PACIFIC LIFE & ANNUITY COMPANY'S
DESCRIPTION OF ISSUANCE, TRANSFER AND REDEMPTION
PROCEDURES FOR POLICIES PURSUANT TO
RULE 6e-3(T)(b)(12)(iii)
This document sets forth the administrative procedures that will be
followed by Pacific Life & Annuity Company ("PL&A") in connection with the
issuance of its Pacific Select Exec II-NY Flexible Premium Variable Life
Insurance Policy ("Policy"), the transfer of assets held under the Policies, and
the redemption by Policy owners of their interests in said Policies.
I. PURCHASE AND RELATED TRANSACTIONS
A. Premium Schedules and Underwriting Standards
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The Policy is a flexible premium variable life insurance policy. The
Policy provides lifetime insurance protection for the insured named in the
Policy, with a death benefit payable when the insured dies while the Policy is
in force. A Policy owner may elect one of two death benefit qualification tests
and one of three options to calculate the amount of death benefit payable under
the Policy. The Policy will be offered and sold pursuant to an established
mortality structure and underwriting standards in accordance with state
insurance laws which prohibit unfair discrimination among Policy owners, but
allow cost of insurance rates to be based upon factors such as age, health or
occupation.
A Policy owner may choose the amount and frequency of premium payments,
subject to a minimum of $50 per payment.
B. Application and Initial Premium Processing
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Upon receipt of a completed application for a Policy, PM Group will follow
certain insurance underwriting (i.e., evaluation of risk) procedures designed to
determine whether the proposed insured is insurable. This process may involve
verification procedures and may require that further information be provided by
the applicant before a determination can be made. PL&A will first become
obligated under a Policy when the total initial premium is received or on the
date the application is accepted by PL&A, whichever is later.
After the Policy is issued, insurance coverage under the Policy will be
deemed to have begun as of the Policy Date. The Policy Date is usually the date
that the Policy is issued. The Policy Date is the date used to determine Policy
years, Policy months, and Policy monthly, quarterly, semi-annual and annual
anniversaries.
C. Additional Premium Payments
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The Policy is a flexible premium policy, and it provides flexibility to pay
premiums at the Policy owner's discretion. When applying for a Policy, a Policy
owner will determine a planned periodic premium that provides for the payment of
level premiums of fixed intervals over a specified period of time. Each Policy
owner will receive a premium reminder notice or listbill on either an annual,
semi-annual, or quarterly basis (or monthly (listbill only)), at the option of
the Policy owner; however, the Policy owner is not required to pay planned
periodic premiums.
Payment of the planned periodic premium will not guarantee that a
Policy will remain in force. Instead, the duration of the Policy depends upon
the Policy's accumulated value. Even if planned periodic premiums are paid, the
Policy will lapse any time accumulated value less Policy debt is
insufficient to pay the current monthly deduction and a grace period expires
without sufficient payment. Any premium payment must be for at least $50. PL&A
also may reject or limit any premium payment that would result in an immediate
increase in the net amount at risk under the Policy, although such a premium may
be accepted with satisfactory evidence of insurability.
D. Premium Allocation
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A Policy owner may allocate net premiums among the variable accounts and/or
the fixed accounts. When a Policy is issued and all delivery requirements are
received at PL&A's Service Center, the Accumulated Value will be automatically
allocated according to the Policy owner's instructions in the application or
more recent instructions if any (except for amounts allocated to the Loan
Account to secure any Debt). The initial allocation must be made in the
application for the Policy. All net premiums are allocated to the Policy owner's
instructions the later of 15 days after the Policy is issued or when all
requirements for the Policy to be considered in force are delivered to the
Service Center (the Free-Look Transfer Date).
Additional net premium payments will be allocated among the investment
alternatives according to the Policy owner's instructions (after the Free-Look
Transfer Date). A Policy owner may change the allocation of accumulated value by
submitting a proper written request to PL&A's Service Center.
PL&A reserves the right to limit the amount allocated to the Fixed LT
Account to $1,000,000 during the most recent 12 months for all of a Policy
owner's policies. Allocations include net premium payments, transfers and loan
repayments. Any excess over $1,000,000 would be transferred to a Policy owner's
other Investment Options according to the Policy owner's most recent
instructions.
