Pacific Life Insurance Company
[700 Newport Center Drive Newport Beach, CA92660
(800) 722-4448]
GUARANTEED WITHDRAWAL BENEFIT V RIDER — JOINT LIFE
Pacific Life Insurance Company, a stock company, (hereinafter referred to as “we”, “us”,
“our”, and the “Company”) has issued this guaranteed minimum withdrawal benefit 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.
The purpose of the guaranteed living benefit provided under this Rider is to provide security
through a stream of income payments to the Owner. This Rider will terminate upon assignment or a
change in ownership of the contract unless the new assignee or Owner meets the qualifications
specified in the Termination of Rider provision.
Guaranteed Withdrawal Benefit V Rider — Joint Life
2
Eligibility
3
Annual Charge
3
Change in Annual Charge
4
Initial Values
4
Subsequent Purchase Payments
4
Limitation on Subsequent Purchase Payments
4
Withdrawal of Protected Payment Amount
4
Withdrawals Exceeding Protected Payment Amount
5
Withdrawals Taken Prior to Age [59 1/2]
5
Withdrawals to Satisfy Required Minimum Distribution
5
Depletion of Contract Value
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
Annuitization
7
Continuation of Rider if Surviving Spouse Continues Contract
7
Ownership and Beneficiary Changes
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
Custom Models
14
Asset Allocation Strategies
14
Purchase Payment Allocations
15
Change of Investment Option Programs
15
Termination of Investment Option Programs
15
ICC10:20-1195
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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.
Designated Lives (each a “Designated Life”) — Designated Lives must be natural persons who are
each other’s spouses on the Rider Effective Date. Designated Lives will remain unchanged while
this Rider is in effect.
To be eligible for lifetime benefits, a Designated Life must:
(a)
be the Owner (or the Annuitant, in the case of a custodial owned IRA or TSA); or
(b)
meet the following two conditions:
(i)
remain the spouse of the other Designated Life; and
(ii)
be the first in the line of succession as determined under the Contract for payment of
any death benefit.
Protected Payment Amount — The maximum amount that can be withdrawn under this Rider without
reducing the Protected Payment Base.
If the youngest Designated Life is younger than age [59 1/2], the Protected Payment Amount on any
day after the Rider Effective Date is equal to zero ($0).
If the youngest Designated Life is age [59 1/2] or older, the Protected Payment Amount on any day
after the Rider Effective Date is equal to [5.0%] multiplied by the Protected Payment Base as of
that day, less cumulative withdrawals during that Contract Year.
The Protected Payment Amount will never be less than zero. Any Protected Payment Amount that is
not withdrawn during a Contract Year may not be withdrawn in a subsequent contract year. Upon
telephone or written request we will provide you with the Protected Payment Amount as of that
day.
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. THE PROTECTED PAYMENT BASE CANNOT BE
WITHDRAWN AS A LUMP SUM AND IS NOT PAYABLE AS A DEATH BENEFIT.
Quarterly Rider Anniversary — Every three month anniversary of the Rider Effective Date.
Reset Date — Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset
or an Owner-Elected Reset occurs.
Spouse — The Owner’s spouse, who is treated as the Owner’s spouse pursuant to federal law.
Surviving Spouse — The surviving spouse of the deceased Owner.
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 V Rider — Joint Life
— You have purchased a Guaranteed Withdrawal
Benefit V Rider – Joint Life. Subject to the terms and conditions described herein, this Rider:
ICC10:20-1195
2
(a)
allows for withdrawals up to the Protected Payment Amount without any
adjustment to the Protected Payment Base, regardless of market performance, until
the death of all Designated Lives eligible for lifetime benefits, subject to the
provisions 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.
We will provide you with an annual statement that lists the Protected Payment Amount and Protected
Payment Base.
Eligibility
— 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 Contract is issued as a:
(i)
Non-Qualified Contact, except that if the Owner is a trust or other entity, this Rider is
not Available; or
(ii)
Qualified Contract under Code Section 408(a), 408(k), 408A, 408(p) or 403(b), except for
an Inherited IRA, Inherited Roth IRA, Inherited TSA, 401(a), 401(k), Individual(k), Keogh, or 457
plan.
