participates in the Plan, and Contributions are
discontinued for one employer, Withdrawals of funds attributable to that
employer may be made under any option available within this Section.
You may make Withdrawals to pay expenses of the Plan. Such Withdrawals
will not be subject to any market value adjustment.
8
6.2 WITHDRAWALS FOR BENEFIT PAYMENTS
We will make payments to the Contractholder to provide benefits permitted
under the terms of the Plan. Such benefit payments may be made for reasons
of a Participant's retirement, termination of employment, death,
disability, hardship, [loans,] or in-service withdrawal after age 59 1/2.
Benefits may also include such other payments made pursuant to the Plan
provisions as agreed to by us in accordance with our existing
administrative practices. The amount of a benefit payment will be the
amount certified by you as necessary to fulfill a benefit payment request
of a Participant. You agree to supply us with documentation to support
benefit payments on request. We will also make distribution payments
consistent with the terms of the Plan relating to the minimum required
distribution provisions of Sections 401(a)(9) of the Code, as applicable.
[Loans made available to a Participant under this Contract will be made in
accordance with the terms provided in the Plan. Prudential will administer
loans in conformity with the Code and ERISA.]
6.3 WITHDRAWALS AT TERMINATION OF CONTRACT
You may, in conjunction with a termination of the Contract, make a
Withdrawal of the balance from the entire Contractholder Fixed Account
over a [two-year] period, less applicable Deferred Sales Charges described
in Section 11. During the [two-year] payout period, interest will be added
to the Contractholder Fixed Account at the end of each day on the amount
of the Contractholder Fixed Account at the end of the preceding day at an
Effective Annual Rate determined on the Withdrawal Date. This rate is
determined by multiplying each Rate Segment by the interest rate that
applies to that segment, adding the products, dividing the sum by the
total dollar amount of all segments and subtracting 0.50%. In no event
will the interest paid under this provision be less than 3.0%.
We will pay [one-third] of the balance of the Contractholder Fixed Account
within 90 days of the Withdrawal Date. We will pay [one-half] of the
Contractholder Fixed Account as of the first anniversary of the Withdrawal
Date on the first Business Day following the first anniversary of the
Withdrawal Date. [If payments are over a period of greater than two years,
subsequent payments will be made on the first Business Day following the
anniversary of the Withdrawal Date, with each such payment substantially
equal in amount to the previous payment.] We will pay the entire balance
of the Contractholder Fixed Account on the first Business Day following
the [second] anniversary of the Withdrawal Date. We will make all payments
to you or to any institution or account you designate. We will make all
payments from the Contractholder Variable Account to you or to an
institution or account you designate. We will usually pay the entire
balance of the Contractholder Variable Account within seven Business Days
after receipt of a Good Order request for a Withdrawal at termination of
the Contract. However, we can postpone such payments if:
1. the New York Stock Exchange is closed, other than customary weekend
and holiday closing, or trading on the exchange is restricted as
determined by the Securities and Exchange Commission (SEC)
2. the SEC permits, by an order, the postponement for the protection of
Contractholders
9
3. the SEC determines that an emergency exits that would make the
disposal of securities held in the Contractholder Variable Account, or
the determination of their value, not reasonably practicable.
You may also elect to make a withdrawal at Contract termination under
Section 6.4.
6.4 WITHDRAWALS SUBJECT TO A MARKET VALUE ADJUSTMENT
Withdrawals from the Contractholder Fixed Account that are not governed by
the provisions of Sections 6.2 and 6.3 may be made at any time. If the
amount withdrawn under this paragraph in any calendar year exceeds $5
million, the Withdrawal may be paid in up to five substantially equal
quarterly payments. The first payment will be made within 10 Business Days
of our receipt of your written request in Good Order. A separate market
value will be calculated for each quarterly Withdrawal. During the
quarterly Withdrawal period, the unpaid amounts will be credited interest
at the rate in effect under Section 3.3 of the Contract, less a daily risk
charge of one-half of one percent annually.
