June 24, 2008
Ms. Sally Samuel, Esq.
Office of Insurance Products
Division of Investment Management
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
RE: Post-effective amendments under Rule 485(b) under the Securities Act of
1933 to Form N-4 registration statements
Dear Ms. Samuel:
This letter responds to your comments on Rule 485(a) filings we made last
month, primarily to add a Beneficiary Income Option ("BIO") to Highest Daily
Lifetime Seven and Spousal Highest Daily Lifetime Seven and a Lifetime Income
Accelerator option ("LIA") to Highest Daily Lifetime Seven. We summarize your
comments and our responses below.
1. Comment: There are so many defined terms in the introduction to the
supplement that it is necessary to either define each term or add
language directing the reader to the Glossary of Terms in the prospectus.
Our response: We have added the reference to the Glossary of Terms in the
prospectus.
2. Comment: For each of BIO and LIA, you asked that we add disclosure in the
introduction describing the benefit and the kind of customer for whom
each such benefit might be appropriate.
Our response: For BIO, we have added the following disclosure: "The Highest
Daily Lifetime Seven with Beneficiary Income Option and the Spousal Highest
Daily Lifetime Seven with Beneficiary Income Option allow the beneficiary to
continue to withdraw the Annual Income Amount until the Protected Withdrawal
Value is depleted. Thus, the option may be appropriate for an Annuity Owner
who wants to provide an additional death benefit option to his/her
beneficiary."
For LIA, we have added the following disclosure: "The Highest Daily Lifetime
Seven with Lifetime Income Accelerator provides a benefit under which the
Annuity Owner may withdraw double the Annual Income Amount once he/she meets
the benefit's eligibility requirements (e.g., being confined to a qualified
nursing facility or being unable to perform two daily life activities as
defined below). Thus, this benefit may be appropriate for an Annuity Owner
who may meet these requirements at a future date."
3. Comment: with respect to each of BIO and LIA, you asked that we present
the fee for the benefit in the same format that is used in the full
prospectus. For example, we should present the fees in the form of a
table with one column for the optional benefit charge and other columns
showing the total fee when the optional benefit is added to each Annuity.
You stated that whenever there is a reference to the fee, the maximum fee
must be stated first, followed by the current fee. You also asked for a
reference to the table of fees in the prospectus. You requested that the
parentheses around the 2.00% maximum should be removed.
Our response: We have done so.
4. Comment: You asked us to number the language on page 2, which begins with
"We added as a new line item...." so that it is easier for the reader to
identify the beginning of a new revision.
Our response: We have done so.
5. Comment: You asked whether someone who had elected Highest Daily Lifetime
Seven could change to elect Highest Daily Lifetime Seven with BIO and/or
LIA. You requested that we disclose the parameters around the ability to
elect BIO/LIA and the impact it would have on the Protected Withdrawal
Value. You requested that we disclose the transition period and its
implications on the customer who chooses to add the BIO or LIA benefits.
Our response: Using the BIO disclosure as an example, we have added the
following language: "If you terminate your Highest Daily Lifetime Seven with
Beneficiary Income Option benefit, you will lose the guarantees that you had
accumulated under your Highest Daily Lifetime Seven benefit and will begin
new guarantees under the Highest Daily Lifetime Seven with BIO benefit based
on the Account Value as of the date the new benefit becomes active." We also
added language to disclose that if the owner had elected Highest Daily
Lifetime Seven, he or she could add the BIO or LIA feature during the
transition period which is 90 days from the date the rider is approved by
their state. We also disclosed that they could add the BIO or LIA feature
each contract anniversary in accordance with the terms of the prospectus.
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6. Comment: You requested that we add language to clarify what the annual
charge in the footnote (1.25% annual charge) was imposed against. You
asked that we make similar changes throughout the supplement so that any
time a charge is listed, it is clear what the charge is imposed against,
i.e. Account Value, Sub-accounts, etc.
Our response: We have added "of amounts invested in the Sub-accounts" as
applicable.
7. Comment: You requested that any state variations in the LIA and BIO
benefits be disclosed. You requested that we delete the sentence:
"Certain terms and conditions may differ between jurisdictions once
approved."
Our response: There are no state variations in the LIA and BIO benefits.
8. With respect to LIA, you asked that we revise the "if you are eligible"
language to "meet the conditions set forth below".
Our response: We have done so.
9. Regarding the sentence: "Since this fee is based on the Protected
Withdrawal Value, the fee for Highest Daily Lifetime Seven with LIA may
be greater than it would have been, had it been based on the Account
Value alone."; if it applies to BIO and Spousal BIO, add to those
sections and bold in each case.
Our response: We have done so.
10.With respect to LIA, you asked us to make the same change regarding the
"one or both" language that we made in the XTra Credit Eight product and
clarify the disclosure dealing with (a) the conditions for eligibility
and (b) our reassessments of eligibility. Specifically, you requested
that we disclose that if a person is determined to be no longer eligible
through a reassessment, that we would not retroactively reduce their LIA
benefit. You also asked that we disclose when the person's LIA benefit
would begin if they met the eligibility requirements, i.e. if they meet
requirements on the 17/th/ of the month, does benefit begin the next day,
the next month, the next quarter?
Our response: We have made the appropriate changes and disclosures.
11.You asked us to add the first table of Permitted Portfolios to the
disclosure concerning Optional Allocation and Rebalancing Program.
Our response: We have added the table requested. We have also modified some
of the funds listed to add new funds and change names to conform to changes
we are making in available funds. Specifically, at the same time that we
plan to introduce
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these optional benefits, we also plan to introduce various changes to the
underlying funds (e.g., fund mergers, fund investment objective changes, and
new underlying funds). These fund-related changes are extensive, and
therefore will be disclosed in separate supplements. The fund-related
changes set forth in the separate supplements are eligible for filing under
Rule 485(b). We plan to file these "fund supplements" at the same time as
the instant "benefits supplement."
12.We also made a correction to Section C which contained an error referring
to Lifetime Five instead of Lifetime Seven.
The instant Rule 485(b) filings pertain to the following Form N-4 registration
statements:
. Pruco Life Insurance Company's Prudential Premier Series (file nos.
333-130989 and 333-144639); and
. Pruco Life Insurance Company of New Jersey's Prudential Premier Series
(file nos. 333-131035 and 333-144657); and
. Prudential Annuities Life Assurance Corporation's ASAP III (333-96577),
Advisors Choice 2000 (333-08853), APEX II (333-71654), ASL II
(333-71672), and XTra Credit SIX (333-71834). Please note that the
supplement also will added to the prospectus for Optimum, Optimum Four,
and Optimum Plus (the LPL private label version of ASAP III, APEX II,
and Optimum Plus, respectively).
In addition, we will be adding the supplement to the applicable companion Form
S-3s set forth below, and seeking acceleration of the effective date of each
such Form S-3 to June 30, 2008 or as soon as possible thereafter:
. 333-24989
. 333-136996
With respect to the Form S-3 registration statements, Prudential Annuities Life
Assurance Corporation (the "Corporation") acknowledges that:
. Should the Securities and Exchange Commission (the "Commission") or the
staff, acting pursuant to delegated authority, declare the instant
filings effective, it does not foreclose the Commission from taking any
action with respect to the filings;
. The action of the Commission or the staff, acting pursuant to delegated
authority, in declaring the filings effective, does not relieve the
Corporation from its full responsibility for the adequacy and accuracy
of the disclosure in the filings; and
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. The Corporation may not assert a declaration of effectiveness as a
defense in any proceeding initiated by the Commission or any person
under the federal securities laws of the United States.
As counsel to the registrants, I represent that there is no disclosure in the
Rule 485(b) filings that would render the filings ineligible to rely on Rule
485(b).
We appreciate your attention to these filings.
Sincerely,
/s/ C. Christopher Sprague
------------------------------
C. Christopher Sprague
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PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
ADVANCED SERIES ADVISOR PLAN III
ADVANCED SERIES APEX II
ADVANCED SERIES XTRA CREDIT SIX
ADVANCED SERIES LIFEVEST II
ADVANCED SERIES ADVISORS CHOICE(R) 2000
(marketed by some firms as "Advisors Select 2000")
Supplement, dated July 21, 2008
To
Prospectus, dated May 1, 2008
This supplement should be read and retained with the prospectus for your
Annuity. If you would like another copy of the prospectus, please call us at
1-888-PRU-2888.
This supplement is being issued to describe enhancements that are being made
to certain optional living benefits available under each of the
above-referenced Annuities. The terms used in this supplement are defined in
the Glossary of Terms in the prospectus. With respect to Highest Daily
Lifetime Seven, we (a) revise the way that certain withdrawals of the Annual
Income Amount are impacted by the Contingent Deferred Sales Charge ("CDSC")
(b) add an optional death benefit, (the "Highest Daily Lifetime Seven with
Beneficiary Income Option") (c) add an optional benefit that increases the
Annual Income Amount if the owner qualifies for increased payments, (the
"Highest Daily Lifetime Seven with Lifetime Income Accelerator") (d) increase
the range of "permitted portfolios" that you may elect if you have chosen the
benefit, with some restrictions and (e) modify the asset transfer formula
under the benefit, to make clear that the Account Value may include amounts
allocated to certain Fixed Rate Options. For Spousal Highest Daily Lifetime
Seven, we (a) revise the way that certain withdrawals of the Annual Income
Amount are impacted by CDSC (b) add an optional death benefit (the "Spousal
Highest Daily Lifetime Seven with Beneficiary Income Option") (c) increase the
range of "permitted portfolios" that you may elect if you have chosen the
benefit, with some restrictions and (d) modify the asset transfer formula
under the benefit, to make clear that the Account Value may include amounts
allocated to certain Fixed Rate Options. The Highest Daily Lifetime Seven with
Beneficiary Income Option and the Spousal Highest Daily Lifetime Seven with
Beneficiary Income Option allow the beneficiary to continue to withdraw the
Annual Income Amount until the Protected Withdrawal Value is depleted. Thus,
the option may be appropriate for an Annuity Owner who wants to provide an
additional death benefit option to his/her beneficiary.
The Highest Daily Lifetime Seven with Lifetime Income Accelerator provides a
benefit under which the Annuity Owner may withdraw double the Annual Income
Amount once he/she meets the benefit's eligibility requirements (e.g., being
confined to a qualified nursing facility or being unable to perform two daily
life activities as defined below). Thus, this benefit may be appropriate for
an Annuity Owner who may meet these requirements at a future date.
