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Pacific Life Insurance Company
700 Newport Center Drive Newport Beach, CA92660
(800) 722-4448
GUARANTEED WITHDRAWAL BENEFIT IV RIDER
Pacific Life Insurance Company, a stock 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.
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
6
Depletion of Contract Value
6
Depletion of Remaining Protected Balance
6
Automatic Reset
7
Automatic Reset – Opt-Out Election
7
Automatic Reset – Future Participation
7
Owner-Elected Resets (Non-Automatic)
7
Application of Rider Provisions
8
Annuitization
8
Continuation of Rider if Surviving Spouse Continues Contract
8
Termination of Rider
8
Rider Effective Date
9
Sample Calculations
10
C:
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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 Credit Value – One of two values that determine the Protected Payment Base prior to the
earlier of:
(a)
The first withdrawal since the Rider Effective Date, or
(b)
[Ten (10)] contract Anniversaries from the Rider effective Date.
The Annual Credit Value will equal the initial Annual Credit Value, increased by any Annual
Credits, plus any subsequent Purchase Payments received from the most recent Contract
Anniversary, during the above-described period.
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of
satisfying the minimum distribution requirements of the Internal Revenue Code Section 401(a)(9)
and related Code provisions in effect on the Rider Effective Date.
Highest Anniversary Value – One of two values that determine the Protected Payment Base prior to
the earlier of:
(a)
The first withdrawal since the Rider Effective Date, or
(b)
[Ten (10)] contract Anniversaries from the Rider effective Date.
The Highest Anniversary Value will equal the highest Contract Value on any Contract Anniversary,
plus any subsequent Purchase Payments received after the date the Highest Anniversary Value was
established, during the above-described period.
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 a non-natural Owner) is age [65] 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 a non-natural Owner) is age [64] or
younger 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,
unless withdrawals are guaranteed until the death of an Owner or sole surviving Annuitant. 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.
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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 IV Rider – You have purchased a Guaranteed Withdrawal Benefit IV
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)
Provides for an annual credit to be applied to the Annual Credit Value as described
under the Annual Credit provision of this Rider;
(c)
allows for withdrawals for purposes of satisfying the minimum distribution requirements
of the 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;
(d)
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 Owner and
Annuitant is no less than [55] years old and no greater than [85] years old; and (b) the entire
Contract Value is invested according to the investment allocation requirements applicable to this
Rider.
Annual Charge – An annual charge for expenses related to this Rider will be deducted on a quarterly
basis. The annual charge is equal to [1.05% (0.2625%] quarterly) and will not exceed a maximum
annual charge percentage of 1.50% (0.375% 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 variable Investment
Options on a proportionate basis relative to the Account Value in each such variable Investment
Option. No portion of the annual charge will be deducted from the DCA Plus Fixed Option (if
available under the Contract).
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 an Owner or sole surviving
Annuitant, unless the Contract is continued as described under the Continuation of Rider if
Surviving Spouse Continues Contract provision;
(b)
upon full annuitization of the Contract;
(c)
after the Contract Value is zero.
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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 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, Remaining Protected Balance, Annual Credit Value, and
Highest Anniversary Value are initially determined on the Rider Effective Date. On the Rider
Effective Date, the Protected Payment Base, Remaining Protected Balance, Annual Credit Value, and
Highest Anniversary Value 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 oldest
Owner’s age, or youngest Annuitant’s age in the case of a non-natural Owner at the time of first
withdrawal) multiplied by the Protected Payment Base.
Adjustment to Values – On each Contract Anniversary, while this rider is in effect and before the
Annuity Date, and before the earlier of:
(a)
The first withdrawal from the Contract since the Rider Effective date, or
(b)
[Ten (10)] contract Anniversaries from the Rider effective Date,
the Protected Payment Base and Remaining Protected Balance will be equal to the greater of (a) the
Annual Credit Value or (b) the Highest Anniversary Value.
During the above-described period, adjustments to the Protected Payment Base and Remaining
Protected Balance are not considered an Automatic Reset or Owner-Elected Reset and will not result
in a change to the Annual Charge.
Subsequent Purchase Payments – Purchase Payments received after the Rider Effective Date and prior
to the earlier of:
(a)
The first withdrawal from the Contract since the Rider Effective date, or
(b)
[Ten (10)] contract Anniversaries from the Rider effective Date
will result in an increase in the Annual Credit Value and the Highest Anniversary Value by the
amount of the Purchase Payment.