(b)
the age of each Designated Life is [85] years or younger; and
(c)
the Contract is structured such that upon death of one Designated Life, the
surviving Designated Life may retain or assume ownership of the Contract; and
(d)
any Annuitant is a Designated Life; and
(e)
the entire Contract Value is invested according to the investment allocation
requirements applicable to this Rider. Please refer to Appendix A attached to this
Rider. You will be notified in writing if we change these investment allocations in the
future.
For the purposes of meeting the eligibility requirements, Designated Lives must be any one of the
following:
(a)
A sole Owner with the Owner’s spouse designated as the sole primary
beneficiary; or
(b)
Joint Owners, where the Owners are each other’s spouses; or
(c)
If the Contract is issued as a custodial owned IRA or TSA, the beneficial
owner must be the Annuitant and the Annuitant’s spouse must be designated as the
sole primary beneficiary under the Contract. The custodian, under a custodial owned
IRA or TSA, for the benefit of the beneficial owner, may be designated as sole
primary beneficiary, provided that the spouse of the beneficial owner is the sole
primary beneficiary of the custodial account.
Annual Charge
— An annual charge for expenses related to this Rider will be deducted on a quarterly
basis. The annual charge is equal to [0.80%] ([0.20%] quarterly) and will not exceed a maximum
annual charge percentage of [1.75%] ([0.4375%] quarterly).
The charge is deducted, in arrears, on each Quarterly Rider Anniversary that this Rider remains in
effect. The charge is equal to the quarterly charge percentage multiplied by the Protected Payment
Base on the day the charge is deducted. The charge will be deducted from the Investment Options on
a proportionate basis relative to the Account Value in each such Investment Option. Any portion of
the annual charge will not be deducted from the DCA Plus fixed account (if available under the
Contract).
ICC10:20-1195
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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 Quarterly Rider Anniversary, the entire charge for the prior
Quarterly Rider Anniversary will be deducted from the Contract Value on that Quarterly Rider
Anniversary.
If the Rider terminates prior to a Quarterly Rider Anniversary, we will prorate the 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 Quarterly Rider Anniversary immediately following the day the Rider
terminates.
We will waive the charge for the current quarter in the following cases:
(a)
if the Rider terminates as a result of the death of the sole surviving Designated Life;
(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, and corresponding deduction, 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 is never reset, the annual charge percentage established on the Rider
Effective Date is guaranteed not to change.
Initial Values
— The Protected Payment Base is initially determined on the Rider Effective
Date. On the Rider Effective Date, the Protected Payment Base is equal to the Initial Purchase
Payment or, if effective on a Contract Anniversary, the Contract Value on that Contract
Anniversary.
Subsequent Purchase Payments
— Purchase Payments received after the Rider Effective Date will
result in an increase in the Protected Payment Base 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 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.
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 the withdrawal,
the Protected Payment Base will remain unchanged.
ICC10:20-1195
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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. 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
(including any applicable withdrawal charge) 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.
WITHDRAWALS EXCEEDING THE PROTECTED PAYMENT AMOUNT COULD REDUCE FUTURE BENEFITS BY MORE THAN THE
DOLLAR AMOUNT OF THE WITHDRAWAL.
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal
that would otherwise exceed the Protected Payment Amount.
Withdrawals Taken Prior to Age [59 1/2]
— If a withdrawal is taken and the youngest Designated Life
is younger than age [59 1/2], we will reduce the Protected Payment Base. 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;
(b)
Determine ratio for proportionate reduction (“B”) where B equals A divided by the
Contract Value immediately prior to the withdrawal;
(c)
Determine the new Protected Payment Base which equals the lesser of:
1.
The Protected Payment Base immediately prior to the withdrawal multiplied
by (1 minus B); or
2.