Except as otherwise provided here, the description of each optional living
benefit set forth in the May 1, 2008 prospectus remains unchanged.
This supplement also discusses certain changes to the Advanced Series Lifevest
II Annuity ("ASL II"). Specifically, we have removed limitations on the amount
of the basic Death Benefit paid under ASLII when death occurs on or after the
decedent's age 85. We are also adding a restriction that the ASLII Annuity is
only available for purchase up to age 85.
CHANGES TO HIGHEST DAILY LIFETIME SEVEN
A. Addition of Death Benefit (HD Lifetime Seven with Beneficiary Income
Option/SM/)
For elections of Highest Daily Lifetime Seven on or after July 21, 2008, the
Annuity Owner may opt for a death benefit, the value of which is linked to the
Annual Income Amount under the benefit. As detailed below, a beneficiary
taking the Annuity's death benefit under this feature is paid the Annual
Income Amount until the Protected Withdrawal Value is depleted. (Note that the
final payment, exhausting the Protected Withdrawal Value, may be less than the
Annual Income Amount). If you choose the Highest Daily Lifetime Seven with
Beneficiary Income Option, the maximum charge we may impose is 2.00% of
Protected Withdrawal Value ("PWV") annually. We currently assess a charge of
0.95% of PWV annually. See the table entitled "Your Optional Benefit Fees and
Charges" in the prospectus for a description of all fees and charges related
to optional benefits.
1. To reflect this death benefit option, we add the following to the
description of Highest Daily Lifetime Seven, immediately after the
sub-section entitled Additional Tax Considerations:
HD Lifetime Seven with Beneficiary Income Option/SM/
We offer an optional death benefit feature under this benefit, the amount of
which is linked to your Annual Income Amount. We refer to this optional death
benefit as the Beneficiary Income Option or ("BIO"). You may choose Highest
Daily Lifetime Seven without also selecting the Beneficiary Income Option
death benefit. You must elect the Beneficiary Income Option death benefit at
the time you elect Highest Daily Lifetime Seven. If you elect Highest Daily
Lifetime Seven without the Beneficiary Income Option and would like to add
this feature later, you must terminate the Highest Daily Lifetime Seven
benefit and elect the Highest Daily Lifetime Seven with Beneficiary Income
Option. If you elected the Highest Daily Lifetime Seven benefit, you will have
a 90 day transition period from the date the Beneficiary Income Option is
approved in your state of residence to terminate your Highest Daily Lifetime
Seven benefit and elect the Highest Daily Lifetime benefit with Beneficiary
Income Option. After the 90 day transition period, you may elect to add the
Beneficiary Income Option on any anniversary of the Issue Date in accordance
with the eligibility rules and restrictions described in the "Election of and
Designations under the Program" section of the prospectus describing the
Highest Daily Lifetime Seven benefit. If you terminate your Highest Daily
Lifetime Seven benefit to elect the Highest Daily Lifetime Seven with
Beneficiary Income Option benefit, you will lose the guarantees that you had
accumulated under your Highest Daily Lifetime Seven benefit and will begin new
guarantees under the Highest Daily Lifetime Seven with BIO benefit based on
the Account Value as of the date the new benefit becomes active.
If you elect this death benefit, you may not elect any other optional benefit.
You may elect the Beneficiary Income Option death benefit so long as the
Annuitant is no older than age 75 at the time of election. For purposes of
this optional death benefit, we calculate the Annual Income Amount and
Protected Withdrawal Value in the same manner that we do under Highest Daily
Lifetime Seven itself (except that for XTra Credit SIX, we exclude from the
Protected Withdrawal Value the amount of any Credit that was granted within 12
months prior to death). Because the fee for this benefit is based on the
Protected Withdrawal Value, the fee for Highest Daily Lifetime Seven with the
beneficiary income option may be greater than it would have been based on the
Account Value alone.
Upon a death that triggers payment of a death benefit under the Annuity, we
identify the following amounts: (a) the amount of the basic Death Benefit
under the Annuity (b) the Protected Withdrawal Value and (c) the Annual Income
Amount. If there were no withdrawals prior to the date of death, then we
calculate the Protected Withdrawal Value for purposes of this death benefit as
of the date of death, and we calculate the Annual Income Amount as if there
were a withdrawal on the date of death. If there were withdrawals prior to the
date of death, then we set the Protected Withdrawal Value and Annual Income
Amount for purposes of this death benefit as of the date that we receive due
proof of death.
If there is one beneficiary, he/she must choose to receive either the basic
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of periodic payments of
the Annual Income Amount - such payments may be annual or at other intervals
that we permit). If there are multiple beneficiaries, each beneficiary is
presented with the same choice. Thus, each beneficiary can choose to take
his/her portion of either (a) the basic death benefit or (b) the Beneficiary
Income Option death benefit. In order to receive the Beneficiary Income Option
death benefit, each beneficiary's share of the death benefit proceeds must be
allocated as a percentage of the total death benefit to be paid. We allow a
beneficiary who has opted to receive the Annual Income Amount to designate
another beneficiary, who would receive any remaining payments upon the former
beneficiary's death. Note also that the final payment, exhausting the
Protected Withdrawal Value, may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
. Assume that (i) the basic death benefit is $50,000, the Protected
Withdrawal Value is $100,000, and the Annual Income Amount is $5,000;
(ii) there are two beneficiaries (the first designated to receive 75% of
the death benefit and the second designated to receive 25% of the death
benefit); (iii) the first beneficiary chooses to receive his/her portion
of the death benefit in the form of the Annual Income Amount, and the
second beneficiary chooses to receive his/her portion of the death
benefit with reference to the basic death benefit.
. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out
period is derived from the $5,000 Annual Income Amount, paid each year
until it exhausts the entire $100,000 Protected Withdrawal Value).
The pro-rated portion of the Annual Income Amount, equal to $3,750
annually (i.e., the first beneficiary's 75% share multiplied by $5000),
is then paid each year for the 20 year period. Payment of $3,750 for 20
years results in total payments of $75,000 (i.e., the first
beneficiary's 75% share of the $100,000 Protected Withdrawal Value).
The second beneficiary would receive 25% of the basic death benefit
amount (or $12,500).
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If you elect to terminate Highest Daily Lifetime Seven with Beneficiary Income
Option, both Highest Daily Lifetime Seven and that death benefit option will
be terminated. You may not terminate the death benefit option without
terminating the entire benefit. If you terminate Highest Daily Lifetime Seven
with Beneficiary Income Option, your ability to elect other optional living
benefits will be affected as indicated in the "Election and Designations under
the Program" section, above.
2. We add the following as a new line item within the portion of the fee table
entitled "Your Optional Benefit Fees and Charges" to reflect the fee for
Highest Daily Lifetime Seven With Beneficiary Income Option:
Highest Daily Lifetime Seven with Beneficiary Income Option: maximum charge of
2.00% of PWV; current charge of 0.95% of PWV. *
Total Maximum Charges Total Current Charges
------------------------------------- ---------------------------------------
ASAPIII: 1.25% of Sub-account net ASAPIII: 1.25% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
APEX II: 1.65% of Sub-account net APEX II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
ASL II: 1.65% of Sub-account net ASL II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
XT6: 1.65% of Sub-account net XT6: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
--------
* Highest Daily Lifetime Seven with Beneficiary Income Option. 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. For ASAP III, 0.95% of PWV is in addition to 1.25% annual
charge of amounts invested in the Sub-accounts (in Annuity Years 1-8) and
0.65% annual charge of amounts invested in the Sub-accounts in subsequent
Annuity Years. For APEX II and ASL II, 0.95% of PWV is in addition to 1.65%
annual charge of amounts invested in the Sub-accounts. For XT6, 0.95% of
PWV is in addition to 1.65% annual charge of amounts invested in the
Sub-accounts in Annuity Years 1-10 and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years.
B. Addition of Lifetime Income Accelerator Feature (HD Lifetime Seven with
Lifetime Income Accelerator/SM/).
1. The following is added at the end of the section concerning Highest Daily
Lifetime Seven.
HD Lifetime Seven with Lifetime Income Accelerator/SM/. We offer another
version of Highest Daily Lifetime Seven that we call Highest Daily Lifetime
Seven with Lifetime Income Accelerator ("Highest Daily Lifetime Seven with
LIA"). 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 receive regulatory approval in those jurisdictions
Highest Daily Lifetime Seven with LIA is offered as an alternative to other
lifetime withdrawal options. If you elect this benefit, you may not elect any
other optional benefit. The income benefit under Highest Daily Lifetime Seven
with LIA currently is based on a single "designated life" who is between the
ages of 55 and 75 on the date that the benefit is elected. If you elected the
Highest Daily Lifetime Seven benefit, you will have a 90 day transition period
from the date the Highest Daily Lifetime Seven with Lifetime Income
Accelerator is approved in your state of residence to terminate your Highest
Daily Lifetime Seven benefit and elect the Highest Daily Lifetime Seven with
LIA benefit. After the 90 day transition period, you may elect to add the
Lifetime Income Accelerator option on any anniversary of the Issue Date in
accordance with the eligibility rules and restrictions described in the
"Election of and Designations under the Program" section of the prospectus
describing the Highest Daily Lifetime Seven benefit. If you terminate your
Highest Daily Lifetime Seven Benefit to elect the highest daily Lifetime Seven
with LIA benefit, you will lose the guarantees that you had accumulated under
your Highest Daily Lifetime Seven benefit and will begin the new guarantees
under the Highest Daily Lifetime Seven benefit with LIA based on the account
value as of the date the new benefit becomes active.
Highest Daily Lifetime Seven with LIA guarantees, until the death of the
single designated life, the ability to withdraw an amount equal to double the
Annual Income Amount (which we refer to as the "LIA Amount") if you meet the
conditions set forth below. The fee for Highest Daily Lifetime Seven with LIA
is 0.95% annually of the Protected Withdrawal Value. We deduct this fee at the
end of each 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 Valuation Day, if the quarter-end is not a
Valuation Day), we deduct 0.2375% of the 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 protected withdrawal value, the fee for Highest Daily Lifetime
Seven with LIA may be greater than it would have been, had it been based on
the Account Value alone. If the fee to be deducted exceeds the current Account
Value, we will reduce the Account Value to zero, and continue the benefit as
described below.
If this benefit is being elected on an Annuity held as a 403 (b) plan, then in
addition to meeting the eligibility requirements listed below for the LIA
Amount you must separately qualify for distributions from the 403 (b) plan
itself.
