Pacific Life &
Annuity Company has issued this Rider as a part of the annuity Contract to which it
is attached.
All provisions of the Contract that do not conflict with this Rider apply to this Rider. In the
event of any conflict between the provisions of this Rider and the provisions of the Contract, the
provisions of this Rider shall prevail over the provisions of the Contract.
By adding this Rider to the Contract, you agreed to certain allocation limitations and investment
alternatives in which you may invest while this Rider is in effect. These requirements may
include, but are not limited to, maximum Purchase Payment allocation limits to certain Variable
Investment Options or on certain allowable fixed-rate General Account Investment Options that are
outside of any asset allocation model, but participate in the asset allocation program; exclusion
of certain Investment Options; required minimum Purchase Payment allocations and restrictions on
transfers to or from certain Investment Options. These restrictions and limitations are summarized
in Appendix A which is a part of this Rider. These requirements apply to the entire Contract
Value.
The numeric examples contained in this Rider are based on certain assumptions. They have been
provided to assist in understanding the benefits provided by this Rider and to demonstrate how
Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect
the values and benefits under this Rider over an extended period of time.
Withdrawals to Satisfy Required Minimum
Distribution
5
Depletion of Contract Value
5
Depletion of Remaining Protected Balance
5
Automatic Reset
6
Automatic Reset — Opt-Out Election
6
Automatic Reset — Future Participation
6
Owner-Elected Resets (Non-Automatic)
6
Application of Rider Provisions
6
Page
Annuitization
6
Continuation of Rider if Surviving Spouse
Continues Contract
7
Termination of Rider
7
Rider Effective Date
8
Sample Calculations
9
Appendix A — Summary of Investment
Allocation Requirements
Investment Allocation Requirements
12
Portfolio Optimization Models
12
Rebalancing
13
Annual Analysis
13
Annual Updates
13
Notice of Automatic Updates
13
Custom Models
13
Asset Allocation Strategies
14
Purchase Payment Allocations
14
Change of Investment Option Programs
14
Termination of Asset Allocation Programs
15
1
Definition of Terms — Unless redefined below, the terms defined in the Contract will have the same
meaning when used in this Rider. For purposes of this Rider, the following definitions apply:
Annual RMD Amount — The amount required to be distributed each Calendar Year for purposes of
satisfying the minimum distribution requirements of Internal Revenue Code Section 401(a)(9) and
related Code provisions in effect on the Rider Effective Date.
Protected Payment Amount — The maximum amount that can be withdrawn under this Rider without
reducing the Protected Payment Base.
If the oldest Owner (or youngest Annuitant, in the case of an Owner who is a Non-Natural Owner)
is age [591/2] or older when the first withdrawal was taken or the most recent reset, whichever is
later, the Protected Payment Amount on any day after the Rider Effective Date is equal to the
withdrawal percentage multiplied by the Protected Payment Base as of that day, less cumulative
withdrawals during that Contract Year
If the oldest Owner (or youngest Annuitant, in the case of an Owner who is a Non-Natural Owner)
is younger than age [591/2] when the first withdrawal was taken or the most recent reset,
whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is
equal to the lesser of:
(a)
the withdrawal percentage multiplied by the Protected Payment Base as of that
day, less cumulative withdrawals during that Contract Year; or
(b)
the Remaining Protected Balance as of that day.
The Protected Payment Amount will never be less than zero.
Protected Payment Base — An amount used to determine the Protected Payment Amount. The
Protected Payment Base will never be less than zero and will remain unchanged except as
otherwise described under the provisions of this Rider.
Remaining Protected Balance — The amount available for future withdrawals made under this
Rider. The Remaining Protected Balance will never be less than zero.
Reset Date — Any Contract Anniversary after the Rider Effective Date on which an automatic
reset or an Owner-elected reset occurs.
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges and
charges for premium taxes and/or other taxes, if applicable. Amounts withdrawn under this Rider
will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions,
limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals
otherwise made under the provisions of the Contract.
Guaranteed Withdrawal Benefit III Rider — You have purchased a Guaranteed Withdrawal Benefit III
Rider. Subject to the terms and conditions described herein, this Rider:
(a)
allows for withdrawals up to the Protected Payment Amount without any adjustment to the
Protected Payment Base, regardless of market performance, until the Rider terminates as
specified in the Termination of Rider provision of this Rider;
(b)
allows for withdrawals for purposes of satisfying the minimum distribution requirements
of Internal Revenue Code Section 401(a)(9) and related Code provisions in effect on the
Rider Effective Date, regardless of the amount, without any adjustment to the Protected
Payment Base, subject to certain conditions as described herein;
(c)
provides for automatic annual resets or Owner-elected resets of the Protected Payment
Base and Remaining Protected Balance.