The amount withdrawn under this Section shall be equal to the Withdrawal
request [increased or] decreased by the market value adjustment (MVA)[,
and reduced by any applicable deferred sales charges as described in
Section 11. The market value adjustment will be applied before the
deduction of any applicable deferred sales charge.]
6.5 MARKET VALUE ADJUSTMENT FORMULA
The market value of the amount withdrawn from the Contractholder Fixed
Account in accordance with Section 6.4 will be calculated using the
formula described in this paragraph. A separate market value adjustment is
determined for each Rate Segment. The interest rate applicable to each
such Rate Segment is compared to the interest rate credited for new
Contributions in the current quarter.
The market value adjustment for a Rate Segment is calculated by
subtracting the interest rate for new Contributions from the interest rate
credited to that Rate Segment and multiplying that result by a factor of
[3.0.] [In no event will the market value adjustment exceed 0.0%.]
Each market value adjustment is then applied to the dollars withdrawn from
the corresponding Rate Segment. The market value of the amount withdrawn
from the Contractholder Fixed Account is equal to the sum of the market
values of the amount withdrawn from each Rate Segment. The market value
adjustment factor may be changed in accordance with Section 9.2.
In the event that a Participant Withdrawal is made as a result of a
communication of the Contractholder or Employer received by the
Participant, which communication in Prudential's reasonable judgment
advises Participants to transfer or withdraw their funds held under this
Contract, the Withdrawal will be treated as a Withdrawal at Contract
termination under Section 6.4. If communication to a Participant is not
provided to Prudential upon written request, Prudential reserves the right
to consider the communication as one which advises Participants to
transfer or withdraw their funds held under this Contract.
10
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SECTION 7 - FORMS OF BENEFITS
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7.1 GENERAL
You may request that we pay amounts that are withdrawn for benefit
payments under Section 6.2 in any of the following forms, to the extent
not contrary to the terms of the Plan:
(a) a lump sum;
(b) any annuity form described in Schedule A;
(c) any other settlement method or combination of methods to which
we consent.
7.2 TERMS OF PAYMENT OF ANNUITIES
If, a Participant, elects an annuity pursuant to Section 7.1(b), the
amount withdrawn will be applied to purchase an annuity in accordance with
Schedule A. The monthly annuity payment is determined from the schedule of
purchase rates for that annuity. Any payments made in annuity form will be
governed by the terms of the annuity certificate.
7.3 CERTIFICATES
A Certificate will be provided for each Annuitant, summarizing the amount
and the terms of such annuity. Certificates are not a part of this
Contract.
7.4 MINIMUM DEATH BENEFIT
Any lump sum death payment from this Contract made to a Beneficiary within
one year of the Participant's death will be equal to the greatest of : (1)
the Participant's Account value as of the date Prudential receives a death
benefit payment request in Good Order; (2) the sum of all contributions
made to the Participant's Account less withdrawals, transfers and charges;
and (3) the greatest of the Participant's Account value calculated on
every third anniversary of the first contribution made on behalf of the
Participant less any withdrawals, transfers and charges under the
Contract.
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SECTION 8 - TERMINATION OF CONTRACT
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8.1 SIXTY DAY TERMINATION
This Contract may be terminated by either party by providing the other
party with 60 days written notice. The Contract termination date will be
established as the first Business Day occurring 60 calendar days following
receipt of the notice of termination. The parties may agree to a different
termination date.
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8.2 TERMINATION FOR CAUSE
We may terminate this Contract for cause by giving you 30 days written
notice. Causes for our termination are:
(a) You fail to meet any of your obligations under this Contract
or under any related agreement.
(b) The Plan is no longer a qualified plan under the Code.
(c) The Plan is terminated.
(d) You no longer have any obligations under the Plan.
(e) You, your agent, or your trustee take an action which, in our
reasonable determination, materially and adversely affects our
rights and obligations under this Contract.
(f) You reject a change or an amendment to this Contract proposed by
us under Section 9.1 or 9.2.
(g) You distribute communication material to Plan Participants that
can reasonably be expected to materially decrease the amounts
directed to this Contract or materially increase the amounts of
Withdrawals or Transfer Payments from this Contract.