You may choose Highest Daily Lifetime Seven without also electing LIA, however
you may not elect LIA without Highest Daily Lifetime Seven. All terms and
conditions of Highest Daily Lifetime Seven apply to this version of the
benefit, except as described herein. Currently, if you elect Highest Daily
Lifetime Seven with LIA and subsequently terminate the benefit, you will be
able to
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re-elect Highest Daily Lifetime Seven with LIA but all conditions of the
benefit described below must be met, and you may be subject to a waiting
period until you can elect this or another lifetime withdrawal benefit.
Eligibility Requirements for LIA Amount. Both a waiting period of 36 months,
from the benefit effective date, and an elimination period of 120 days, from
the date of notification that one or both of the requirements described
immediately below have been met, apply before you can become eligible for the
LIA Amount. Assuming the 36 month waiting period has been met and we have
received the notification referenced in the immediately preceding sentence,
the LIA amount would be available for withdrawal on the Valuation Day
immediately after the 120/th/ day. The waiting period and the elimination
period may run concurrently. In addition to satisfying the waiting and
elimination period, either or both of the following requirements ("LIA
conditions") must be met. It is not necessary to meet both conditions:
(1) The designated life is confined to a qualified nursing facility. A
qualified nursing facility is a facility operated pursuant to law or any
state licensed facility providing medically necessary in-patient care which
is prescribed by a licensed physician in writing and based on physical
limitations which prohibit daily living in a non-institutional setting.
(2) The designated life is unable to perform two or more basic abilities of
caring for oneself or "activities of daily living." We define these basic
abilities as:
i. Eating: Feeding oneself by getting food into the body from a receptacle
(such as a plate, cup or table) or by a feeding tube or intravenously.
ii. Dressing: Putting on and taking off all items of clothing and any
necessary braces, fasteners or artificial limbs.
iii. Bathing: Washing oneself by sponge bath; or in either a tub or shower,
including the task of getting into or out of the tub or shower.
iv. Toileting: Getting to and from the toilet, getting on and off the
toilet, and performing associated personal hygiene.
v. Transferring: Moving into or out of a bed, chair or wheelchair.
vi. Continence: Maintaining control of bowel or bladder function; or when
unable to maintain control of bowel or bladder function, the ability to
perform personal hygiene (including caring for catheter or colostomy bag).
You must notify us when the LIA conditions have been met. If, when we receive
such notification, there are more than 120 days remaining until the end of the
waiting period described above, you will not be eligible for the LIA Amount.
If there are 120 days or less remaining until the end of the waiting period
when we receive notification that the LIA conditions are met, we will
determine eligibility for the LIA Amount through our then current
administrative process, which may include, but is not limited to,
documentation verifying the LIA conditions and/or an assessment by a third
party of our choice. Such assessment may be in person and we will assume any
costs associated with the aforementioned assessment. Once eligibility is
determined, the LIA Amount is equal to double the Annual Income Amount as
described in this prospectus under the Highest Daily Lifetime Seven Benefit.
Additionally, we will reassess your eligibility on an annual basis although
your LIA benefit for the year that immediately precedes our reassessment will
not be affected if it is determined that you are no longer eligible. Your
first reassessment may occur in the same year as your initial assessment. If
we determine you are no longer eligible to receive the LIA Amount, upon the
next Annuity Anniversary the Annual Income Amount would replace the LIA
Amount. There is no limit on the number of times you can become eligible for
the LIA Amount, however, each time would require the completion of the 120-day
elimination period, notification that the designated life meets the LIA
conditions, and determination, through our then current administrative
process, that you are eligible for the LIA Amount, each as described above.
LIA amount at the first Withdrawal. If your first withdrawal subsequent to
election of Highest Daily Lifetime Seven with LIA occurs while you are
eligible for the LIA Amount, the available LIA Amount is equal to double the
Annual Income Amount.
LIA amount after the First Withdrawal. If you become eligible for the LIA
Amount after you have taken your first withdrawal, the available LIA amount
for the current and subsequent Annuity Years is equal to double the then
current Annual Income Amount, however the available LIA amount in the current
Annuity Year is reduced by any withdrawals that have been taken in the current
Annuity Year. Cumulative withdrawals in an Annuity Year which are less than or
equal to the LIA Amount (when eligible for the LIA amount) will not reduce
your LIA Amount in subsequent Annuity Years, but any such withdrawals will
reduce the LIA Amount on a dollar-for-dollar basis in that Annuity Year.
Withdrawals In Excess of the LIA amount. If your cumulative withdrawals in an
Annuity Year are in excess of the LIA Amount when you are eligible ("Excess
Withdrawal"), your LIA Amount in subsequent years will be reduced (except with
regard to required minimum distributions) by the result of the ratio of the
excess portion of the withdrawal to the Account Value immediately prior to the
Excess Withdrawal. Reductions include the actual amount of the withdrawal,
including any CDSC that may apply. Withdrawals of any amount up to and
including the LIA Amount will reduce the Protected Withdrawal Value by the
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amount of the withdrawal. Excess Withdrawals will reduce the Protected
Withdrawal Value by the same ratio as the reduction to the LIA Amount. Any
withdrawals that are less than or equal to the LIA amount (when eligible) but
in excess of the free withdrawal amount available under this Annuity will not
incur a CDSC.
Withdrawals are not required. However, subsequent to the first withdrawal, the
LIA Amount is not increased in subsequent Annuity Years if you decide not to
take a withdrawal in an Annuity Year or take withdrawals in an Annuity Year
that in total are less than the LIA Amount.
Purchase Payments. If you are eligible for the LIA Amount as described under
"Eligibility Requirements for LIA Amount" and you make an additional Purchase
Payment, we will increase your LIA Amount by double the amount we add to your
Annual Income Amount.
Step Ups. If your Annual Income Amount is stepped up, your LIA Amount will be
stepped up to equal double the stepped up Annual Income Amount.
Guarantee Payments. If your Account Value is reduced to zero as a result of
cumulative withdrawals that are equal to or less than the LIA Amount, or as a
result of the fee that we assess for Highest Daily Lifetime Seven with LIA,
and there is still a LIA Amount available, we will make an additional payment
for that Annuity Year equal to the remaining LIA Amount. Thus, in that
scenario, the remaining LIA Amount would be payable even though your Account
Value was reduced to zero. In subsequent Annuity Years we make payments that
equal the LIA Amount as described in this section. We will make payments until
the death of the single designated life. Should the designated life no longer
qualify for the LIA amount (as described under "Eligibility Requirements for
LIA Amount" above), the Annual Income Amount would continue to be available.
Subsequent eligibility for the LIA Amount would require the completion of the
120 day elimination period as well as meeting the LIA conditions listed above
under "Eligibility Requirements for LIA Amount". To the extent that cumulative
withdrawals in the current Annuity Year that reduce your Account Value to zero
are more than the LIA Amount (except in the case of required minimum
distributions), Highest Daily Lifetime Seven with LIA terminates, and no
additional payments are made.
Annuity Options. In addition to the Highest Daily Lifetime Seven Annuity
Options described above, after the 10th benefit anniversary you may also
request that we make annuity payments each year equal to the Annual Income
Amount. In any year that you are eligible for the LIA Amount, we make annuity
payments equal to the LIA Amount. If you would receive a greater payment by
applying your Account Value to receive payments for life under your Annuity,
we will pay the greater amount. Prior to the 10th benefit anniversary this
option is not available.
We will continue to make payments until the death of the Designated Life. If
this option is elected, the Annual Income Amount and LIA Amount will not
increase after annuity payments have begun.
If you elect HD Lifetime Seven with LIA, and never meet the eligibility
requirements you will not receive any additional payments based on the LIA
Amount.
2. We add the following as a new line item within the portion of the fee table
entitled "Your Optional Benefit Fees and Charges" to reflect the fee for
Highest Daily Lifetime Seven With Optional Lifetime Income Accelerator:
Highest Daily Lifetime Seven w/Optional Lifetime Income Accelerator: maximum
charge of 2.00% of PWV; current charge of 0.95% of PWV. *
Total Maximum Charges Total Current Charges
--------------------------------------- -------------------------------------
ASAPIII: 1.25% of Sub-account net ASAPIII: 1.25% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
APEX II: 1.65% of Sub-account net APEX II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
ASL II: 1.65% of Sub-account net ASL II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
XT6: 1.65% of Sub-account net XT6: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
--------
* Highest Daily Lifetime Seven With Lifetime Income Accelerator. 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. For ASAP III, 0.95% of PWV is in addition to 1.25% annual
charge of amounts invested in the Sub-accounts (in Annuity Years 1-8) and
0.65% annual charge of amounts invested in the Sub-accounts in subsequent
Annuity Years. For APEX II and ASL II, 0.95% of PWV is in addition to 1.65%
annual charge of amounts invested in the Sub-accounts. For XT6, 0.95% of
PWV is in addition to 1.65% annual charge of amounts invested in the
Sub-accounts in Annuity Years 1-10 and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years.
5
C. Revision to the way that certain withdrawals of the Annual Income Amount
are impacted by CDSC
We add the following as the last sentence of the first paragraph under the
sub-section entitled "Key Feature - Annual Income Amount under the Highest
Daily Lifetime Seven Benefit" to make clear that no withdrawal of the Annual
Income Amount (provided such withdrawal does not constitute Excess Income)
will be subject to a CDSC:
Note that if your withdrawal of the Annual Income Amount in a given Annuity
Year exceeds the applicable free withdrawal amount under the Annuity (but is
not considered Excess Income), we will not impose any CDSC on the amount of
that withdrawal.
D. Revised Asset Transfer Formula for Highest Daily Lifetime Seven and Spousal
Highest Daily Lifetime Seven
For elections of Highest Daily Lifetime Seven on or after July 21, 2008, the
asset transfer formula differs from that set forth in the May 1, 2008
prospectus. The revised formula reflects the fact that Account Value may
include amounts allocated to certain Fixed Rate Options. Currently, no Fixed
Rate Options are available for use with Highest Daily Lifetime Seven and
Spousal Highest Daily Lifetime Seven.
Here is the revised formula (the Table of "a" factors remains the same):
Terms and Definitions referenced in the calculation formula:
. Cu - 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%.
. Ct - the target is established on the Effective Date and is not changed
for the life of the guarantee. Currently, it is 80%.
. Cl - 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.
. V\\v\\ - the total value of all Permitted Sub-accounts in the Annuity.