This Rider may be purchased and added to the Contract on the Contract Issue Date or Contract
Anniversary, if available, provided that on the Rider Effective Date: (a) the age of each Annuitant
is [85] years or younger; and (b) the entire Contract Value is invested according to the investment
allocation requirements applicable to this Rider.
2
Annual Charge — An annual charge for expenses related to this Rider will be deducted from the
Investment Options on a proportionate basis relative to the Account Value in each such Investment
Option.
The annual charge is deducted, in arrears, on each Contract Anniversary that this Rider remains in
effect. The annual charge is equal to [0.85%] (not to exceed a maximum annual charge percentage of
1.50%) multiplied by the Protected Payment Base on the day the charge is deducted.
The annual charge percentage established on the Rider Effective Date will not change, except as
otherwise described in the provisions of this Rider.
If this Rider terminates on a Contract Anniversary, the entire annual charge for the prior Contract
Year will be deducted from the Contract Value on that Contract Anniversary.
If the Rider terminates prior to a Contract Anniversary, we will prorate the annual charge. The
prorated amount will be based on the Protected Payment Base as of the day the Rider terminates.
Such prorated amount will be deducted from the Contract Value on the earlier of the day the
Contract terminates or the Contract Anniversary immediately following the day the Rider terminates.
We will waive the annual charge for the current Contract Year in the following cases:
(a)
if the Rider terminates as a result of the death of an Owner or sole surviving
Annuitant;
(b)
upon full annuitization of the Contract;
(c)
after the Contract Value is zero.
Any portion of the annual charge we deduct from any of our fixed-rate General Account Investment
Options (if available under the Contract) will not be greater than the annual interest credited in
excess of that option’s minimum guaranteed interest rate.
Change in Annual Charge — The annual charge percentage may change as a result of any automatic
reset or Owner-elected reset. The annual charge percentage will never exceed the annual charge
percentage then in effect for new issues of this same rider. If we are no longer issuing this
rider, any change in the annual charge percentage will not result in an annual charge percentage
that exceeds the maximum annual charge percentage specified in the Annual Charge provision.
If the Protected Payment Base and Remaining Protected Balance are never reset, the annual charge
percentage established on the Rider Effective Date is guaranteed not to change.
Initial Values — The Protected Payment Base and Remaining Protected Balance are initially
determined on the Rider Effective Date. On the Rider Effective Date, the Protected Payment Base
and Remaining Protected Balance are equal to the Initial Purchase Payment or, if effective on a
Contract Anniversary, the Contract Value on that Contract Anniversary.
The initial Protected Payment Amount on the Rider Effective Date is equal to the applicable
withdrawal percentage (based on the Owner’s age at the time of purchase) multiplied by the
Protected Payment Base.
Subsequent Purchase Payments — Purchase Payments received after the Rider Effective Date will
result in an increase in the Protected Payment Base and Remaining Protected Balance by the amount
of the Purchase Payment.
Limitation on Subsequent Purchase Payments — For purposes of this Rider, in no event may any
Purchase Payment received on or after the first (1st) Contract Anniversary, measured from the Rider
Effective Date or the most recent Reset Date, whichever is later, result in the total of all
Purchase Payments received since that Contract Anniversary to exceed $100,000, without our prior
approval.
This provision only applies if the Contract permits Purchase Payments after the first (1st)
Contract Anniversary, measured from the Contract Date.
For purposes of this Rider, we reserve the right to restrict subsequent Purchase Payments.
3
Withdrawal Percentage — On or prior to the date of first withdrawal (measured from the later of
the Rider Effective Date or most recent Reset Date), the withdrawal percentage is determined as
follows based on the oldest Owner’s age (or youngest Annuitant in the case of a non-natural Owner):
Age
Withdrawal Percentage
Before [591/2]
[5.0%]
[591/2] — 64
[5.0%]
65 — 69
[5.0%]
70-74
[6.0%]
75-79
[6.0%]
80-84
[6.0%]
85 and older
[7.0%]
An additional percentage amount of [0.10%] is added to the withdrawal percentages in the above
table on each Contract Anniversary following the Rider Effective Date if, on such Contract
Anniversary:
1.
the oldest Owner (or youngest Annuitant in the case of a non-natural Owner) has reached
the age of [591/2]; and
2.
no withdrawals have been taken after the Rider Effective Date.
If the first withdrawal (measured from the later of the Rider Effective Date or most recent Reset
Date) is taken on or after age [591/2]:
•
The withdrawal percentage will automatically increase according to the above table
based on the oldest Owner’s age (or youngest Annuitant in the case of a non-natural
Owner) as of the most recent Contract Anniversary.
If the first withdrawal (measured from the later of the Rider Effective Date or most recent Reset
Date) is taken prior to age [591/2]:
•
The withdrawal percentage determined at the time of first withdrawal will remain
unchanged unless a reset occurs. Once a reset occurs, the withdrawal percentage will
be the determined at the time of the first withdrawal following such reset.