8.3 EFFECT OF TERMINATION
You may make no further Contributions or Transfer Payments after a
contract termination date is established, unless we agree otherwise. Death
benefits and previously purchased annuities will continue to be paid.
Benefit Withdrawals, including the purchase of annuities if we agree, may
be made from the Contractholder Fixed Account after the contract
termination date. Benefit withdrawals from the Contractholder Variable
Account will continue to be made after the contract termination date. The
Contractholder Fixed Account will be distributed under the terms of
Section 6.3 unless you elect to have it distributed under the terms of
Section 6.4.
Withdrawals upon termination are subject to any limitations or
restrictions that appear elsewhere in this Contract.
8.4 PARTIAL CONTRACT TERMINATION
If, through a divestiture or other corporate restructuring, employees of
an employer cease to be eligible to participate in the Plan, you may
partially terminate this Contract and request that we issue a new contract
to a successor plan. Any such contract is subject to any terms and
conditions mutually agreed to. Section 8.3 applies to amounts payable in
connection with a partial termination.
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SECTION 9 - CHANGES
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9.1 CHANGES BY AGREEMENT
This Contract may be changed at any time by agreement between the parties.
A change will be effective after each party receives notice of such
change. Any change made to this Contract will be consistent with
applicable state and federal law.
9.2 CHANGES BY PRUDENTIAL
We may change this Contract if we, in our discretion, deem it appropriate
to conform to the requirements of any law or regulation.
We reserve the right to change the method for determining the market value
adjustment upon 30 days prior written notice to you and to periodically
update the annuity purchase rates.
No modifications or amendments to this Contract may affect the terms of
any annuity purchased prior to the effective date of the modification or
amendment. The annuity purchase rates will not be modified or amended (i)
during the first year that the Contract is in effect, or (ii) more than
once in any 12 month period; and (iii) may not be less favorable to you
than the annuity purchase rates we offer to any Contractholder in the same
class as this Contract.
9.3 PERSONS EMPOWERED TO ACT FOR US
No agent or other person except one of the following Prudential officers
may change this Contract or bind us.
[Chairman of the Board and Actuary
Chief Executive Officer Associate Actuary
President Secretary
Vice President Assistant Secretary
Second Vice President]
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SECTION 10 - GENERAL TERMS
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10.1 COMMUNICATIONS
All communications under this Contract shall be in writing. They will be
addressed to you at your principal office, or at such other address as you
may communicate to us. Communications to us should be addressed to
[Prudential, c/o Prudential Investments, 30 Scranton Office Park,
Scranton, Pennsylvania 18507-1789,] or at such other address as we may
communicate.
10.2 PLACE OF PAYMENT
All payments to us under this Contract shall be payable at our office
described above or at an address or to a representative we specify by
notice to you.
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10.3 INFORMATION - RECORDS
You agree to furnish all information which we may reasonably require for
the administration of this Contract. You also agree to provide to us any
applicable administrative agreements pertaining to recordkeeping or
servicing of Participant Accounts. We will not be liable for the
fulfillment of any obligations in any way dependent upon information
unless and until we receive the information in a form satisfactory to us,
which includes receiving information in Good Order where appropriate.
Information furnished to us may be corrected for demonstrated errors
unless we have already acted to our prejudice by relying on the
information. Except for the corrections, information furnished to us will
be regarded as conclusive.
10.4 MISSTATEMENTS
If there has been a misstatement as to any annuitant, we will not pay more
than that which should be paid based on the correct information. Any
overpayment will, together with interest, be deducted from future
payments. Any underpayment will, together with interest, be paid
immediately upon receipt of the corrected information. The interest rate
credited or charged under this section will be 3.0%.
10.5 BENEFICIARY
You may, if permitted by law, direct that we pay any benefit under this
Contract directly to the Beneficiary of a Participant or other designated
payee. Payments in annuity form will be governed by the terms of the
annuity certificate.