. V\\F\\ the total value of all elected Fixed Rate Options in the Annuity
. 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 Account
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 Account Value (V\\V\\ + V\\F\\) is equal to zero, no
calculation is necessary.
L = 0.05 * P * a
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:
Target Ratio r = (L - B) / (V\\V\\ + V\\F\\).
. If r (greater than) Cu, assets in the Permitted Sub-accounts are
transferred to the AST Investment Grade Bond Portfolio Sub-account.
6
. 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:
T = {Min (V\\V\\ + V\\F\\), [L - B - Money is transferred from the
(V\\V\\ + V\\F\\) * Ct] / (1-Ct))} elected Sub-accounts and Fixed
Rate Options to the Transfer
Account
T = {Min (B,-[L - B -(V\\V\\ + V\\F\\)* Money is transferred from the
C\\t\\] / (1-C\\t\\))} Transfer Account to the elected
Sub-accounts
CHANGES TO SPOUSAL HIGHEST DAILY LIFETIME SEVEN
1. We add the following, immediately after the section entitled "Additional
Tax Considerations":
A. Addition of Death Benefit (Spousal HD Lifetime Seven with Beneficiary Income
Option/SM/)
The Annuity Owner may opt for a death benefit, the value of which is linked to
the Annual Income Amount under the benefit. We refer to the death benefit as
the Beneficiary Income Option. As detailed below, a beneficiary taking the
Annuity's death benefit under this feature is paid the Annual Income Amount
until the Protected Withdrawal Value is depleted. (Note that the final
payment, exhausting the Protected Withdrawal Value, may be less than the
Annual Income Amount). If you choose the Spousal Highest Daily Lifetime Seven
with Beneficiary Income Option the maximum charge we may impose is 2.00% of
Protected Withdrawal Value ("PWV") annually. We currently assess a charge of
0.95% of PWV annually. To reflect this death benefit option, we add the
following to the description of Spousal Highest Daily Lifetime Seven:
Spousal HD Lifetime Seven with Beneficiary Income Option/SM/
We offer an optional death benefit feature under this benefit, the amount of
which is linked to your Annual Income Amount. You may choose Spousal Highest
Daily Lifetime Seven without also selecting the Beneficiary Income Option
death benefit ("BIO"). If you elect Spousal Highest Daily Lifetime Seven
without the Beneficiary Income Option and would like to add this feature
later, you must terminate the Spousal Highest Daily Lifetime Seven benefit and
elect the Spousal Highest Daily Lifetime Seven with Beneficiary Income Option.
If you elected the Spousal Highest Daily Lifetime Seven benefit, you will have
a 90 day transition period from the date the Beneficiary Income Option is
approved in your state of residence to terminate your Spousal Highest Daily
Lifetime Seven benefit and elect the Spousal Highest Daily Lifetime Seven
benefit with Beneficiary Income Option. After the 90 day transition period,
you may elect to add the Beneficiary Income Option on any anniversary of the
Issue Date in accordance with the eligibility rules and restrictions described
in the "Election of and Designations under the Program" section of the
prospectus describing the Highest Daily Lifetime Seven benefit. If you
terminate your Spousal Highest Daily Lifetime Seven benefit to elect the
Spousal Highest Daily Lifetime Seven with Beneficiary Income Option benefit,
you will lose all guarantees under the Spousal Highest Daily Lifetime Seven
benefit, and will begin new guarantees under the Spousal Highest Daily
Lifetime Seven with BIO based on the account value as of the date the new
benefit becomes active.
If you elect the Beneficiary Income Option death benefit, you may not elect
any other optional benefit. You may elect the Beneficiary Income Option death
benefit so long as each Designated Life is no older than age 75 at the time of
election. This death benefit is not transferable in the event of a divorce,
nor may the benefit be split in accordance with any divorce proceedings or
similar instrument of separation. Since this fee is based on the Protected
Withdrawal Value, the fee for Spousal Highest Daily Lifetime Seven with BIO
may be greater than it would have been, had it been based on the Account Value
alone.
For purposes of the Beneficiary Income Option death benefit, we calculate the
Annual Income Amount and Protected Withdrawal Value in the same manner that we
do under Spousal Highest Daily Lifetime Seven itself (except that for XTra
Credit SIX, we exclude from the Protected Withdrawal Value the amount of any
Credit that was granted within 12 months prior to death). Upon the first death
of a Designated Life, no amount is payable under the Beneficiary Income Option
death benefit. Upon the second death of a Designated Life, we identify the
following amounts: (a) the amount of the base death benefit under the Annuity
(b) the Protected Withdrawal Value and (c) the Annual Income Amount. If there
were no withdrawals prior to the date of death, then we calculate the
Protected Withdrawal Value for purposes of this death benefit as of the date
of death, and we calculate the Annual Income Amount as if there were a
withdrawal on the date of death. If there were withdrawals prior to the date
of death, then we set the Protected Withdrawal Value and Annual Income Amount
for purposes of this death benefit as of the date that we receive due proof of
death.
7
If there is one beneficiary, he/she must choose to receive either the base
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of annual payment of the
Annual Income Amount - such payments may be annual or at other intervals that
we permit). If there are multiple beneficiaries, each beneficiary is presented
with the same choice. Thus, each beneficiary can choose to take his/her
portion of either (a) the basic death benefit or (b) the Beneficiary Income
Option death benefit. In order to receive the Beneficiary Income Option death
benefit, each beneficiary's share of the death benefit proceeds must be
allocated as a percentage of the total death benefit to be paid. We allow a
beneficiary who has opted to receive the Annual Income Amount to designate
another beneficiary, who would receive any remaining payments upon the former
beneficiary's death. Note also that the final payment, exhausting the
Protected Withdrawal Value, may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
. Assume that (i) the basic death benefit is $50,000, the Protected
Withdrawal Value is $100,000, and the Annual Income Amount is $5,000;
(ii) there are two beneficiaries (the first designated to receive 75% of
the death benefit and the second designated to receive 25% of the death
benefit); (iii) the first beneficiary chooses to receive his/her portion
of the death benefit in the form of the Annual Income Amount, and the
second beneficiary chooses to receive his/her portion of the death
benefit with reference to the basic death benefit.
. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out
period is derived from the $5,000 Annual Income Amount, paid each year
until it exhausts the entire $100,000 Protected Withdrawal Value).
The pro-rated portion of the Annual Income Amount equal to $3,750 (i.e.,
the first beneficiary's 75% share multiplied by $5,000) is then paid
each year for the 20 year period. Payment of $3,750 for 20 years results
in total payments of $75,000 (i.e., the first beneficiary's 75% share of
the $100,000 Protected Withdrawal Value).
The second beneficiary would receive 25% of the basic death benefit
amount (or $12,500).
If you elect to terminate Spousal Highest Daily Lifetime Seven with
Beneficiary Income Option, both Spousal Highest Daily Lifetime Seven and that
death benefit option will be terminated. You may not terminate the death
benefit option without terminating the entire benefit. If you terminate
Spousal Highest Daily Lifetime Seven with Beneficiary Income Option, your
ability to elect other optional living benefits will be affected as indicated
in the "Election and Designations under the Program" section, above.
2. We add the following as a new line item within the portion of the fee table
entitled "Your Optional Benefit Fees and Charges" to reflect the fee for
Spousal Highest Daily Lifetime Seven With Beneficiary Income Option:
Spousal Highest Daily Lifetime Seven w/Beneficiary Income Option: maximum
charge of 2.00% of PWV; current charge of 0.95% of PWV. *
Total Maximum Charges Total Current Charges
--------------------------------------- -------------------------------------
ASAPIII: 1.25% of Sub-account net ASAPIII: 1.25% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
APEX II: 1.65% of Sub-account net APEX II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
ASL II: 1.65% of Sub-account net ASL II: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
XT6: 1.65% of Sub-account net XT6: 1.65% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
--------
* Spousal Highest Daily Lifetime Seven With Beneficiary Income Option. 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. For ASAP III, 0.95% of PWV is in addition to
1.25% annual charge of amounts invested in the Sub-accounts (in Annuity
Years 1-8) and 0.65% annual charge of amounts invested in the Sub-accounts
in subsequent Annuity Years. For APEX II and ASL II, 0.95% of PWV is in
addition to 1.65% annual charge of amounts invested in the Sub-accounts.
For XT6, 0.95% of PWV is in addition to 1.65% annual charge of amounts
invested in the Sub-accounts in Annuity Years 1-10 and 0.65% annual charge
of amounts invested in the Sub-accounts in subsequent Annuity Years.
B. Revision to the way that certain withdrawals of the Annual Income Amount
are impacted by CDSC
We add the following as the last sentence of the first paragraph under the
sub-section entitled "Key Feature - Annual Income Amount under the Spousal
Highest Daily Lifetime Seven Benefit" to make clear that no withdrawal of the
Annual Income Amount (provided such withdrawal does not constitute Excess
Income) will be subject to a CDSC:
Note that if your withdrawal of the Annual Income Amount in a given Annuity
Year exceeds the applicable free withdrawal amount under the Annuity (but is
not considered Excess Income), we will not impose any CDSC on the amount of
that withdrawal.
8
C. Revised Asset Transfer Formula for Highest Daily Lifetime Seven and Spousal
Highest Daily Lifetime Seven
For elections of Spousal Highest Daily Lifetime Seven on or after July 21,
2008, the asset transfer formula differs from that set forth in the May 1,
2008 prospectus. See the section above under Highest Daily Lifetime Seven for
the revised formula.
EXPANDED GROUP OF AVAILABLE FUNDS
Under Investment Options, What Are the Investment Objectives And Policies Of
The Portfolios?, we make the revisions appearing below.
1. We replace the sentence stating "[t] following chart lists the currently
available and permitted investment options . . ." with the following:
As a condition to your participating in certain of our optional benefits, we
limit the investment options to which you may allocate your Account Value.
Broadly speaking, we offer two groups of permitted funds. Under the first
group, your allowable investment options are more limited, but you are not
subject to mandatory quarterly re-balancing. Under the second group, you may
allocate your Account Value between a broader range of investment options, but
must participate in quarterly re-balancing. The set of tables immediately
below describes the first category of permitted investment options. The second
set of tables describes the second category, under which:
(a) you must allocate at least 20% of your Account Value to certain fixed
income portfolios (currently, the AST PIMCO Total Return Bond Portfolio
and the AST Western Asset Core Plus Bond Portfolio)
(b) you may allocate up to 80% in the equity and other portfolios listed in
the table below
(c) on each quarter (or the next Valuation Day, if the quarter-end is not a
Valuation Day), we will automatically re-balance your Account Value, so
that the percentages devoted to each Portfolio remain the same as those in
effect on the immediately preceding quarter-end
(d) between quarter-ends, you may re-allocate your Account Value among the
investment options permitted within this category. If you reallocate, the
next quarterly rebalancing will restore the percentages to those of your
most recent reallocation.