Withdrawal of Protected Payment Amount — While this Rider is in effect, you may withdraw up to the
Protected Payment Amount without any adjustment to the Protected Payment Base, regardless of market
performance, until the Rider terminates as specified in the Termination of Rider provision of this
Rider.
If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal,
the Protected Payment Base will remain unchanged. Immediately following the withdrawal, the
Remaining Protected Balance will decrease by the withdrawal amount.
Withdrawals Exceeding Protected Payment Amount — Except as otherwise provided under the
Withdrawals to Satisfy Required Minimum Distribution provision of this Rider, if a withdrawal
exceeds the Protected Payment Amount immediately prior to that withdrawal, we will reduce the
Protected Payment Base and Remaining Protected Balance. This adjustment will occur immediately
following the withdrawal according to the following calculation:
(a)
Determine excess withdrawal amount (“A”) where A equals total withdrawal amount minus
the Protected Payment Amount immediately prior to the withdrawal;
(b)
Determine ratio for proportionate reduction (“B”) where B equals A divided by (Contract
Value immediately prior to the withdrawal minus Protected Payment Amount immediately prior
to the withdrawal);
(c)
Determine the new Protected Payment Base which equals (Protected Payment Base
immediately prior to the withdrawal) multiplied by (1 minus B). The Protected Payment Base
will never be less than zero;
4
(d)
Determine the new Remaining Protected Balance which equals the lesser of:
1.
(Remaining Protected Balance immediately prior to the
withdrawal minus the Protected Payment Amount immediately prior to the
withdrawal) multiplied by (1 minus B); or
2.
the Remaining Protected Balance immediately prior to
the withdrawal minus the total withdrawal amount.
The amount available for withdrawal under the Contract must be sufficient to support any
withdrawal that would otherwise exceed the Protected Payment Amount.
Withdrawals to Satisfy Required Minimum Distribution — No adjustment will be made to the Protected
Payment Base if a withdrawal made under this Rider exceeds the Protected Payment Amount immediately
prior to the withdrawal, provided that such withdrawal (herein referred to as an “RMD withdrawal”)
is for purposes of satisfying the minimum distribution requirements of Internal Revenue Code
Section 401(a)(9) and related Code provisions in effect on the Rider Effective Date, and further
subject to the following:
(a)
you have authorized us to calculate and make periodic distribution of the Annual RMD
Amount for the Calendar Year required based on the payment frequency you have chosen;
(b)
the Annual RMD Amount is based on this Contract only; and
(c)
no withdrawals (other than RMD withdrawals) are made from the Contract during the
Contract Year.
Immediately following a RMD withdrawal, the Remaining Protected Balance will decrease by the RMD
withdrawal amount.
Depletion of Contract Value — If a withdrawal (including an RMD withdrawal) does not exceed the
Protected Payment Amount immediately prior to the withdrawal and reduces the Contract Value to
zero, the following will apply:
(a)
if the oldest Owner (or youngest Annuitant, in the case of an Owner who is a
Non-Natural Owner):
(i)
was younger than age [591/2] when the first withdrawal was taken under this
Rider after the Rider Effective Date or the most recent Reset Date, whichever is
later, the Protected Payment Amount will be paid each year until the Remaining
Protected Balance is reduced to zero; or
(ii)
was age [591/2] or older when the first withdrawal was taken under this
Rider after the Rider Effective Date or the most recent Reset Date, whichever is
later, the Protected Payment Amount will be paid each year until the day of the
first death of an Owner or the date of death of the sole surviving Annuitant.
The payments under subparagraphs (a)(i) and (a)(ii) above will be made under a series of
pre-authorized withdrawals under a payment frequency, as elected by the Owner, but no less
frequently than annually;
(b)
no additional Purchase Payments will be accepted under the Contract;
(c)
any Remaining Protected Balance will not be available for payment in a lump sum and
will not be applied to provide payments under an Annuity Option; and
(d)
the Contract will cease to provide any death benefit.
If the Owner or sole surviving Annuitant dies and the Contract Value is zero as of the date of
death, any Remaining Protected Balance will be paid to the Beneficiary under the series of
pre-authorized withdrawals and payment frequency then in effect at the time of the Owner’s or sole
surviving Annuitant’s death.
Depletion of Remaining Protected Balance — If a withdrawal reduces the Remaining Protected Balance
to zero and Contract Value remains, the following will apply:
If the oldest Owner (or youngest Annuitant, in the case of an Owner who is a Non-Natural Owner):
(a)
was younger than age [591/2] when the first withdrawal was taken under this Rider after
the Rider Effective Date or the most recent Reset Date, whichever is later, this Rider will
terminate; or
5
(b)
was age [591/2] or older when the first withdrawal was taken under this Rider after the
Rider Effective Date or the most recent Reset Date, whichever is later, you may elect to
withdraw up to the Protected Payment Amount each year until the day of the first death of
an Owner or the date of death of the sole surviving Annuitant.