The Protected Payment Base immediately prior to the withdrawal minus the
total withdrawal amount.
The Protected Payment Base will never be less than zero. WITHDRAWALS EXCEEDING THE PROTECTED
PAYMENT AMOUNT COULD REDUCE FUTURE BENEFITS BY MORE THAN THE DOLLAR AMOUNT OF THE WITHDRAWAL.
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; and
(d)
the youngest Designated Life is age [59 1/2] or older.
Depletion of Contract Value
— If the youngest Designated Life is age [59 1/2] or older, and 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:
ICC10:20-1195
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(a)
the Protected Payment Amount will be paid each year until the death of all Designated
Lives eligible for lifetime benefits. The payments 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)
the Contract will cease to provide any death benefit.
If the youngest Designated Life is younger than age [59 1/2], and a withdrawal (including an RMD
withdrawal) reduces the Contract Value to zero, this Rider will terminate.
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 if the Protected Payment Base is less
than the Contract Value on that Contract Anniversary.
The Protected Payment Base 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, 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 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 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 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 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. The
limitations and restrictions on Purchase Payments and withdrawals, the deduction of quarterly
charges and any future reset options available on and after each Reset Date, will again apply and
will be measured from that Reset Date.
ICC10:20-1195
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 fixed annuity option
is chosen, the annuity payments will be equal to the greater of:
(a)
the Life Only fixed 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 fixed 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 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 (who is also a Designated Life
eligible for lifetime benefits) 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 day of death of such surviving spouse. The surviving spouse may elect any of the reset
options available under this Rider for subsequent Contract Anniversaries.
Ownership and Beneficiary Changes
— Changes in Contract Owner(s), Annuitant and/or Beneficiary
designations and changes in marital status may adversely affect the benefits of this Rider.
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 of death of all Designated Lives eligible for lifetime benefits;
(c)
upon the death of the first Designated Life, if a death benefit is payable and a
spouse who chooses to continue the contract is not a Designated Life eligible for
lifetime benefits;
(d)
upon the death of the first Designated Life, if a death benefit is payable and the
Contract is not continued according to the Continuation of Rider if Surviving Spouse
Continues Contract provision;
(e)
if both Designated Lives are Joint Owners and there is a change in marital status,
the Rider will terminate upon the death of the first Designated Life eligible for
lifetime benefits and who is also an Owner;
(f)
the day the Contract is terminated in accordance with the provisions of the
Contract;
(g)
the day that neither Designated Life is an Owner (or Annuitant, in the case of a
custodial owned IRA or TSA);
(h)
the Annuity Date;
(i)
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; or
(j)
the day that the Contract Value is reduced to zero and the youngest Designated Life
is younger than age [59 1/2].
ICC10:20-1195
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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 INSURANCE COMPANY
[
Chairman and Chief Executive Officer
Secretary ]
ICC10:20-1195
8
GUARANTEED WITHDRAWAL BENEFIT V RIDER — JOINT LIFE
SAMPLE CALCULATIONS — For Illustration Purposes Only
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 purchased at Contract issue and the youngest Designated Life is age 64
•
Automatic resets are shown, if applicable
•
Investment returns are hypothetical
Example 1: Setting of Initial Values
Contract
Protected
Protected
Purchase
Withdrawal
Value After
Payment
Payment
Contract Year
Payment
Amount
Transaction
Base
Amount
Beginning of Year 1
$
100,000
$
100,000
$
100,000
$
5,000
Example 2: Subsequent Purchase Payment
Contract
Protected
Protected
Purchase
Withdrawal
Value After
Payment
Payment
Contract Year
Payment
Amount
Transaction
Base
Amount
Beginning of Year 1
$
100,000
$
100,000
$
100,000
$
5,000
Activity
$
100,000
$
202,000
$
200,000
$
10,000
Beginning of Year 2
$
207,000
$
207,000
$
10,350
•
Since a subsequent purchase payment of $100,000 was made in the first Contract Year,
the Protected Payment Base is increased by the amount of the purchase payment and the
Protected Payment Amount is adjusted to equal 5% of the new Protected Payment Base.