10.6 SMALL ANNUITIES AND AMOUNTS; NATURAL PERSONS
To the extent consistent with the terms of the Plan and Code Section
411(a)(11) as applicable, if the total monthly payment from the annuity
that would otherwise be purchased on behalf of any person, or any series
of payments under this Contract, is less than $50, we may, in our
discretion, make a single sum payment in lieu of purchasing such annuity
or making such series of payments. The single sum paid will be equal to
the amount that would otherwise be applied to purchase such annuity. The
single sum paid in lieu of a stream of payments will be equal to the value
of the series of payments discounted at interest from each payment due
date to the date of the single sum payment. The discount interest rate
will be the interest rate in the schedule of annuity purchase rates used
to establish the series of payments.
If the payee is not a natural person and a series of payments is payable,
we may choose to make a payment in one sum.
10.7 DIVISIBLE SURPLUS
The portion, if any, of our divisible surplus accruing under this Contract
will be determined annually by our Board of Directors and credited to the
Contractholder Account as determined by the Board. It is unlikely that any
divisible surplus will accrue upon this Contract. No annuity under this
Contract will be taken into account in the determination of any divisible
surplus to be credited to this Contract.
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10.8 LIMIT ON ASSIGNMENT
To the extent applicable law requires, the interests in and payments from
this contract are not transferable nor assignable or subject to the claims
of any creditor. For this purpose, compliance with the terms of a
Qualified Domestic Relations Order as defined in subsection 414(p) of the
Internal Revenue Code will not be considered to be an assignment of
benefits.
10.9 PLAN CHANGES
This Contract applies to the terms of the Plan in effect on the Effective
Date of this Contract. You shall furnish us a copy of the Plan, any
proposed amendment or any change to the Plan, its operation, or its
investment policy, and any communications by you to the Participants
concerning investments available through the Plan. If we notify you within
60 days of receipt of a proposed Plan amendment, change in Plan operation,
or change in Plan investment policy that such change, in our reasonable
judgment, will adversely affect the financial experience of Prudential or
other Contractholders in this class of Contracts, the change will be
effective only upon agreement between the parties.
10.10 ENTIRE CONTRACT
This document constitutes the entire Contract between us.
10.11 GOVERNING LAW
This Contract will be construed according to the laws of the jurisdiction
set forth on the cover page.
10.12 INTEREST ON BENEFIT PAYMENTS
Any benefit payment we make under Section 6.2 that is not made within 10
Business Days of the receipt in Good Order of a request for such payment
will be credited with interest in the same rate and manner as provided in
Section 3.3 or as required by state insurance or Federal securities law.
We reserve the right to credit interest on benefit payments paid within 10
Business Days for all Contractholders within this class of contracts.
10.13 CONTRACTHOLDER
We will normally conduct business only with you. We will be entitled to
rely on any acts or omissions by you pursuant to the terms of this
Contract.
Either party may, from time to time, delegate to an agency or trustee
certain administrative powers and responsibilities under this Contract. No
party is bound to recognize any such delegation until it has received
notice of it. The notice must specify those powers and responsibilities
and include evidence of acceptance by the agency. On and after the date of
receipt of the notice, the notified party will deal with the agency with
respect to those powers and responsibilities and will be entitled to any
action taken or omitted by the agency with respect thereto in the same
manner as if dealing with the party to the Contract. Either party may give
notice to the other party of a subsequent delegation to another agency of
specified powers and responsibilities.
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10.14 EXCLUSIVE BENEFIT
Under this contract it is impossible, at any time prior to the
satisfaction of all liabilities with respect to Participants and their
beneficiaries under the contract, for any part of the corpus or income to
be used for, or directed to, purposes other than for the exclusive benefit
of the Participants or their beneficiaries.
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[SECTION 11 - DEFERRED SALES CHARGES
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11.1 DEFERRED SALES CHARGES
Contractholder withdrawals made under Section 6.3 or 6.4 are subject to a
Deferred Sales Charge. The amount of a Withdrawal subject to a Deferred
Sales Charge shall be the amount requested less the Deferred Sales Charge
determined from the following table.
If the Contractholder requests a partial withdrawal under Section 6.3 or
6.4, a deferred sales charge is assessed only against those assets
withdrawn by reason of a specified group, classification or type of
employee leaving the Plan as a result of a corporate merger,
restructuring, or other comparable employer-initiated event.