If a withdrawal made under subparagraph (b) (except an RMD withdrawal) taken from the Contract
exceeds the Protected Payment Amount, the Protected Payment Base will be reduced according to the
Withdrawals Exceeding Protected Payment Amount provision of this Rider.
Any death benefit proceeds to be paid to the Beneficiary from remaining Contract Value will be paid
as described under the Death Benefit provisions of the Contract.
Automatic Reset — On each Contract Anniversary while this rider is in effect and before the
Annuity Date we will automatically reset the Protected Payment Base and Remaining Protected Balance
if the Protected Payment Base is less than the Contract Value on that Contract Anniversary.
The Protected Payment Base and Remaining Protected Balance will be reset to an amount equal to 100%
of the Contract Value.
The annual charge percentage may change as a result of any automatic reset. (See Change in Annual
Charge provision). We will provide you with written confirmation of each automatic reset.
Automatic Reset — Opt-Out Election — If you are within [sixty (60)] days after a Contract
Anniversary on which an automatic reset is effective, you have the option to reinstate the
Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and the annual charge
percentage to their respective amounts immediately before the automatic reset.
If you elect this option, your opt-out election must be received, in a form satisfactory to us, at
our Service Center within the same sixty (60) day period after the Contract Anniversary on which
the reset is effective.
Any future automatic resets will continue in effect in accordance with the Automatic Reset
provision of this Rider.
Automatic Reset — Future Participation — You may elect not to participate in future automatic
resets at any time. Your election must be received, in a form satisfactory to us, at our Service
Center, while this rider is in effect and before the Annuity Date. Such election will be effective
for future Contract Anniversaries.
If you previously elected not to participate in automatic resets, you may re-elect to participate
in future automatic resets at any time. Your election to resume participation must be received, in
a form satisfactory to us, at our Service Center while this Rider is in effect and before the
Annuity Date. Such election will be effective for future Contract Anniversaries as described in
the Automatic Reset provision.
Owner-Elected Resets (Non-Automatic) — You may, on any Contract Anniversary after the Rider
Effective Date or the most recent Reset Date, whichever is later, elect to reset the Remaining
Protected Balance and Protected Payment Base to an amount equal to 100% of the Contract Value as of
that Contract Anniversary. The annual charge percentage may change if you elect this reset option.
(See Change in Annual Charge provision).
On each Reset Date we will set the Remaining Protected Balance and Protected Payment Base to an
amount equal to 100% of the Contract Value as of that Reset Date.
If you elect this option, your election must be received, in a form satisfactory to us, at our
Service Center within [sixty (60)] days after the Contract Anniversary on which the reset is
effective. This option may result in a reduction in the Protected Payment Base, Remaining Protected
Balance, and Protected Payment Amount. We will provide you with written confirmation of your
election.
Application of Rider Provisions — On and after each Reset Date, the provisions of this Rider shall
apply in the same manner as they applied when the Rider was originally issued. A reset does not
start a new period in which additional percentage amounts accrue in delay of withdrawal situations.
The limitations and restrictions on Purchase Payments and withdrawals, the deduction of annual
charges and any future reset options available on and after each Reset Date, will again apply and
will be measured from that Reset Date.
6
Annuitization — If you annuitize the Contract at the maximum Annuity Date specified in the
Contract and this Rider is still in effect at the time of your election and a Life Only annuity
option is chosen, the annuity payments will be equal to the greater of:
.
(a)
the Life Only annual payment amount calculated based on the Net Contract Value at the
maximum Annuity Date, less any charges for premium taxes and/or other taxes, and the Life
Only annuity rates based on the greater of our current income factors in effect for the
Contract on the maximum Annuity Date; or our guaranteed income factors; or
(b)
the Protected Payment Amount in effect at the maximum Annuity Date.
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in the
Contract, your annuity payments will be determined in accordance with the terms of the Contract.
The Protected Payment Base, Remaining Protected Balance and Protected Payment Amount under this
Rider will not be used in determining any annuity payments.
Continuation of Rider if Surviving Spouse Continues Contract — If the Owner dies while this Rider
is in effect and if the surviving spouse of the deceased Owner elects to continue the Contract in
accordance with its terms, the surviving spouse may continue to take withdrawals of the Protected
Payment Amount under this Rider, until the Remaining Protected Balance is reduced to zero. If the
Remaining Protected Balance is at zero when the Owner dies, this Rider will terminate.
The surviving spouse may elect any of the reset options available under this Rider for subsequent
Contract Anniversaries. If a reset takes place, then the provisions of this Rider will continue in
full force and in effect for the surviving spouse. If a reset takes place, the withdrawal
percentage may change and will be determined based on the age of the surviving spouse.
The surviving spouse will receive any accrued increases in the withdrawal percentage, but no
further additional percentage amounts accrue for delaying withdrawals.