•
An automatic Reset takes place at the beginning of Contract Year 2, since the Contract
Value ($207,000) is higher than the Protected Payment Base ($200,000). This resets the
Protected Payment Base to $207,000 and the Protected Payment Amount increases to $10,350 (5% x
$207,000).
Example 3: Withdrawal of Less than the Protected Payment Amount
Contract
Protected
Protected
Purchase
Withdrawal
Value After
Payment
Payment
Contract Year
Payment
Amount
Transaction
Base
Amount
Beginning of Year 1
$
100,000
$
100,000
$
100,000
$
5,000
Activity
$
100,000
$
202,000
$
200,000
$
10,000
Beginning of Year 2
$
207,000
$
207,000
$
10,350
Activity
$
5,000
$
204,000
$
207,000
$
5,350
Beginning of Year 3
$
205,000
$
207,000
$
10,350
Beginning of Year 4
$
215,000
$
215,000
$
10,750
•
Since a withdrawal of less than the Protected Payment Amount takes place in Contract
Year 2, the Protected Payment Base remains the same ($207,000) and the Protected Payment
Amount is reduced by the amount of the withdrawal.
ICC10:20-1195
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•
At the beginning of Contract Year 3, a Reset does not take place since the Contract Value
($205,000) is less than the Protected Payment Base ($207,000). The Protected Payment Base
($207,000) remains the same and the Protected Payment Amount is reset to $10,350 (5% x
207,000).
•
An automatic Reset takes place at the beginning of Contract Year 4, since the Contract
Value ($215,000) is higher than the Protected Payment Base ($207,000). This resets the
Protected Payment Base to $215,000. Also, the Protected Payment Amount increases to $10,750
(5% x $215,000).
Example 4: Withdrawal Exceeding the Protected Payment Amount
Contract
Protected
Protected
Purchase
Withdrawal
Value After
Payment
Payment
Contract Year
Payment
Amount
Transaction
Base
Amount
Beginning of Year 1
$
100,000
$
100,000
$
100,000
$
5,000
Activity
$
100,000
$
202,000
$
200,000
$
10,000
Beginning of Year 2
$
207,000
$
207,000
$
10,350
Activity
$
20,000
$
182,000
$
196,567
$
0
Beginning of Year 3
$
192,000
$
196,567
$
9,828
Beginning of Year 4
$
215,000
$
215,000
$
10,750
•
Since the $20,000 withdrawal in Contract Year 2 exceeds the Protected Payment
Amount, the Protected Payment Base is reduced to $196,567
o
A = $9,650 = ($20,000 — $10,350)
o
B = 0.0504 = $9,650/($202,000 — $10,350); $202,000 = contract value prior
to the $20,000 withdrawal
o
Protected Payment Base = $196,567 = $207,000 x (1 — 0.0504)
o
The Protected Payment Amount is reduced to $0 for the remainder of Contract Year 2
•
At the beginning of Contract Year 3, a Reset does not take place since the Contract
Value ($192,000) is less than the Protected Payment Base ($196,567). The Protected Payment
Base ($196,567) remains the same and the Protected Payment Amount is reset to $9,828 (5% x
196,567).
•
An automatic Reset takes place at the beginning of Contract Year 4, since the Contract
Value ($215,000) is higher than the Protected Payment Base ($196,567). This resets the
Protected Payment Base to $215,000. Also, the Protected Payment Amount increases to
$10,750 (5% x $215,000).