E. Reinstatement
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PL&A will reinstate a lapsed Policy (see "Policy Lapsation", Section III.C.
of this document) at any time within five years after the end of the grace
period, provided PL&A receives the following: (1) a written application of the
Policy owner; (2) evidence of insurability satisfactory to PL&A for each
insured; and (3) payment of all monthly charges and deductions that were due and
unpaid during the grace period, and payment of a premium at least equal to three
times the most recent monthly deduction.
When the Policy is reinstated, the accumulated value will be equal to the
accumulated value on the date of the lapse subject to the following: (1) if the
Policy is reinstated after the first monthly payment date following lapse, the
accumulated value will be reduced by the amount of the Policy debt on the date
of lapse and no Policy debt will exist on the date of reinstatement; (2) if the
Policy is reinstated on the monthly payment date next following lapse, any
Policy debt on the date of lapse will also be reinstated; and (3) no interest on
amounts held in PL&A's Loan Account so secure Policy debt will be paid or
credited between lapse and reinstatement.
Reinstatement will be effective as of the monthly payment date on or next
following the date of approval by PL&A, and accumulated value minus Policy debt
will be allocated among the variable accounts and the fixed options in
accordance with the Policy owner's current premium allocation instructions.
F. Policy Loans
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A Policy owner may borrow from PL&A an amount up to the greater of 90% of
the Policy's accumulated value, less any outstanding Policy debt and any
surrender charges, or (2) 100% of the product of (a x b/c - d) where (a) equals
the Policy's accumulated value less 12 times the current monthly deduction; (b)
equals 1 plus the annual loan interest rate credited; (c) equals 1 plus the
annual loan interest rate currently charged; and (d) equals any existing Policy
debt. The minimum loan that may be taken is $200. A Policy is the only security
required for a loan.
When a Policy owner takes a loan, an amount equal to the loan is
transferred out of the Policy owner's accumulated value in the variable accounts
and the fixed options on a proportional basis, unless the Policy owner
instructs PL&A otherwise.
The interest rate on loans is 3.55% annually for all years. PL&A will
credit interest monthly on amounts held in the Loan Account to secure the loan
at an annual rate of 3.00% in Policy years 1 through 10, and 3.3% in Policy year
11 and thereafter. The owner may repay all or a part of the loan at any time
while the Policy is in force. If not repaid, the Policy debt will reduce the
amount of death proceeds paid upon the death of the insured, the cash surrender
value paid upon surrender, or the refund of premium upon exercise of the Free-
Look Right.
A loan may affect the length of time the Policy remains in force. The Policy
will lapse when accumulated value minus Policy debt is insufficient to cover the
monthly deduction against the Policy's accumulated value on any monthly payment
date and the minimum payment required is not made during the grace period.
Moreover, the Policy may enter the grace period more quickly when a loan is
outstanding, because the loaned amount is not available to cover monthly
deductions.
II. TRANSFER AMONG INVESTMENT OPTIONS
The Pacific Select Exec Separate Account (the "Separate Account") is a
separate investment account of PL&A used to support the variable death benefits
and policy values of PL&A's life insurance policies. The Separate Account
currently is made up of eighteen variable accounts which invest in shares of a
corresponding portfolio of Pacific Select Fund (the "Fund"), the investment
vehicle of the Separate Account. The Fund is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 as an open-end
management investment company of the series type. The portfolios of the Fund,
each of which has a different investment objective, are the Money Market
Portfolio, the High Yield Bond Portfolio, the Managed Bond Portfolio, the
Government Securities Portfolio, the Growth Portfolio, the Aggressive Equity
Portfolio, the Growth LT Portfolio, the Equity Income Portfolio, the Multi-
Strategy Portfolio, the Mid-Cap Value Portfolio, the Large-Cap Value Portfolio,
the Equity Portfolio, the Bond and Income Portfolio, the Equity Index Portfolio,
the Small-Cap Index Portfolio, the REIT Portfolio, the International Portfolio,
and the Emerging Markets Portfolio.
A Policy owner may allocate accumulated value from the variable accounts to
the fixed options. However, such a transfer will only be permitted in the
Policy month preceding a Policy anniversary, except that such a transfer may be
made at any time during the first 18 Policy months. Transfers from the fixed
options to the variable accounts are also permitted, subject to the following
restrictions: (1) the Policy owner may not make more than one transfer from the
fixed options to the variable accounts in any 12-month period; and (2) the
Policy owner may transfer no more than the greater of 25% of the Accumulated
Value in the Fixed Account or $5,000 to the Variable Accounts in any 12-month
period, and no more than the greater of 10% of the Accumulated Value in the
Fixed LT Account or $5,000 to the Variable Accounts.