Termination of Rider — Except as otherwise provided under the Continuation of Rider if Surviving
Spouse Continues Contract provision of this Rider, this Rider will automatically terminate upon the
earliest to occur of one of the following events:
(a)
the day any portion of the Contract Value is no longer invested according to the
investment allocation requirements applicable to this Rider;
(b)
the day the Remaining Protected Balance is reduced to zero;
(c)
the day of the first death of an Owner or the date of death of the sole surviving
Annuitant;
(d)
the day the Contract is terminated in accordance with the provisions of the Contract;
(e)
the day we are notified of a change in ownership of the Contract to a non-spouse Owner
if the Contract is non-qualified excluding changes in ownership to or from certain trusts;
(f)
the Annuity Date; or
(g)
the day that the Contract Value is reduced to zero as a result of a withdrawal (except
an RMD withdrawal) that exceeds the Protected Payment Amount.
This Rider will not terminate under subparagraph (b) above if the oldest Owner (or youngest
Annuitant, in the case of an Owner who is a Non-Natural Owner) was age [591/2] or older when the
first withdrawal was taken under this Rider after the Rider Effective Date or the most recent Reset
Date, whichever is later.
This Rider and the Contract will not terminate under subparagraph (d) above if at the time of this
event, the Contract Value is zero and we are making pre-authorized withdrawals of the Protected
Payment Amount. In this case, the Rider and Contract will terminate under:
(i)
subparagraph (b) if the oldest Owner (or youngest Annuitant, in the case of an
Owner who is a Non-Natural Owner) was younger than age [591/2] when the first withdrawal
was taken under this Rider after the Rider Effective Date or the most recent Reset
Date, whichever is later; or
7
(ii)
subparagraph (c) if the oldest Owner (or youngest Annuitant, in the case of an
Owner who is a Non-Natural Owner) was age [591/2] or older when the first withdrawal was
taken under this Rider after the Rider Effective Date or the most recent Reset Date,
whichever is later.
Rider Effective Date — This Rider is effective on the Contract Date, unless a later date is shown
below
Rider Effective Date: [Date]
All other terms and conditions of the Contract remain unchanged by this Rider.
PACIFIC
LIFE & ANNUITY COMPANY
Chairman and Chief Executive Officer
Secretary
8
GUARANTEED WITHDRAWAL BENEFIT III RIDER
SAMPLE CALCULATIONS
The numeric examples shown in this section are based on certain assumptions. They have been
provided to assist in understanding the benefits provided by this Rider and to demonstrate how
Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect
the values and benefits under this Rider over an extended period of time. These examples are not
intended to serve as projections of future investment returns.
The values shown in Examples 1 through 4 are based on the following assumptions:
•
Rider Effective Date = Contract Date
•
Rider purchased by a 68 year old
•
Automatic resets are shown, if applicable
Example #1 — Setting of Initial Values.
Protected
Protected
Remaining
Beginning
Contract Value
Payment
Payment
Protected
Withdrawal
of Contract Year
Purchase Payment
Withdrawal
after Activity
Base
Amount
Balance
Percentage
1
$
100,000
$
100,000
$
100,000
$
5,000
$
100,000
5.0
%
Example #2 — Subsequent Purchase Payments.
Protected
Protected
Remaining
Beginning
Contract Value
Payment
Payment
Protected
Withdrawal
of Contract Year
Purchase Payment
Withdrawal
after Activity
Base
Amount
Balance
Percentage
1
$
100,000
$
100,000
$
100,000
$
5,000
$
100,000
5.0
%
Activity
$
100,000
$
200,000
$
200,000
$
10,000
$
200,000
5.0
%
2
$
207,000
$
207,000
$
10,557
$
207,000
5.1
%
Activity
$
100,000
$
307,000
$
307,000
$
15,657
$
307,000
5.1
%
3
$
321,490
$
321,490
$
19,932
$
321,490
6.2
%
•
Since a subsequent purchase payment of $100,000 was made in the first Contract Year, the
Protected Payment Base and Remaining Protected Balance are increased by the amount of the
Purchase Payment.
•
Since no withdrawals were taken during the first Contract Year, an additional percentage
amount is added to the withdrawal percentage which equals 5.1%.
•
Since the Owner turned 70 and no withdrawals were taken during Contract Year 2, an
additional percentage amount is added to the withdrawal percentage which equals 6.2%.
9
Example #3 — Withdrawals Not Exceeding Protected Payment Amount.