While those who do not participate in any optional benefit generally may
invest in any of the investment options described in this prospectus, only
those who participate in Highest Daily Lifetime Seven and Spousal Highest
Daily Lifetime Seven may participate in the second category (along with its
attendant re-balancing requirement). This second category is called our
"Optional Allocation and Rebalancing Program." If you participate in the
Optional Allocation and Rebalancing Program, you may not participate in a
Dollar Cost Averaging Program or Automatic Rebalancing Program. We may modify
or terminate the Optional Allocation and Rebalancing Program at any time.
9
The following chart lists the currently available and permitted investment
options when you choose certain optional benefits/1/:
Group I: Allowable Benefit Allocations
--------
/1/ Fund availability may vary by annuity.
Optional Benefit Name/2/ Allowable Benefit Allocations
Lifetime Five Income Benefit AST Academic Strategies Asset
Spousal Lifetime Five Income Benefit Allocation Portfolio
Highest Daily Lifetime Five Income AST Capital Growth Asset
Benefit Allocation Portfolio
AST Balanced Asset Allocation
Highest Daily Lifetime Seven Income Portfolio
Benefit AST Focus Four Plus Portfolio
AST Preservation Asset Allocation
Spousal Highest Daily Lifetime Seven Portfolio
Income Benefit AST First Trust Balanced Target
Portfolio
Highest Daily Value Death Benefit AST First Trust Capital
Appreciation Target Portfolio
AST Advanced Strategies Portfolio
AST T. Rowe Price Asset
Allocation Portfolio
AST UBS Dynamic Alpha Strategy
Portfolio
AST Schroders Multi-Asset World
Strategies Portfolio
AST Niemann Capital Growth Asset
Allocation Portfolio
AST CLS Growth Asset Allocation
Portfolio
AST CLS Moderate Asset Allocation
Portfolio
AST Horizon Growth Asset
Allocation Portfolio
AST Horizon Moderate Asset
Allocation Portfolio
Franklin Templeton VIP Founding
Funds Allocation Fund
--------------------------------------------------------------------------------
Combo 5% Rollup & HAV Death Benefit All investment options permitted,
EXCEPT these:
Guaranteed Minimum Income Benefit ProFund VP UltraNASDAQ-100
Guaranteed Minimum Withdrawal Benefit ProFund VP UltraSmall Cap
GRO/GRO PLUS/GRO PLUS 2008 ProFund VP Semiconductor
ProFund VP Internet
Highest Anniversary Value Death Benefit ProFund VP UltraBull
Value Line(R) Target 25
AIM VI Technology
Highest Daily GRO ProFund VP Technology
NASDAQ(R) Target 15
ProFund VP Biotechnology
ProFund VP Short Small-Cap
Access VP High Yield
ProFund VP Short Mid-Cap
Evergreen VA Growth Fund
--------------------------------------------------------------------------------
Additional 5 investment options
NOT permitted with GRO Plus 2008
GRO Plus 2008 & Highest Daily GRO
Highest Daily GRO ProFund VP Ultra Mid-Cap
ProFund VP Precious Metals
ProFund VP NASDAQ-100
ProFund VP Asia 30
ProFund VP Short NASDAQ-100
--------------------------------------------------------------------------------
Group II: Optional Allocation and Rebalancing Program
Optional Benefit Name/2/ Allowable Benefit Allocations
Highest Daily Lifetime Seven AST Academic Strategies Asset
Spousal Highest Daily Lifetime Seven Allocation
AST Advanced Strategies
AST Aggressive Asset Allocation
AST AllianceBernstein Core Value
AST AllianceBernstein Growth &
Income
--------------------------------------------------------------------------------
/2/ Detailed Information regarding these optional benefits can be found in the
"Living Benefits" and "Death Benefits" sections of this prospectus.
10
AST American Century Income &
Growth
AST Balanced Asset Allocation
AST Capital Growth Asset
Allocation
AST CLS Growth Asset Allocation
AST CLS Moderate Asset Allocation
AST Cohen & Steers Realty
AST DeAM Large-Cap Value
AST Federated Aggressive Growth
AST First Trust Balanced Target
AST First Trust Capital
Appreciation Target
AST Focus Four Plus
AST Global Real Estate
AST Goldman Sachs Concentrated
Growth
AST Goldman Sachs Mid-Cap Growth
AST Goldman Sachs Small-Cap Value
AST High Yield
AST Horizon Growth Asset
Allocation
AST Horizon Moderate Asset
Allocation
AST International Growth
AST International Value
AST JPMorgan International Equity
AST Large-Cap Value
AST Lord Abbett Bond-Debenture
AST Marsico Capital Growth
AST MFS Global Equity
AST MFS Growth
AST Mid-Cap Value
AST Money Market
AST Neuberger Berman Mid-Cap
Growth
AST Neuberger Berman LSV Midcap
Value
AST Neuberger Berman Small-Cap
Growth
AST Niemann Capital Growth Asset
Allocation
AST Parametric Emerging Markets
Equity
AST PIMCO Limited Maturity Bond
AST PIMCO Total Return Bond
AST Preservation Asset Allocation
AST QMA US Equity Alpha
AST Schroders Multi-Asset World
Strategies Portfolio
AST Small-Cap Growth
AST Small-Cap Value
AST T. Rowe Price Asset Allocation
AST T. Rowe Price Global Bond
AST T. Rowe Price Large-Cap Growth
AST T. Rowe Price Natural
Resources
AST UBS Dynamic Alpha Strategy
AST Western Asset Core Plus Bond
Franklin Templeton VIP Founding
Funds Allocation Fund
ProFund VP Consumer Goods
ProFund VP Consumer Services
ProFund VP Financials
ProFund VP Health Care
ProFund VP Industrials
ProFund VP Large-Cap Growth
ProFund VP Large-Cap Value
ProFund VP Mid-Cap Growth
ProFund VP Mid-Cap Value
ProFund VP Real Estate
ProFund VP Small-Cap Growth
ProFund VP Small-Cap Value
ProFund VP Telecommunications
ProFund VP Utilities
11
CHANGES TO THE ASLII ANNUITY
We make the following revisions to the prospectus in order to remove
limitations on the amount of the basic Death Benefit paid under our ASLII
Annuity when death occurs on or after the decedent's age 85. We are also
adding a restriction that the ASLII Annuity is only available for purchase up
to age 85.
. Within the section "Purchasing Your Annuity," within the subsection
"What Are Our Requirements for Purchasing One of the Annuities?," we
replace the paragraph entitled "Age Restrictions" with the following:
Age Restrictions: Unless we agree otherwise and subject to our rules, the
Owner (or Annuitant if entity owned) must not be older than a maximum issue
age as of the Issue Date of the Annuity as follows: age 80 for ASAP III, age
75 for XT6 and age 85 for APEX II and ASL II. If an Annuity is owned jointly,
the oldest of the Owners must not be older than the maximum issue age on the
Issue Date. You should consider your need to access your Account Value and
whether the Annuity's liquidity features will satisfy that need. If you take a
distribution prior to age 59 1/2, you may be subject to a 10% penalty in
addition to ordinary income taxes on any gain. The availability and level of
protection of certain optional benefits may vary based on the age of the Owner
on the Issue Date of the Annuity or the date of the Owner's death.
. Within the section "Death Benefit," within the subsection "Basic Death
Benefit," we replace the last three paragraphs with the following:
For ASAP III, APEX II and XT6 Annuities, the existing basic Death Benefit (for
all decedent ages) is the greater of:
. The sum of all Purchase Payments (not including any Credits) less the
sum of all proportional withdrawals.
. The sum of your Account Value in the Sub-accounts and your Interim Value
in the Fixed Allocations (less the amount of any Credits applied within
12-months prior to the date of death, with respect to XT6).
For ASL II Annuities issued before July 21, 2008,where death occurs before the
decedent's age 85, the basic Death Benefit is the greater of:
. The sum of all Purchase Payments less the sum of all proportional
withdrawals.
. The sum of your Account Value in the Sub-accounts and your Interim Value
in the Fixed Allocations.
For ASL II Annuities issued before July 21, 2008 where death occurs after the
decedent's age 85, the Death Benefit is (a) your Account Value (for Annuities
other than those issued in New York) or (b) your Account Value in the
Sub-accounts plus your Interim Value in the Fixed Allocations (for Annuities
issued in New York only).
For ASL II Annuities issued on or after July 21, 2008, subject to regulatory
approval, the basic Death Benefit is the greater of:
. The sum of all Purchase Payments less the sum of all proportional
withdrawals.
. The sum of your Account Value in the Sub-accounts and your Interim Value
in the Fixed Allocations.
"Proportional withdrawals" are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn. For
example, a withdrawal of 50% of Account Value would be considered as a 50%
reduction in Purchase Payments for purposes of calculating the basic Death
Benefit.
12
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
OPTIMUM/SM/
OPTIMUM FOUR/SM/
OPTIMUM PLUS/SM/
Supplement, dated July 21, 2008
To
Prospectus, dated May 1, 2008
This supplement should be read and retained with the prospectus for your
Annuity. If you would like another copy of the prospectus, please call us at
1-888-PRU-2888.
This supplement is being issued to describe enhancements that are being made
to certain optional living benefits available under each of the
above-referenced Annuities. The terms used in this supplement are defined in
the Glossary of Terms in the prospectus. With respect to Highest Daily
Lifetime Seven, we (a) revise the way that certain withdrawals of the Annual
Income Amount are impacted by the Contingent Deferred Sales Charge ("CDSC")
(b) add an optional death benefit, (the "Highest Daily Lifetime Seven with
Beneficiary Income Option") (c) add an optional benefit that increases the
Annual Income Amount if the owner qualifies for increased payments, (the
"Highest Daily Lifetime Seven with Lifetime Income Accelerator"), and
(d) modify the asset transfer formula under the benefit, to make clear that
the Account Value may include amounts allocated to certain Fixed Rate Options.