PL&A reserves the right to limit the amount allocated to the Fixed LT
Account to $1,000,000 during the most recent 12 months for all of a Policy
owner's policies. Allocations include net premium payments, transfers and loan
repayments. Any excess over $1,000,000 would be transferred to a Policy owner's
other Investment Options according to the Policy owner's most recent
instructions.
III. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. Surrender for Net Cash Surrender Value
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A Policy owner can make partial withdrawals of the net cash surrender value
of the Policy starting on the first Policy anniversary. During the first
fifteen Policy years, the portion of a partial withdrawal of up to the lesser of
$10,000 or 10% of premium paid will not reduce the face amount under the Policy.
The excess of any withdrawal over this amount may cause a reduction in Face
Amount if the Death Benefit Option is Option A, as described below.
A partial withdrawal must be for at least $200, and the Policy's net cash
surrender value after the withdrawal must be at least $500. If there is any
Policy debt, the maximum partial withdrawal amount is limited to the excess, if
any, of the cash surrender value immediately prior to the withdrawal over the
result of the Policy debt divided by 90%.
When a partial withdrawal is made on a Policy on which the owner has
selected Death benefit Option A, the face amount under the Policy is decreased
by the excess, if any, of the face amount over the result of the death benefit
immediately prior to the partial withdrawal minus the amount of the partial
withdrawal. A partial withdrawal will not change the face amount of a Policy on
which the owner has selected Death Benefit Option B or Death Benefit Option C.
However, assuming that the death benefit is not equal to accumulated value times
a death benefit percentage, the partial withdrawal will reduce the death benefit
by the amount of the partial withdrawal. To the extent the death benefit is
based upon the accumulated value times the death benefit percentage applicable
to the insureds, a partial withdrawal may cause the death benefit to decrease by
an amount greater than the amount of the partial withdrawal.
B. Death Claims
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Upon the death of the insured, PL&A will pay to a named beneficiary death
benefit proceeds, either in a lump sum or under a payment plan offered under the
Policy. The proceeds will be the death benefit under the Policy, plus any
insurance proceeds provided by rider, reduced by adjustments for any outstanding
Policy debt (and, if in the grace period, any overdue charges).
The death benefit will be the greater of the Guideline Minimum Death
Benefit or one of the following three options: (1) Death Benefit Option A -- the
face amount of the Policy; (2) Death Benefit Option B -- the face amount of the
Policy plus the accumulated value; or (3) Death Benefit Option C -- the face
amount of the Policy plus the total premiums paid minus total withdrawals.
Because of the Guideline Minimum Death Benefit, an increase in accumulated value
may increase the death benefit.
The face amount of the Policy may be decreased by the Policy owner. Such a
change may change the death benefit, depending, among other things, upon the
death benefit option chosen by the owner and whether, and the degree to which,
the death benefit under a Policy exceeds the face amount prior to the change. A
change in the face amount may affect the net amount at risk under a Policy,
which may affect a Policy owner's cost of insurance charge. For these purposes,
the net amount at risk is equal to the death benefit less the policy owner's
accumulated value.
Any request for a change in face amount must be by written application to
PL&A's Service Center. A Policy owner may make only one such request per Policy
year.
C. Policy Lapsation
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If the accumulated value less Policy debt of a Policy is insufficient to
cover deductions and charges on a monthly payment date, PL&A will give written
notice to the Policy owner that if the amount shown in the notice (which will be
sufficient to cover the deduction amount(s) due) is not paid within 61 days (the
"grace period"), the Policy owner faces a danger of lapse. The Policy will
remain in force through the grace period, but if no payment is forthcoming, it
will terminate at the end of the grace period. In order to avoid termination,
the Policy owner must pay an amount equal to three times the charges and
deductions due on the monthly payment date in which the insufficiency occurred.
If the required payment is made during the grace period, such payment will
be allocated among the variable accounts and the fixed options in accordance
with the Policy owner's allocation instructions. If the survivor dies during the
grace period, the death benefit proceeds will equal the amount of the death
benefit immediately prior to the commencement of the grace period, reduced by
any unpaid monthly deductions and charges due and any Policy debt.
A lapsed Policy may be reinstated at any time within five years after the
end of the grace period but before the maturity date. See "Reinstatement",
Section I.E. above.
D. Policy Loans
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See Section I.F. above.