Protected
Protected
Remaining
Beginning
Contract Value
Payment
Payment
Protected
Withdrawal
of Contract Year
Purchase Payment
Withdrawal
after Activity
Base
Amount
Balance
Percentage
1
$
100,000
$
100,000
$
100,000
$
5,000
$
100,000
5.0
%
Activity
$
100,000
$
200,000
$
200,000
$
10,000
$
200,000
5.0
%
2
$
207,000
$
207,000
$
10,557
$
207,000
5.1
%
Activity
$
100,000
$
307,000
$
307,000
$
15,657
$
307,000
5.1
%
3
$
321,490
$
321,490
$
19,932
$
321,490
6.2
%
Activity
$
19,932
$
324,062
$
321,490
$
0
$
301,558
6.2
%
4
$
324,062
$
324,062
$
20,092
$
324,062
6.2
%
5
$
346,746
$
346,746
$
21,498
$
346,746
6.2
%
Activity
$
21,498
$
349,520
$
346,746
$
0
$
325,248
6.2
%
6
$
349,520
$
349,520
$
21,670
$
349,520
6.2
%
•
Since a withdrawal takes place in Contract Year 3, no further additional percentage
amounts will be added to the withdrawal percentage so that the withdrawal percentage will
remain at 6.2% until the Contract Anniversary after the Owner attains age 85.
Example #4 — Withdrawals Exceeding Protected Payment Amount.
Protected
Protected
Remaining
Beginning
Contract Value
Payment
Payment
Protected
of Contract Year
Purchase Payment
Withdrawal
after Activity
Base
Amount
Balance
Withdrawal Percentage
1
$
100,000
$
100,000
$
100,000
$
5,000
$
100,000
5.0
%
Activity
$
100,000
$
200,000
$
200,000
$
10,000
$
200,000
5.0
%
2
$
207,000
$
207,000
$
10,557
$
207,000
5.1
%
Activity
$
100,000
$
307,000
$
307,000
$
15,657
$
307,000
5.1
%
3
$
321,490
$
321,490
$
19,932
$
321,490
6.2
%
Activity
$
30,000
$
313,994
$
311,491
$
0
$
291,490
6.2
%
4
$
313,994
$
313,994
$
19,468
$
313,994
6.2
%
5
$
335,974
$
335,974
$
20,830
$
335,974
6.2
%
Activity
$
100,000
$
259,492
$
257,423
$
0
$
235,974
6.2
%
6
$
259,492
$
259,492
$
16,089
$
259,492
6.2
%
•
Since a withdrawal takes place in Contract Year 3, no further additional percentage
amounts will be added to the withdrawal percentage so that the withdrawal percentage will
remain at 6.2% until the Contract Anniversary after the Owner attains age 85.
•
Due to the non-compliant withdrawal of $30,000 made in Contract Year 3, the Protected
Payment Base is reduced to $311,491 and the Remaining Protected Balance is reduced to
$291,490. They are determined as follows:
•
A = $10,068 = ($30,000 — $19,932)
•
B = 0.0311 = ($10,068/($343,994 — $19,932))
•
Protected Payment Base = $311,491 = $321,490 x (1 — 0.0311)
$292,179 = ($321,490 — $19,932) x (1 — 0.0311); or
•
$291,490 = ($321,490 — $30,000)
•
An automatic reset takes place at the beginning of Contract Year 4, increasing the
Protected Payment Base and Remaining Protected Balance to $313,994. The Protected Payment
Amount is reset to $19,468 (6.2% x $313,994)
•
Due to the non-compliant withdrawal of $100,000 made in Contract Year 5, the Protected
Payment Base is reduced to $257,423 and the Remaining Protected Balance is reduced to
$235,974.
•
A = $79,170 = ($100,000 — $20,830)
•
B = 0.2338 = ($79,170/($359,492 — $20,830))
•
Protected Payment Base = $257,423 = $335,974 x (1 — 0.2338)
$241,463 = ($335,974 — $20,830) x (1 — 0.2338); or
•
$235,974 = ($335,974 — $100,000)
•
An automatic reset takes place at the beginning of Contract Year 6, increasing the
Protected Payment Base and Remaining Protected Balance to $259,492. The Protected Payment
Amount is reset to $16,089 (6.2% x $259,492)
10
Example #5 — Contract Value Fluctuations Due to Market Activity.
The values shown below are based on the following assumptions:
•
Rider Effective Date = Contract Date
•
Rider purchased by a 68 year old
•
Automatic Resets are shown if applicable
Protected
Protected
Remaining
Beginning
Contract Value
Payment
Payment
Protected
Withdrawal
of Contract Year
Purchase Payment
Withdrawal
after Activity
Base
Amount
Balance
Percentage
1
$
100,000
$
100,000
$
100,000
$
5,000
$
100,000
5.0
%
2
$
107,000
$
107,000
$
5,457
$
107,000
5.1
%
3
$
125,000
$
125,000
$
7,750
$
125,000
6.2
%
4
$
190,000
$
190,000
$
11,970
$
190,000
6.3
%
5
$
180,000
$
190,000
$
12,160
$
190,000
6.4
%
6
$
240,000
$
240,000
$
15,600
$
240,000
6.5
%
7
$
220,000
$
240,000
$
15,840
$
240,000
6.6
%
8
$
250,000
$
250,000
$
16,750
$
250,000
6.7
%
11
GUARANTEED WITHDRAWAL BENEFIT III RIDER
APPENDIX A — SUMMARY OF INVESTMENT ALLOCATION REQUIREMENTS
This summary outlines the general features of the investment allocation requirements applicable to
this Rider.