The values shown in Example 5 are based on the following assumptions:
•
Rider purchased at Contract issue and the youngest Designated Life is age 56
•
Automatic resets are shown, if applicable
Example 5: Early Withdrawal
Youngest
Contract
Protected
Protected
Designated Life
Purchase
Withdrawal
Value After
Payment
Payment
Contract Year
Age
Payment
Amount
Transaction
Base
Amount
Beginning of Year 1
56
$
100,000
$
100,000
$
100,000
$
0
Activity
$
100,000
$
202,000
$
200,000
$
0
Beginning of Year 2
57
$
207,000
$
207,000
$
0
Beginning of Year 3
58
$
220,000
$
220,000
$
0
Activity
$
30,000
$
180,000
$
188,562
$
0
Beginning of Year 4
59
$
183,000
$
188,562
$
0
Activity
Attains age 59 1/2
$
178,000
$
188,562
$
9,428
Beginning of Year 5
60
$
185,000
$
188,562
$
9,428
Beginning of Year 6
61
$
215,000
$
215,000
$
10,750
•
The Protected Payment Amount is equal to $0 until the youngest Designated Life
reaches age 59 1/2.
•
Since the withdrawal of $30,000 is taken prior to age 59 1/2 in Contract Year 3, the
Protected Payment Base is reduced to $188,562; the Protected Payment Base is reset to the
lesser of:
o
The Protected Payment Base immediately prior to the withdrawal multiplied by (1 minus B);
§
A = $30,000
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§
B = 0.1429 = $30,000/$210,000; $210,000 = contract value prior to the
$30,000 withdrawal
§
Protected Payment Base = $188,562 = $220,000 x (1 — 0.1429)
o
The Protected Payment Base immediately prior to the withdrawal minus the
total withdrawal amount.
§
Protected Payment Base = $190,000 = $220,000 — $30,000
o
Since $188,562 is less than $190,000, the Protected Payment Base is reduced to $188,562
•
At the beginning of Contract Year 4, a Reset does not take place since the Contract
Value ($183,000) is less than the Protected Payment Base ($188,562). The Protected Payment
Base ($188,562) remains the same. Also, the Protected Payment Amount remains at $0 since
the youngest Designated Life has not reached age 59 1/2.
•
During Contract Year 4, the youngest Designated Life attains age 59 1/2. At this time,
the Protected Payment Amount is set to $9,428 (5.0% x $188,562).
•
At the beginning of Contract Year 5, a Reset does not take place since the Contract
Value ($185,000) is less than the Protected Payment Base ($188,562). The Protected Payment
Base ($188,562) and Protected Payment Amount ($9,428) remain the same.
•
An automatic Reset takes place at the beginning of Contract Year 6, since the Contract
Value ($215,000) is higher than the Protected Payment Base ($188,562). This resets the
Protected Payment Base to $215,000. Also, the Protected Payment Amount increases to
$10,750 (5% x $215,000).
ICC10:20-1195
11
APPENDIX A — SUMMARY OF INVESTMENT ALLOCATION REQUIREMENTS
This summary outlines the general features of the investment allocation requirements
applicable to this Rider. Details regarding the investment allocation models will be provided to
you upon request.
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 Service, Asset Allocation
Strategies, and Custom Models. 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 the allowable Asset Allocation Strategies, OR
3)
100% among allowable investment options part of the Custom Models program.
Currently, the allowable Portfolio Optimization Models, Asset Allocation Strategies, and Custom
Models are as follows:
Custom
Portfolio Optimization Service
Asset Allocation Strategies
Models
[Portfolio Optimization Model A]
[Pacific Dynamix-Conservative Growth Portfolio]
[Allowable
[Portfolio Optimization Model B]
[Pacific Dynamix-Moderate Growth Portfolio]
investment options
[Portfolio Optimization Model C]
[Pacific Dynamix-Growth Portfolio ]
within various
[Portfolio Optimization Model D]
[Alliance Bernstein VPS Balanced Wealth Strategy]
asset groups as
[BlackRock Global Allocation V.I. Fund]
described in the
[American Funds® Asset Allocation]
Custom Models
[Franklin Templeton VIP Founding Funds]
section of this
[GE Investments Total Return Fund]
Appendix A.]