For Spousal Highest Daily Lifetime Seven, we (a) revise the way that certain
withdrawals of the Annual Income Amount are impacted by CDSC (b) add an
optional death benefit (the "Spousal Highest Daily Lifetime Seven with
Beneficiary Income Option") and (c) modify the asset transfer formula under
the benefit, to make clear that the Account Value may include amounts
allocated to certain Fixed Rate Options. The Highest Daily Lifetime Seven with
Beneficiary Income Option and the Spousal Highest Daily Lifetime Seven with
Beneficiary Income Option allow the beneficiary to continue to withdraw the
Annual Income Amount until the Protected Withdrawal Value is depleted. Thus,
the option may be appropriate for an Annuity Owner who wants to provide an
additional death benefit option to his/her beneficiary.
The Highest Daily Lifetime Seven with Lifetime Income Accelerator provides a
benefit under which the Annuity Owner may withdraw double the Annual Income
Amount once he/she meets the benefit's eligibility requirements (e.g., being
confined to a qualified nursing facility or being unable to perform two daily
life activities as defined below). Thus, this benefit may be appropriate for
an Annuity Owner who may meet these requirements at a future date.
Except as otherwise provided here, the description of each optional living
benefit set forth in the May 1, 2008 prospectus remains unchanged.
CHANGES TO HIGHEST DAILY LIFETIME SEVEN
A. Addition of Death Benefit (HD Lifetime Seven with Beneficiary Income
Option/SM/)
For elections of Highest Daily Lifetime Seven on or after July 21, 2008, the
Annuity Owner may opt for a death benefit, the value of which is linked to the
Annual Income Amount under the benefit. As detailed below, a beneficiary
taking the Annuity's death benefit under this feature is paid the Annual
Income Amount until the Protected Withdrawal Value is depleted. (Note that the
final payment, exhausting the Protected Withdrawal Value, may be less than the
Annual Income Amount). We impose a maximum charge of 2.00% of Protected
Withdrawal Value ("PWV") annually, and a current charge of 0.95% of PWV
annually, if you choose Highest Daily Lifetime Seven with Beneficiary Income
Option. See the table entitled "Your Optional Benefit Fees and Charges" in the
prospectus for a description of all fees and charges related to optional
benefits.
1. To reflect this death benefit option, we add the following to the
description of Highest Daily Lifetime Seven, immediately after the
sub-section entitled Additional Tax Considerations:
HD Lifetime Seven with Beneficiary Income Option/SM/
We offer an optional death benefit feature under this benefit, the amount of
which is linked to your Annual Income Amount. We refer to this optional death
benefit as the Beneficiary Income Option ("BIO"). You may choose Highest Daily
Lifetime Seven without also selecting the Beneficiary Income Option death
benefit. You must elect the Beneficiary Income Option death benefit at the
time you elect Highest Daily Lifetime Seven. If you elect Highest Daily
Lifetime Seven without the Beneficiary Income Option and would like to add
this feature later, you must terminate the Highest Daily Lifetime Seven
benefit and elect the Highest Daily Lifetime Seven with Beneficiary Income
Option. If you elected the Highest Daily Lifetime Seven benefit, you will have
a 90 day transition period from the date the Beneficiary Income Option is
approved in your state of residence to terminate your Highest Daily Lifetime
Seven benefit and elect the Highest Daily Lifetime Seven benefit with
Beneficiary Income Option. If you do not elect to add the Beneficiary Income
Option in the 90 day transition period, you can elect it on any anniversary of
the Issue Date that is at least 90 calendar days from the date that the
Highest Daily Lifetime Seven benefit was terminated. If you terminate your
Highest Daily Lifetime Seven benefit to elect the Highest Daily Lifetime Seven
with Beneficiary Income Option benefit, you will lose all guarantees under the
Highest Daily Lifetime Seven benefit, and will begin the new guarantees under
the Highest Daily Lifetime Seven benefit with BIO based on the account value
as of the date the new benefit is elected.
If you elect this death benefit, you may not elect any other optional benefit.
You may elect the Beneficiary Income Option death benefit so long as the
Annuitant is no older than age 75 at the time of election. For purposes of
this optional death benefit, we calculate the Annual Income Amount and
Protected Withdrawal Value in the same manner that we do under Highest Daily
Lifetime Seven itself (except that for Optimum Plus, we exclude from the
Protected Withdrawal Value the amount of any Credit that was granted within 12
months prior to death). Because the fee for this benefit is based on the
Protected Withdrawal Value, the fee for Highest Daily Lifetime seven with the
beneficiary income option may be greater than it would have been based on the
Account Value alone.
Upon a death that triggers payment of a death benefit under the Annuity, we
identify the following amounts: (a) the amount of the basic Death Benefit
under the Annuity (b) the Protected Withdrawal Value and (c) the Annual Income
Amount. If there were no withdrawals prior to the date of death, then we
calculate the Protected Withdrawal Value for purposes of this death benefit as
of the date of death, and we calculate the Annual Income Amount as if there
were a withdrawal on the date of death. If there were withdrawals prior to the
date of death, then we set the Protected Withdrawal Value and Annual Income
Amount for purposes of this death benefit as of the date that we receive due
proof of death.
If there is one beneficiary, he/she must choose to receive either the basic
Death Benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of periodic payments of
the Annual Income Amount - such payments may be annual or at other intervals
that we permit). If there are multiple beneficiaries, each beneficiary is
presented with the same choice. Thus, each beneficiary can choose to take
his/her portion of either (a) the basic death benefit or (b) the Beneficiary
Income Option death benefit. In order to receive the Beneficiary Income Option
death benefit, each beneficiary's share of the death benefit proceeds must be
allocated as a percentage of the total death benefit to be paid. We allow a
beneficiary who has opted to receive the Annual Income Amount to designate
another beneficiary, who would receive any remaining payments upon the former
beneficiary's death. Note also that the final payment, exhausting the
Protected Withdrawal Value, may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
. Assume that (i) the basic death benefit is $50,000, the Protected
Withdrawal Value is $100,000, and the Annual Income Amount is $5,000;
(ii) there are two beneficiaries (the first designated to receive 75% of
the death benefit and the second designated to receive 25% of the death
benefit); (iii) the first beneficiary chooses to receive his/her portion
of the death benefit in the form of the Annual Income Amount, and the
second beneficiary chooses to receive his/her portion of the death
benefit with reference to the basic death benefit.
. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out
period is derived from the $5,000 Annual Income Amount, paid each year
until it exhausts the entire $100,000 Protected Withdrawal Value).
The pro-rated portion of the Annual Income Amount, equal to $3,750
annually (i.e., the first beneficiary's 75% share multiplied by $5000),
is then paid each year for the 20 year period. Payment of $3,750 for 20
years results in total payments of $75,000 (i.e., the first
beneficiary's 75% share of the $100,000 Protected Withdrawal Value).
The second beneficiary would receive 25% of the basic death benefit
amount (or $12,500).
If you elect to terminate Highest Daily Lifetime Seven with Beneficiary Income
Option, both Highest Daily Lifetime Seven and that death benefit option will
be terminated. You may not terminate the death benefit option without
terminating the entire benefit. If you terminate Highest Daily Lifetime Seven
with Beneficiary Income Option, your ability to elect other optional living
benefits will be affected as indicated in the "Election and Designations under
the Program" section, above.
2
2. We add the following as a new line item within the portion of the fee table
entitled "Your Optional Benefit Fees and Charges" to reflect the fee for
Highest Daily Lifetime Seven With Beneficiary Income Option:
Highest Daily Lifetime Seven with Beneficiary Income Option: maximum charge of
2.00% of PWV; current charge of 0.95% of PWV. *
Total Maximum Charges Total Current Charges
--------------------------------------- -------------------------------------
Optimum: 1.25% of Sub-account net Optimum: 1.25% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
Optimum 1.65% of Sub-account net Optimum 1.65% of Sub-account net
Four: assets + 2.00% of PWV Four: assets + 0.95% of PWV
Optimum 1.65% of Sub-account net Optimum 1.65% of Sub-account net
Plus: assets + 2.00% of PWV Plus: assets + 0.95% of PWV
--------
* Highest Daily Lifetime Seven With Beneficiary Income Option. 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. For Optimum, 0.95% of PWV is in addition to 1.25% annual
charge of amounts invested in the Sub-accounts (in Annuity Years 1-8) and
0.65% annual charge of amounts invested in the Sub-accounts in subsequent
Annuity Years. For Optimum Four, 0.95% of PWV is in addition to 1.65%
annual charge of amounts invested in the Sub-accounts. For Optimum Plus,
0.95% of PWV is in addition to 1.65% annual charge in Annuity Years 1-10
and 0.65% annual charge of amounts invested in the Sub-accounts in
subsequent Annuity Years.
B. Addition of Lifetime Income Accelerator Feature (HD Lifetime Seven with
Lifetime Income Accelerator/SM/).
A. The following is added at the end of the section concerning Highest Daily
Lifetime Seven.
HD Lifetime Income Accelerator /SM/. We offer another version of Highest Daily
Lifetime Seven that we call Highest Daily Lifetime Seven with Lifetime Income
Accelerator ("Highest Daily Lifetime Seven with LIA"). 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
receive regulatory approval in those jurisdictions. Highest Daily Lifetime
Seven with LIA is offered as an alternative to other lifetime withdrawal
options. If you elect this benefit, you may not elect any other optional
benefit. The income benefit under Highest Daily Lifetime Seven with LIA
currently is based on a single "designated life" who is between the ages of 55
and 75 on the date that the benefit is elected. If you elected the Highest
Daily Lifetime Seven benefit, you will have a 90 day transition period from
the date the Highest Daily Lifetime Seven with Lifetime Income Accelerator is
approved in your state of residence to terminate your Highest Daily Lifetime
Seven benefit and elect the Highest Daily Lifetime Seven with LIA benefit. If
you do not elect to add the Lifetime Income Accelerator option in the 90 day
transition period, you can elect it on any anniversary of the Issue Date that
is at least 90 calendar days from the date that the Highest Daily Lifetime
Seven benefit was terminated. If you terminate your Highest Daily Lifetime
Seven benefit to elect the Highest Daily Lifetime Seven with LIA benefit, you
will lose all guarantees under the Highest Daily Lifetime Seven benefit and
will begin the new guarantees under the Highest Daily Lifetime Seven benefit
with LIA based on the Account Value as of the date the new benefit is elected.