Investment Allocation Requirements — The investment allocation requirements of this Rider consist
of several different investment option programs, which are maintained by us for use in combination
with certain optional riders that are available with our variable annuity contracts. The
investment option programs described herein may change from time to time. To remain up-to-date on
any changes made, please see the most recent Prospectus. The investment option programs are asset
allocation programs, which consist of the Portfolio Optimization Models, Custom Models, and Asset
Allocation Strategies. Asset allocation is the allocation of Purchase Payments or Contract Value
among various investment asset classes and involves decisions about which asset classes should be
selected and how much of the total Contract Value should be allocated to each asset class. The
theory of asset allocation is that diversification among asset classes can help reduce volatility
over the long-term. At initial purchase and during the entire time that you own this Rider, you
must allocate your entire Contract Value according to the investment allocation requirements
applicable to this Rider. You may allocate your Contract Value according to the following
requirements:
1)
100% to one allowable Portfolio Optimization Model, OR
2)
100% among allowable investment options part of the Custom Models program, OR
3)
100% among the allowable Asset Allocation Strategies.
Currently, the allowable Portfolio Optimization Models, Asset Allocation Strategies, and Custom
Models are as follows:
1) Portfolio Optimization Models — Portfolio Optimization Models are asset allocation models, each
comprised of a selected combination of Investment Options. Currently, there are five (5) Portfolio
Optimization models. Asset allocation is a two-step process. First, an analysis is prepared to
determine the break down of asset classes. Next, after the asset class exposures are known, a
determination is made on how each Investment Option can be used to implement the asset class level
allocations. The Investment Options are selected by evaluating the asset classes represented by
that Investment Option and combining Investment Options to arrive at the desired asset class
exposure. Based on this analysis, the Investment Options are selected in a manner intended to
optimize returns for each model, given a particular level of risk tolerance. The current models
and their asset class exposure are set out below.
Asset Class Exposure
Model A
Model B
Model C
Model D
Model E
Cash
[7%]
Cash
[5%]
Cash
[2%]
Cash
[0%]
Cash
[0%]
Bonds
[73%]
Bonds
[55%]
Bonds
[38%]
Bonds
[20%]
Bonds
[4%]
Domestic Stocks
[15%]
Domestic Stocks
[29%]
Domestic Stocks
[43%]
Domestic Stocks
[55%]
Domestic Stocks
[66%]
International Stocks
[5%]
International Stocks
[11%]
International Stocks
[17%]
International Stocks
[25%]
International Stocks
[30%]
Shorter Investment Horizon
Longer Investment Horizon
Lower Risk
Higher Risk
Less Volatile
More Volatile
12
Rebalancing — If a Portfolio Optimization Model is selected for your investments, you can
rebalance your Contract Value quarterly, semi-annually, or annually, to maintain the current
allocations of your model, since changes in the net asset values of the underlying
portfolios in each model will alter your asset allocation over time. This rebalancing
option is independent of any other automatic rebalancing as a result of an annual analysis.
If you also allocate part of your Purchase Payment or Contract Value to any allowable
fixed-rate General Account Investment Option and you elect periodic rebalancing, such
amounts will not be considered when rebalancing. Only the Investment Options within your
model will be rebalanced.
Annual Analysis — Each of the Portfolio Optimization Models are evaluated annually to assess
whether the combination of investment options within each model should be changed to better
seek to optimize the potential return for the level of risk tolerance intended for the
model. As a result of the periodic analysis, each model may change and investment options
may be added to a model (including investment options not currently available), or
investment options may be deleted from a model.
Annual Updates — When your Portfolio Optimization Model is updated, we will reallocate your
Contract Value (and subsequent Purchase Payments, if applicable) in accordance with any
changes to the model you have selected. This means the allocation of your Contract Value,
and potentially the investment options in which you are invested, will automatically change
and your Contract Value (and subsequent Purchase Payments, if applicable) will be
automatically reallocated among the investment options in your updated model (independently
of any automatic rebalancing you may have selected). We require that you grant us
discretionary investment authority to periodically reallocate your Contract Value (and
subsequent Purchase Payments, if applicable) in accordance with the updated version of the
Portfolio Optimization Model you have selected.
Notice of Automatic Updates — We will send you written notice of the updated Portfolio
Optimization Models at least thirty (30) days in advance of the date we intend the updated
version of the model to be effective. You should carefully review these notices. If you wish
to accept the changes in your selected model, you will not need to take any action, as your
Contract Value (or subsequent Purchase Payments, if applicable) will be reallocated in
accordance with the updated model automatically, provided you have granted us discretionary
investment authority (see Annual Updates provision of this Appendix A).