Purchase Payments received after the Rider Effective Date and after the earlier of:
(a)
The first withdrawal from the Contract since the Rider Effective date, or
(b)
[Ten (10)] contract Anniversaries from the Rider Effective Date
will result in an increase in the Protected Payment Base and Remaining Protected Balance equal to
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.
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For purposes of this Rider, we reserve the right to restrict subsequent Purchase Payments.
Annual Credit – On each Contract Anniversary after the Rider Effective Date, an Annual Credit will
be applied to the Annual Credit Value until the earlier of:
(a)
the first withdrawal from the contract since the Rider Effective Date, or
(b)
[ten (10)] contract Anniversaries from the Rider Effective Date.
The Annual Credit is equal to [5%] of either:
(a)
total Purchase Payments if the rider is purchased on the Contract Issue Date, or
(b)
the Contract Anniversary Value at the time the Rider is added to the Contract plus any
subsequent purchase payments received after the Rider Effective Date.
Withdrawal Percentage – The withdrawal percentage is determined according to the table below based
on oldest Owner’s age (or youngest Annuitant, in the case of a non-natural Owner) at the time of
the first withdrawal. The withdrawal percentages are as follows:
Age
Withdrawal Percentage
[55 – 59]
[5.0%]
[60 – 64]
[5.0%]
[65 – 69]
[5.0%]
[70 – 74]
[5.0%]
[75 – 79]
[5.0%]
[80 – 84]
[5.0%]
[85 and older]
[5.0%]
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. 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 the ratio for proportionate reduction (“B”) where B equals A divided by the
(Contract Value immediately prior to the withdrawal minus the 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;
(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
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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 the 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 an 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 a non-natural Owner):
(i)
was age [64] or younger 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 [65] 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
death of an Owner or sole surviving Annuitant.
The payments under subparagraphs (a)(i) and (a)(ii) above will be made through a series of
pre-authorized withdrawals with 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.
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 a non-natural Owner):
(a)
was age [64] or younger 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
(b)
was age [65] 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 death of an
Owner or the sole surviving Annuitant.
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If a withdrawal (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, and after the earlier of:
(a)
The first withdrawal from the Contract since the Rider Effective date, or
(b)
[Ten (10)] contract Anniversaries from the Rider effective Date,
we will automatically reset the Protected Payment Base and Remaining Protected Balance if the
Protected Payment Base is less than the Contract Anniversary Value. The Protected Payment Base and
Remaining Protected Balance will be reset to an amount equal to the Contract Anniversary 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 Automatic 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 earlier of:
(a)
The first withdrawal from the Contract since the Rider Effective Date, or
(b)
[Ten (10)] contract Anniversaries from the Rider Effective Date,
elect to reset the Remaining Protected Balance and Protected Payment Base to an amount equal to the
Contract Value as of that Contract Anniversary. The annual charge percentage may change if you
elect this Owner-Elected 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 the Contract Value as of that Contract Anniversary.
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 Owner-Elected
Reset is effective. This option may result in a reduction in the Protected Payment Base, Remaining
Protected Balance, and Protected Payment
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Amount. The reduction will occur when your Contract Value is less than the Protected Payment Base
as of the Contract Anniversary you elected the Reset. We will provide you with written
confirmation of your election.
Application of Rider Provisions – On and after each Reset Date, the limitations and restrictions on
Purchase payments and withdrawals, the deduction of annual charges, and any future Automatic Reset
or Owner-Elected Reset options available will again apply and be measured from that Reset Date.
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, 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
Contract Value or Remaining Protected Balance is at zero when the Owner dies, this Rider will
terminate.
The surviving spouse may elect any of the Automatic Reset or Owner-Elected Reset options available
under this Rider for subsequent Contract Anniversaries. If an Automatic Reset or Owner-Elected
Reset takes place, then the provisions of this Rider will continue in full force and in effect for
the surviving spouse.
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 death of an Owner or 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 a non-natural Owner) was age [65] 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.
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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 a
non-natural Owner) was age [64] or younger when the first withdrawal was taken under this
Rider after the Rider Effective Date or the most recent Reset Date, whichever is later;
or
(ii)
subparagraph (c) if the oldest Owner (or youngest Annuitant, in the case of a
non-natural Owner) was age [65] 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 INSURANCE COMPANY
Chairman and Chief Executive Officer
Secretary
20-1176
9
GUARANTEED WITHDRAWAL BENEFIT IV
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 65 year old.
•
Automatic Resets are shown, if applicable.
•
Investment returns are random.