Highest Daily Lifetime Seven with LIA guarantees, until the death of the
single designated life, the ability to withdraw an amount equal to double the
Annual Income Amount (which we refer to as the "LIA Amount") if you meet the
conditions set forth below. The fee for Highest Daily Lifetime Seven with LIA
is 0.95% annually of the Protected Withdrawal Value. We deduct this fee at the
end of each 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 Valuation Day, if the quarter-end is not a
Valuation Day), we deduct 0.2375% of the 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 Protected Withdrawal Value, the fee for Highest Daily Lifetime
Seven with LIA may be greater than it would have been, had it been based on
the Account Value alone. If the fee to be deducted exceeds the current Account
Value, we will reduce the Account Value to zero, and continue the benefit as
described below.
If this benefit is being elected on an Annuity held as a 403 (b) plan, then in
addition to meeting the eligibility requirements listed below for the LIA
Amount you must separately qualify for distributions from the 403 (b) plan
itself.
You may choose Highest Daily Lifetime Seven without also electing LIA, however
you may not elect LIA without Highest Daily Lifetime Seven. All terms and
conditions of Highest Daily Lifetime Seven apply to this version of the
benefit, except as described herein. Currently, if you elect Highest Daily
Lifetime Seven with LIA and subsequently terminate the benefit, you will be
able to re-elect Highest Daily Lifetime Seven with LIA but all conditions of
the benefit described below must be met, and you may be subject to a waiting
period until you can elect this or another lifetime withdrawal benefit.
3
Eligibility Requirements for LIA Amount. Both a waiting period of 36 months,
from the benefit effective date, and an elimination period of 120 days, from
the date of notification that one or both of the requirements described
immediately below have been met, apply before you can become eligible for the
LIA Amount. Assuming the 36 month waiting period has been met and we have
received the notification referenced in the immediately preceding sentence,
the LIA amount would be available for withdrawal on the Valuation Date
immediately after the 120/th/ day. The waiting period and the elimination
period may run concurrently. In addition to satisfying the waiting and
elimination period, either or both of the following requirements ("LIA
conditions") must be met It is not necessary to meet both conditions:
(1) The designated life is confined to a qualified nursing facility. A
qualified nursing facility is a facility operated pursuant to law or any
state licensed facility providing medically necessary in-patient care which
is prescribed by a licensed physician in writing and based on physical
limitations which prohibit daily living in a non-institutional setting.
(2) The designated life is unable to perform two or more basic abilities of
caring for oneself or "activities of daily living." We define these basic
abilities as:
i. Eating: Feeding oneself by getting food into the body from a receptacle
(such as a plate, cup or table) or by a feeding tube or intravenously.
ii. Dressing: Putting on and taking off all items of clothing and any
necessary braces, fasteners or artificial limbs.
iii. Bathing: Washing oneself by sponge bath; or in either a tub or shower,
including the task of getting into or out of the tub or shower.
iv. Toileting: Getting to and from the toilet, getting on and off the
toilet, and performing associated personal hygiene.
v. Transferring: Moving into or out of a bed, chair or wheelchair.
vi. Continence: Maintaining control of bowel or bladder function; or when
unable to maintain control of bowel or bladder function, the ability to
perform personal hygiene (including caring for catheter or colostomy bag).
You must notify us when the LIA conditions have been met. If, when we receive
such notification, there are more than 120 days remaining until the end of the
waiting period described above, you will not be eligible for the LIA Amount.
If there are 120 days or less remaining until the end of the waiting period
when we receive notification that the LIA conditions are met, we will
determine eligibility for the LIA Amount through our then current
administrative process, which may include, but is not limited to,
documentation verifying the LIA conditions and/or an assessment by a third
party of our choice. Such assessment may be in person and we will assume any
costs associated with the aforementioned assessment. Once eligibility is
determined, the LIA Amount is equal to double the Annual Income Amount as
described in this prospectus under the Highest Daily Lifetime Seven Benefit.
Additionally, we will reassess your eligibility on an annual basis although
your LIA benefit for the year that immediately precedes our reassessment will
not be affected if it is determined that you are no longer eligible. Your
first reassessment may occur in the same year as your initial assessment. If
we determine you are no longer eligible to receive the LIA Amount, upon the
next Annuity Anniversary the Annual Income Amount would replace the LIA
Amount. There is no limit on the number of times you can become eligible for
the LIA Amount, however, each time would require the completion of the 120-day
elimination period, notification that the designated life meets the LIA
conditions, and determination, through our then current administrative
process, that you are eligible for the LIA Amount, each as described above.
LIA amount at the First Withdrawal. If your first withdrawal subsequent to
election of Highest Daily Lifetime Seven with LIA occurs while you are eligible
for the LIA Amount, the available LIA Amount is equal to double the Annual
Income Amount.
LIA amount after the First Withdrawal. If you become eligible for the LIA
Amount after you have taken your first withdrawal, the available LIA amount for
the current and subsequent Annuity Years is equal to double the then current
Annual Income Amount, however the available LIA amount in the current Annuity
Year is reduced by any withdrawals that have been taken in the current Annuity
Year. Cumulative withdrawals in an Annuity Year which are less than or equal to
the LIA Amount (when eligible for the LIA amount) will not reduce your LIA
Amount in subsequent Annuity Years, but any such withdrawals will reduce the
LIA Amount on a dollar-for-dollar basis in that Annuity Year.
Withdrawals in Excess of the LIA amount. If your cumulative withdrawals in an
Annuity Year are in excess of the LIA Amount when you are eligible ("Excess
Withdrawal"), your LIA Amount in subsequent years will be reduced (except with
regard to required minimum distributions) by the result of the ratio of the
excess portion of the withdrawal to the Account Value immediately prior to the
Excess Withdrawal. Reductions include the actual amount of the withdrawal,
including any CDSC that may apply. Withdrawals of any amount up to and
including the LIA Amount will reduce the Protected Withdrawal Value by the
amount of the withdrawal. Excess Withdrawals will reduce the Protected
Withdrawal Value by the same ratio as the reduction to
4
the LIA Amount. Any withdrawals that are less than or equal to the LIA amount
(when eligible) but in excess of the free withdrawal amount available under
this Annuity will not incur a CDSC.
Withdrawals are not required. However, subsequent to the first withdrawal, the
LIA Amount is not increased in subsequent Annuity Years if you decide not to
take a withdrawal in an Annuity Year or take withdrawals in an Annuity Year
that in total are less than the LIA Amount.
Purchase Payments. If you are eligible for the LIA Amount as described under
"Eligibility Requirements for LIA Amount" and you make an additional Purchase
Payment, we will increase your LIA Amount by double the amount we add to your
Annual Income Amount.
Step Ups. If your Annual Income Amount is stepped up your LIA Amount will be
stepped up to equal double the stepped up Annual Income Amount.
Guarantee Payments. If your Account Value is reduced to zero as a result of
cumulative withdrawals that are equal to or less than the LIA Amount, or as a
result of the fee that we assess for Highest Daily Lifetime Seven with LIA, and
there is still a LIA Amount available, we will make an additional payment for
that Annuity Year equal to the remaining LIA Amount. Thus, in that scenario,
the remaining LIA Amount would be payable even though your Account Value was
reduced to zero. In subsequent Annuity Years we make payments that equal the
LIA Amount as described in this section. We will make payments until the death
of the single designated life. Should the designated life no longer qualify for
the LIA amount (as described under "Eligibility Requirements for LIA Amount"
above), the Annual Income Amount would continue to be available. Subsequent
eligibility for the LIA Amount would require the completion of the 120 day
elimination period as well as meeting the LIA conditions listed above under
"Eligibility Requirements for LIA Amount". To the extent that cumulative
withdrawals in the current Annuity Year that reduce your Account Value to zero
are more than the LIA Amount (except in the case of required minimum
distributions), Highest Daily Lifetime Seven with LIA terminates, and no
additional payments are made.
Annuity Options. In addition to the Highest Daily Lifetime Seven Annuity
Options described above, after the 10th benefit anniversary you may also
request that we make annuity payments each year equal to the Annual Income
Amount. In any year that you are eligible for the LIA Amount, we make annuity
payments equal to the LIA Amount. If you would receive a greater payment by
applying your Account Value to receive payments for life under your Annuity, we
will pay the greater amount. Prior to the 10th benefit anniversary this option
is not available.
We will continue to make payments until the death of the Designated Life. If
this option is elected, the Annual Income Amount and LIA Amount will not
increase after annuity payments have begun.
If you elect HD Lifetime Seven with LIA, and never meet the eligibility
requirements you will not receive any additional payments based on the LIA
Amount.
B. We add the following as a new line item within the portion of the fee table
entitled "Your Optional Benefit Fees and Charges" to reflect the fee for
Highest Daily Lifetime Seven With Optional Lifetime Income Accelerator:
Highest Daily Lifetime Seven w/Optional Lifetime Income Accelerator maximum
charge of 2.00% of PWV; current charge of 0.95% of PWV. *
Total Maximum Charges Total Current Charges
--------------------------------------- -------------------------------------
Optimum: 1.25% of Sub-account net Optimum: 1.25% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
Optimum 1.65% of Sub-account net Optimum 1.65% of Sub-account net
Four: assets + 2.00% of PWV Four: assets + 0.95% of PWV
Optimum 1.65% of Sub-account net Optimum 1.65% of Sub-account net
Plus: assets + 2.00% of PWV Plus: assets + 0.95% of PWV
--------
* Highest Daily Lifetime Seven with Lifetime Income Accelerator. 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. For Optimum, 0.95% of PWV is in addition to 1.25% annual
charge of amounts invested in the Sub-accounts (in Annuity Years 1-8) and
0.65% annual charge of amounts invested in the Sub-accounts in subsequent
Annuity Years. For Optimum Four, 0.95% of PWV is in addition to 1.65%
annual charge of amounts invested in the Sub-accounts. For Optimum Plus,
0.95% of PWV is in addition to 1.65% annual charge of amounts invested in
the Sub-accounts in Annuity Years 1-10 and 0.65% annual charge of amounts
invested in the Sub-accounts in subsequent Annuity Years.
5
C. Revision to the way that certain withdrawals of the Annual Income Amount
are impacted by CDSC
We add the following as the last sentence of the first paragraph under the
sub-section entitled "Key Feature - Annual Income Amount under the Highest
Daily Lifetime Seven Benefit" to make clear that no withdrawal of the Annual
Income Amount (provided such withdrawal does not constitute Excess Income)
will be subject to a CDSC:
Note that if your withdrawal of the Annual Income Amount in a given Annuity
Year exceeds the applicable free withdrawal amount under the Annuity (but is
not considered Excess Income), we will not impose any CDSC on the amount of
that withdrawal.