Withdrawals made in the years indicated, counting from the effective date
of this Contract, will have the following Deferred Sales Charge, measured
as a percentage of Contributions withdrawn:
[0 - 1 year 5%
1 - 2 years 4%
2 - 3 years 3%
3 - 4 years 2%
4 - 5 years 1%
After 5 years 0%]
Deferred sales charges do not apply to amounts withdrawn in excess of
Contributions to this Contract.
Withdrawals from the Contractholder Fixed Account will be made on a
pro-rata basis from all Rate Segments applicable to a Participant under
the Contract.]
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[APPENDIX A - SEPARATE INVESTMENT ACCOUNT
Contributions paid to the Contractholder Variable Account may be invested in the
Subaccounts of the Prudential Discovery Select Group Variable Contract Account
("the Discovery Account"). This variable separate account, sponsored by
Prudential Insurance Company of America, is currently divided into 22
Subaccounts. Any income and realized or unrealized gains and losses in a
Subaccount are credited to or charged against that Subaccount without regard to
income, gains, or losses in other Subaccounts.
Eleven Subaccounts invest in portfolios of the Prudential Series Fund. These
portfolios include Money Market, Government Income, Diversified Bond, Equity,
High Yield Bond, Stock Index, Equity Income, Prudential ▇▇▇▇▇▇▇▇, Global,
Conservative Balanced and Flexible Managed Portfolios. The Subaccounts of the
Discovery Account also invest in other underlying Fund portfolios. These include
the [AIM V.I. Growth and Income Fund, the AIM V.I. Value Fund, the Janus Aspen
Series Growth Portfolio, the Janus Aspen Series International Growth Portfolio,
the MFS Emerging Growth Series, the MFS Research Series, the OCC Accumulation
Managed Portfolio, the OCC Accumulation Small Cap Portfolio, the ▇. ▇▇▇▇ Price
Equity Income Portfolio, the ▇. ▇▇▇▇ Price International Stock Portfolio, and
the Warburg Pincus Post-Venture Capital Portfolio].
The investment strategy of each Subaccount is described in the Prospectus. The
choice of Subaccounts may change. Any such change will be described in the
Prospectus.
The administrative charge for each Subaccount in the Discovery Account will not
exceed an effective annual rate of [1.10%]. This charge is deducted daily from
the assets in each of the Subaccounts. This charge is for the issuing of the
Contract, establishing and maintaining records, and providing reports to the
Contractholder and the Participants. Prudential may impose a lower
administrative charge for certain classes of contractholders that meet minimum
size requirements (for example, assets exceeding $25 million or plans with 500
or more Participants). Any reductions in administrative charges will be
available on a uniform basis to similarly-situated contractholders.
Mortality risk and expense charges are deducted daily at an effective annual
rate of not more than [0.15%] of the assets held in the Subaccounts.
Participants selecting from any of the Subaccounts in the Discovery Account must
receive a Prospectus prior to investing.]
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SCHEDULE A - FORMS OF ANNUITY WHICH MAY BE PURCHASED
Form of Payment Payable Applicable Schedule
----------------------- -------------------
1. Life - Payment Certain Annuity. Use Schedule B
2. Life - Contingent Annuity. Use Schedule C
3. Payment Certain Annuity. Use Schedule D
We may provide monthly amounts of annuity larger than those shown in the
following schedules for annuities purchased during any period we specify.
Annuity purchase rates for other forms of annuity to which we consent will be
furnished on request.
The annuity purchase rates under this contract will be no less favorable to a
Participant than used under other Prudential group annuity contracts of this
Class.
The forms of annuities which may be purchased are fixed dollar annuities which
are guaranteed by Prudential. The amount of fixed annuity payments depends only
on the form and duration of the annuity selected, the dollar amount applied to
purchase the form of annuity, the age of the Annuitant and the annuity purchase
rates in Schedules B, C and D. The amount of the fixed annuity payments does not
depend on the performance of the Discovery Account or any Subaccount.