If you do not wish to accept the changes to your selected model, you can change to a
different model (see Change of Investment Options Programs provision of this Appendix A),
change to a different investment option program, or withdraw from the investment option
programs (see Termination of Investment Option Programs provision of this Appendix A).
2) Custom Models — The Custom Models program allows you, with the help of your financial
professional, to create your own asset allocation model that will comply with the investment
allocation requirements applicable to this Rider. You will create your own model using the
requirements listed below.
To create your model, you may select investment options from the 4 Groups (Groups A, B, C and D)
listed in the table below. You must allocate at least 25% of your Purchase Payment or Contract
Value into each of Groups A, B, and C. You may not allocate more than 15% of your Purchase Payment
or Contract Value into any one Investment Option within Group A, B, or C. Group D is optional and
you are not required to allocate any part of your Purchase Payment or Contract Value to this Group.
If you choose to allocate your Purchase Payment or Contract Value to Group D, you are allowed to
allocate more than 15% to any one Investment Option within Group D. Allocation percentages among
the Groups must total 100%. The model you create will be automatically rebalanced on a quarterly
basis.
13
Group C — International
Group D — Asset Allocation
Group A — Fixed Income
Group B — U.S. Equity
& Sectors
Investment Options
[Short Duration Bond]
[Small-Cap Growth]
[International Value]
[BlackRock Global Allocation V.I.
[Money Market]
[Diversified Research]
[International Small-Cap]
Fund]
[Managed Bond]
[Long/Short Large-Cap]
[Technology]
[AllianceBernstein VPS Balanced
[Floating Rate Loan]
[Equity]
[Health Sciences]
Wealth Strategy Portfolio]
[High Yield Bond Inflation]
[Equity Index]
[International Large-Cap]
[Franklin Templeton VIP
[Managed Diversified Bond]
[Growth-Income]
[Emerging Markets]
Founding Funds]
[Small-Cap Index]
[Real Estate]
[American Funds Growth]
[American Funds
Growth-Income]
[Large-Cap Value]
[Large-Cap Growth]
[Comstock]
[Growth LT]
[Small-Cap Value]
[Mid-Cap Growth]
[Focused 30]
[Multi-Strategy]
[Small-Cap Equity]
[Mid-Cap Equity]
[Main Street Core]
3) Asset Allocation Strategies. You may allocate your entire Purchase Payment or Contract Value
among any of the allowable Asset Allocation Strategies listed below:
Allocations among these three strategies must total 100%.
Purchase Payment Allocations — Your Initial Purchase Payment (in the case of a new application) or
Contract Value, as applicable, will be allocated to the investment option program you select.
Subsequent Purchase Payments, if allowed under the Contract, will also be allocated accordingly,
unless you instruct us otherwise in writing.
You may also allocate Purchase Payments to any allowable fixed-rate General Account Investment
Option (if available under the Contract) only for purposes of dollar cost averaging (the periodic
transfer of amounts) to the investment options within your investment option program. However,
amounts transferred from any such allowable fixed-rate General Account Investment Option must be
made over a period not to exceed twelve (12) months.
The entire Contract Value must remain invested according to the investment allocation requirements
applicable to this Rider for this Rider to remain in effect. Any portion of a Purchase Payment or
Contract Value allocated to an investment option that does not comply with the investment
allocation requirements applicable to this Rider may terminate the Rider in addition to your
participation in the program (see Termination of Investment Option Programs provision of this
Appendix A).
Change of Investment Option Programs — Subject to trading restrictions, you may change your
investment option program or options within a program selection at any time with a proper written
request or by electronic instructions provided a valid electronic authorization is on file with us.
You should consult with your registered representative to assist you in determining which
investment option program or options within a program is best suited to your financial needs,
investment time horizon, and is consistent with your risk comfort level. You should periodically
review those factors to determine if you need to change programs or options within a program to
reflect such changes.
14
Termination of Investment Option Programs — If your investment allocation fails to meet the
requirements of the investment option programs established for this rider, this Rider will
terminate.
You may cause an involuntary termination of both the Rider and your participation in the investment
option programs upon the occurrence of any one of the following events:
(a)
you allocate any portion of your Purchase Payments or transfer any portion of the
Contract Value to an investment option that is not currently compliant with the investment
allocation requirements applicable to this Rider;
(b)
you allocate any portion of your Purchase Payments or transfer any portion of the
Contract Value to any fixed-rate General Account Investment Option (if available under the
Contract) that is not an allowable option or an allowable transfer under the program; or
(c)
you change the allocation percentages of your Custom Model program such that the
changes do not comply with the requirements described in the Custom Models section of this
Appendix A.
We will send you written notice in the event any transaction described in subparagraphs (a) through
(c) above occur.