D. Revised Asset Transfer Formula for Highest Daily Lifetime Seven and Spousal
Highest Daily Lifetime Seven
For elections of Highest Daily Lifetime Seven on or after July 21, 2008, the
asset transfer formula differs from that set forth in the May 1, 2008
prospectus. The revised formula reflects the fact that Account Value may
include amounts allocated to certain Fixed Rate Options. Currently, no Fixed
Rate Options are available for use with Highest Daily Lifetime Seven and
Spousal Highest Daily Lifetime Seven.
Here is the revised formula (the Table of "a" factors remains the same):
Terms and Definitions referenced in the calculation formula:
. Cu - 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%.
. Ct - the target is established on the Effective Date and is not changed
for the life of the guarantee. Currently, it is 80%.
. Cl - 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.
. V\\v\\ - the total value of all Permitted Sub-accounts in the Annuity.
. V\\F\\ the total value of all elected Fixed Rate Options in the Annuity
. 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 Account
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 Account Value (V\\V\\ + V\\F\\) is equal to zero, no
calculation is necessary.
L = 0.05 * P * a
6
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:
Target Ratio r = (L - B) / (V\\V\\ + V\\F\\).
. If r (greater than) Cu, 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:
T = {Min (V\\V\\ + V\\F\\), [L - B - (V\\V\\ + V\\F\\) * Ct] / (1-Ct))}
Money is transferred from the elected Sub-accounts and Fixed Rate
Options to the Transfer Account
T = {Min (B, - [L - B -(V\\V\\ + V\\F\\)* C\\t\\] / (1-C\\t\\))} Money
is transferred from the Transfer Account to the elected Sub-accounts
CHANGES TO SPOUSAL HIGHEST DAILY LIFETIME SEVEN
1. We add the following, immediately after the section entitled "Additional
Tax Considerations":
A. Addition of Death Benefit (Spousal HD Lifetime Seven with Beneficiary
Income Option/SM/)
The Annuity Owner may opt for a death benefit, the value of which is linked to
the Annual Income Amount under the benefit. We refer to the death benefit as
the Beneficiary Income Option. As detailed below, a beneficiary taking the
Annuity's death benefit under this feature is paid the Annual Income Amount
until the Protected Withdrawal Value is depleted. (Note that the final payment,
exhausting the Protected Withdrawal Value, may be less than the Annual Income
Amount). We impose a maximum charge of 2.00% of Protected Withdrawal Value
("PWV") and a current charge of 0.95% of PWV annually, if you choose Spousal
Highest Daily Lifetime Seven with Beneficiary Income Option. To reflect this
death benefit option, we add the following to the description of Spousal
Highest Daily Lifetime Seven:
Spousal HD Lifetime Seven with Beneficiary Income Option/SM/
We offer an optional death benefit feature under this benefit, the amount of
which is linked to your Annual Income Amount. You may choose Spousal Highest
Daily Lifetime Seven without also selecting the Beneficiary Income Option
death benefit. If you elect Spousal Highest Daily Lifetime Seven without the
Beneficiary Income Option ("BIO") and would like to add this feature later,
you must terminate the Spousal Highest Daily Lifetime Seven benefit and elect
the Spousal Highest Daily Lifetime Seven with Beneficiary Income Option. If
you elected the Spousal Highest Daily Lifetime Seven benefit, you will have a
90 day transition period from the date the Beneficiary Income Option is
approved in your state of residence to terminate your Spousal Highest Daily
Lifetime Seven benefit and elect the Spousal Highest Daily Lifetime Seven
benefit with Beneficiary Income Option. If you do not elect to add the
Beneficiary Income Option in the 90 day transition period, you can elect it on
any anniversary of the Issue Date that is at least 90 calendar days from the
date that the Spousal Highest Daily Lifetime Seven Seven benefit was
terminated. If you terminate your Spousal Highest Daily Lifetime Seven benefit
to elect the Spousal Highest Daily Lifetime Seven with Beneficiary Income
Option benefit, you will lose all guarantees that you had accumulated under
your Spousal Highest Daily Lifetime Seven benefit, and will begin the new
guarantees under the Spousal Highest Daily Lifetime Seven benefit with BIO
based on the Account Value as of the date the new benefit is elected.
If you elect the Beneficiary Income Option death benefit, you may not elect
any other optional benefit. You may elect the Beneficiary Income Option death
benefit so long as each Designated Life is no older than age 75 at the time of
election. This death benefit is not transferable in the event of a divorce,
nor may the benefit be split in accordance with any divorce proceedings or
similar instrument of separation. Since this fee is based on the Protected
Withdrawal Value, the fee for Spousal Highest Daily Lifetime Seven with BIO
may be greater than it would have been, had it been based on the Account Value
alone.
For purposes of the Beneficiary Income Option death benefit, we calculate the
Annual Income Amount and Protected Withdrawal Value in the same manner that we
do under Spousal Highest Daily Lifetime Seven itself (except that for Optimum
Plus, we exclude from the Protected Withdrawal Value the amount of any Credit
that was granted within 12 months prior to death). Upon the first
7
death of a Designated Life, no amount is payable under the Beneficiary Income
Option death benefit. Upon the second death of a Designated Life, we identify
the following amounts: (a) the amount of the base death benefit under the
Annuity (b) the Protected Withdrawal Value and (c) the Annual Income Amount.
If there were no withdrawals prior to the date of death, then we calculate the
Protected Withdrawal Value for purposes of this death benefit as of the date
of death, and we calculate the Annual Income Amount as if there were a
withdrawal on the date of death. If there were withdrawals prior to the date
of death, then we set the Protected Withdrawal Value and Annual Income Amount
for purposes of this death benefit as of the date that we receive due proof of
death.
If there is one beneficiary, he/she must choose to receive either the base
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of annual payment of the
Annual Income Amount - such payments may be annual or at other intervals that
we permit). If there are multiple beneficiaries, each beneficiary is presented
with the same choice. Thus, each beneficiary can choose to take his/her
portion of either (a) the basic death benefit or (b) the Beneficiary Income
Option death benefit. In order to receive the Beneficiary Income Option death
benefit, each beneficiary's share of the death benefit proceeds must be
allocated as a percentage of the total death benefit to be paid. We allow a
beneficiary who has opted to receive the Annual Income Amount to designate
another beneficiary, who would receive any remaining payments upon the former
beneficiary's death. Note also that the final payment, exhausting the
Protected Withdrawal Value, may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
. Assume that (i) the basic death benefit is $50,000, the Protected
Withdrawal Value is $100,000, and the Annual Income Amount is $5,000;
(ii) there are two beneficiaries (the first designated to receive 75% of
the death benefit and the second designated to receive 25% of the death
benefit); (iii) the first beneficiary chooses to receive his/her portion
of the death benefit in the form of the Annual Income Amount, and the
second beneficiary chooses to receive his/her portion of the death
benefit with reference to the basic death benefit.
. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out
period is derived from the $5,000 Annual Income Amount, paid each year
until it exhausts the entire $100,000 Protected Withdrawal Value).
The pro-rated portion of the Annual Income Amount equal to $3,750 (i.e.,
the first beneficiary's 75% share multiplied by $5,000) is then paid
each year for the 20 year period. Payment of $3,750 for 20 years results
in total payments of $75,000 (i.e., the first beneficiary's 75% share of
the $100,000 Protected Withdrawal Value).
The second beneficiary would receive 25% of the basic death benefit
amount (or $12,500).
If you elect to terminate Spousal Highest Daily Lifetime Seven with
Beneficiary Income Option, both Spousal Highest Daily Lifetime Seven and that
death benefit option will be terminated. You may not terminate the death
benefit option without terminating the entire benefit. If you terminate
Spousal Highest Daily Lifetime Seven with Beneficiary Income Option, your
ability to elect other optional living benefits will be affected as indicated
in the "Election and Designations under the Program" section, above.
2. We add the following as a new line item within the portion of the fee table
entitled "Your Optional Benefit Fees and Charges" to reflect the fee for
Spousal Highest Daily Lifetime Seven With Beneficiary Income Option:
Spousal Highest Daily Lifetime Seven w/Beneficiary Income Option : maximum
charge of 2.00% of PWV; current charge of 0.95% of PWV. *
Total Maximum Charges Total Current Charges
--------------------------------------- -------------------------------------
Optimum: 1.25% of Sub-account net Optimum: 1.25% of Sub-account net
assets + 2.00% of PWV assets + 0.95% of PWV
Optimum 1.65% of Sub-account net Optimum 1.65% of Sub-account net
Four: assets + 2.00% of PWV Four: assets + 0.95% of PWV
Optimum 1.65% of Sub-account net Optimum 1.65% of Sub-account net
Plus: assets + 2.00% of PWV Plus: assets + 0.95% of PWV
--------
* Spousal Highest Daily Lifetime Seven With Beneficiary Income Option. 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. For Optimum, 0.95% of PWV is in addition to
1.25% annual charge of amounts invested in the Sub-accounts (in Annuity
Years 1-8) and 0.65% annual charge of amounts invested in the Sub-accounts
in subsequent Annuity Years. For Optimum Four, 0.95% of PWV is in addition
to 1.65% annual charge of amounts invested in the Sub-accounts. For Optimum
Plus, 0.95% of PWV is in addition to 1.65% annual charge of amounts
invested in the Sub-accounts in Annuity Years 1-10 and 0.65% annual charge
of amounts invested in the Sub-accounts in subsequent Annuity Years.
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B. Revision to the way that certain withdrawals of the Annual Income Amount
are impacted by CDSC
We add the following as the last sentence of the first paragraph under the
sub-section entitled "Key Feature - Annual Income Amount under the Spousal
Highest Daily Lifetime Seven Benefit" to make clear that no withdrawal of the
Annual Income Amount (provided such withdrawal does not constitute Excess
Income) will be subject to a CDSC:
Note that if your withdrawal of the Annual Income Amount in a given Annuity
Year exceeds the applicable free withdrawal amount under the Annuity (but is
not considered Excess Income), we will not impose any CDSC on the amount of
that withdrawal.
C. Revised Asset Transfer Formula for Highest Daily Lifetime Seven and Spousal
Highest Daily Lifetime Seven
For elections of Spousal Highest Daily Lifetime Seven on or after July 21,
2008, the asset transfer formula differs from that set forth in the May 1,
2008 prospectus. See the section above under Highest Daily Lifetime Seven for
the revised formula.
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