AVAILABLE FORMS OF ANNUITIES
Life annuities and Payment Certain annuities are available under this Contract.
A Life form of annuity is one payable at least during the lifetime of the person
(referred to as the "Annuitant") for whom it was purchased. Depending on the
existence and nature of any payment payable after the death of the Annuitant, a
Life annuity will be either a Life-Payment Certain or a Life-Contingent annuity.
A Payment Certain form of annuity may be payable for a period less than the
lifetime of the Annuitant. The terms of payment for each form of annuity are
described below.
Life-Payment Certain Annuity:
The first monthly payment of a Life-Payment Certain annuity is payable as
of the date the annuity is purchased. Monthly payments are payable on the
first day of each month thereafter throughout the Annuitant's remaining
lifetime. If the Annuitant dies before the number of annuity payments made
equals the number of Payments Certain applicable to him, monthly annuity
payments will continue to be made to the Annuitant's Beneficiary until the
total number of payments is so equal. The number of Payments Certain is
established when the annuity is purchased and may be 60, 120, 180, 240, or
any other number accepted by Prudential.
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Life-Contingent Annuity:
The first monthly payment of a Life-Contingent annuity is payable on the
date the annuity is purchased. Monthly payments are payable on the first
day of each month thereafter throughout the Annuitant's remaining
lifetime. If the Annuitant dies before the death of his Contingent
Annuitant, monthly payments will continue to the Contingent Annuitant
throughout the Contingent ▇▇▇▇▇▇▇▇▇'s remaining lifetime. The amount of
each monthly Contingent Annuity payment will be a percentage of the
monthly annuity payment payable before the Annuitant's death. The
percentage is established when the annuity is purchased and may be 33
1/3%, 50%, 66 2/3%, or 100%, or any other percentage we accept.
Payment Certain Annuity:
The first monthly payment of a Payment Certain annuity is payable on the
date the annuity is purchased. Monthly payments are payable on the first
day of each month thereafter until the total number of Payments Certain
specified when the annuity was purchased has been paid. The number of
payments may be 60, 120, 180, 240 or any other number we accept. If the
Annuitant dies before his Beneficiary, monthly annuity payments will
continue to be made to the Beneficiary until the number of payments
specified by the Annuitant has been made.
Other forms of annuity may be provided with our consent.
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ANNUITY SCHEDULES
[The schedules show the monthly amount of annuity purchased per $10,000, after
deduction of any taxes on annuity premiums that may apply.]
The amounts of annuity for other ages of the Annuitant or Contingent Annuitant
will be provided upon request.
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[SCHEDULE B - LIFE - PAYMENT CERTAIN ANNUITY (120 PAYMENTS CERTAIN)
Monthly Amount
--------------
If the date the annuity is purchased is in:
AGE 1998 1999 2000 2005
--- ---- ---- ---- ----
60 $34.89 $34.75 $34.61 $33.90
65 39.86 39.67 39.49 38.59
70 46.17 45.93 45.70 44.55
SCHEDULE C - LIFE - CONTINGENT ANNUITY
Monthly Amount
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If Annuitant and Contingent Annuitant have same date of birth. If the date
the annuity is purchased is in:
AGE 1998 1999 2000 2005
--- ---- ---- ---- ----
If specified percentage to Contingent Annuitant is 100%:
60 $29.87 $29.77 $29.66 $29.15
65 33.64 33.49 33.35 32.66
70 38.74 38.54 38.34 37.40
If specified percentage to Contingent Annuitant is 50%:
60 $32.36 $32.23 $32.10 $31.48
65 36.87 36.70 36.53 35.71
70 42.97 42.74 42.50 41.37]
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[SCHEDULE D - PAYMENT CERTAIN ANNUITY
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Monthly Amount
--------------
If the date the annuity is purchased is in:
NUMBER OF
PAYMENTS
CERTAIN 1998 1999 2000 2005
--------- ---- ---- ---- ----
60 $160.49 $160.49 $160.49 $160.49
120 84.21 84.21 84.21 84.21
180 58.87 58.87 58.87 58.87]
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