[Invesco Van Kampen V.I. Global Tactical Asset Allocation Fund]
[Invesco V.I. Global Multi-Asset Fund]
[PIMCO Global Multi-Asset Portfolio]
1)
Portfolio Optimization Models
Portfolio Optimization Service — The Portfolio Optimization Service represents five asset
allocation models, each comprised of a selected combination of Investment Options. Currently,
there are [four (4)] Portfolio Optimization models available for use in combination with certain
optional riders with our variable annuity contracts. Asset allocation is a two-step process.
First, an analysis is prepared to determine the breakdown 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.
ICC10:20-1195
12
Asset Class Exposure
[Model A
Model B
Model C
Model D]
[Cash Equivalents
7
%
Cash Equivalents
5
%
Cash Equivalents
2
%
Cash Equivalents
0%]
[Fixed Income
73
%
Fixed Income
57
%
Fixed Income
42
%
Fixed Income
25%]
[Domestic Equity
15
%
Domestic Equity
29
%
Domestic Equity
41
%
Domestic Equity
54%]
[International Equity
5
%
International Equity
9
%
International Equity
15
%
International Equity
21%]
Shorter
Investment
Horizon
Lower Risk
Less Volatile
Longer
Investment Horizon
Higher Risk
More Volatile
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).
ICC10:20-1195
13
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 available Categories listed in
the table below. You must allocate at least [25%] of your Purchase Payment or Contract Value
into each one of the available Categories. You may not allocate more than [15%] of your
Purchase Payment or Contract Value into any one Investment Option within Category A, B, or C.
Category D is optional and you are not required to allocate any part of your Purchase Payment or
Contract Value to this Category. If you choose to allocate your Purchase Payment or Contract
Value to Category D, you are allowed to allocate more than [15%] to any one Investment Option
within Category D. Allocation percentages among the Categories must total [100%]. The model you
create will be automatically rebalanced on a quarterly basis.
Category C —
Category A —
International
Fixed-Income
Category B — Domestic
Equity and Sector
Portfolios
Equity Portfolios
Portfolios
Category D — Asset Allocation Strategies
[Floating Rate Loan
[Small-Cap Growth
[International Value
[Pacific Dynamix-Conservative Growth Portfolio
Short Duration Bond
Long/Short Large-Cap
International Small-Cap
Pacific Dynamix-Moderate Growth Portfolio
Cash Management
Equity Index
Technology
Pacific Dynamix-Growth Portfolio
High Yield Bond
Mid-Cap Value
Health Sciences
Alliance Bernstein VPS Balanced Wealth Strategy
Managed Bond
Small-Cap Index
International Large-Cap
BlackRock Global Allocation V.I. Fund
Inflation Managed
American Funds® Growth-Income
Real Estate
American Funds® Asset Allocation
Diversified Bond]
American Funds® Growth
Emerging Markets]
Franklin Templeton VIP Founding Funds
Large-Cap Value
GE Investments Total Return Fund
Small-Cap Equity
Invesco Van Kampen V.I. Global Tactical Asset Allocation
Comstock
Fund
Growth LT
Invesco V.I. Global Multi-Asset Fund
Focused 30
PIMCO Global Multi-Asset Portfolio]
Mid-Cap Equity
Mid-Cap Growth
Small-Cap Value
Main Street® Core
Dividend Growth
Large-Cap Growth]
3)
Asset Allocation Strategies.
You may allocate your entire Purchase Payment or Contract
Value among any of the allowable Asset Allocation Strategies listed below:
[Pacific Dynamix-Conservative Growth Portfolio
Pacific Dynamix-Moderate Growth Portfolio
Pacific Dynamix-Growth Portfolio
Alliance Bernstein VPS Balanced Wealth Strategy
BlackRock Global Allocation V.I. Fund
American Funds® Asset Allocation
Franklin Templeton VIP Founding Funds
GE Investments Total Return Fund
Invesco Van Kampen V.I. Global Tactical Asset Allocation Fund
Invesco V.I. Global Multi-Asset Fund
PIMCO Global Multi-Asset Portfolio]
Allocations among these strategies must total 100%.
ICC10:20-1195
14
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 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.
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.