Example 1: Setting of Initial Values
Contract
Annual
Highest
Protected
Remaining
Protected
Contract
Purchase
Value After
Credit
Anniversary
Payment
Protected
Payment
Year
Payment
Withdrawal
Transaction
Value
Value
Base
Balance
Amount
Rider Effective Date
$
100,000
$
100,000
$
100,000
$
100,000
$
100,000
$
100,000
$
5,000
Example 2: Subsequent Purchase Payment
Contract
Annual
Highest
Protected
Remaining
Protected
Contract
Purchase
Value After
Credit
Anniversary
Payment
Protected
Payment
Year
Payment
Withdrawal
Transaction
Value
Value
Base
Balance
Amount
Rider Effective Date
$
100,000
$
100,000
$
100,000
$
100,000
$
100,000
$
100,000
$
5,000
Activity
$
100,000
$
203,000
$
200,000
$
200,000
$
200,000
$
200,000
$
10,000
Year 2 Contract
Anniversary
$
208,000
$
210,000
$
208,000
$
210,000
$
210,000
$
10,500
Year 3 Contract
Anniversary
$
250,000
$
220,000
$
250,000
$
250,000
$
250,000
$
12,500
•
Since a subsequent purchase payment of $100,000 was made in the first Contract Year, the
Annual Credit Value, Highest Anniversary Value, 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 annual credit of
$10,000 (5% x $200,000) is added to the Annual Credit Value at the Year 2 Contract
Anniversary. At the Year 2 Contract Anniversary, the Protected Payment Base and Remaining
Protected Balance are increased to $210,000, which is the greater of: 1) the Annual Credit
Value ($210,000) or 2) the Highest Anniversary Value ($208,000).
•
Since no withdrawals were taken during Contract Year 2, an annual credit of $10,000 (5%
x $200,000) is added to the Annual Credit Value at the Year 3 Contract Anniversary. At the
Year 3 Contract Anniversary, the Protected Payment Base and Remaining Protected Balance are
increased to $250,000, which is the greater of: 1) the Annual Credit Value ($220,000) or 2)
the Highest Anniversary Value ($250,000).
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Example 3: Withdrawal Less Than or Equal to the Protected Payment Amount
Contract
Annual
Highest
Protected
Remaining
Protected
Contract
Purchase
Value After
Credit
Anniversary
Payment
Protected
Payment
Year
Payment
Withdrawal
Transaction
Value
Value
Base
Balance
Amount
Rider Effective Date
$
100,000
$
100,000
$
100,000
$
100,000
$
100,000
$
100,000
$
5,000
Activity
$
100,000
$
203,000
$
200,000
$
200,000
$
200,000
$
200,000
$
10,000
Year 2 Contract
Anniversary
$
208,000
$
210,000
$
208,000
$
210,000
$
210,000
$
10,500
Activity
$
10,500
$
205,000
$
210,000
$
199,500
$
0
Year 3 Contract
Anniversary
$
205,000
NA
NA
$
210,000
$
199,500
$
10,500
Year 4 Contract
Anniversary
$
215,000
NA
NA
$
215,000
$
215,000
$
10,750
Year 4 Contract
Anniversary –
Owner Election to
Opt-Out of
Automatic Reset
$
215,000
NA
NA
$
210,000
$
199,500
$
10,500
•
Since a withdrawal of less than or equal to the Protected Payment Amount takes place in
Contract Year 2, the Protected Payment Base remains the same ($210,000) and the Remaining
Protected Balance ($199,500) is reduced by the amount of the withdrawal ($10,500). Also,
the Annual Credit Value and Highest Anniversary Value are no longer applicable after the
withdrawal.
•
An Automatic Reset takes place at the Year 4 Contract Anniversary, since the Contract
Value ($215,000) is higher than the Protected Payment Base ($210,000). This increases the
Protected Payment Base and Remaining Protected Balance to $215,000. Also, the Protected
Payment Amount increases to $10,750 (5% x $215,000).
•
Within 60 days of the Year 4 Contract Anniversary, the Owner elected to opt-out of the
Automatic Reset that took place at the Year 4 Contract Anniversary due to an increase in
the Rider’s annual charge percentage. Due to the election to opt-out, the Protected
Payment Base, Remaining Protected Balance, Protected Payment Amount and annual charge
percentage are reinstated to their respective amounts immediately prior to the Automatic
Reset.
20-1176
11
Example 4: Withdrawal Exceeding the Protected Payment Amount
Contract
Annual
Highest
Protected
Remaining
Protected
Contract
Purchase
Value After
Credit
Anniversary
Payment
Protected
Payment
Year
Payment
Withdrawal
Transaction
Value
Value
Base
Balance
Amount
Rider Effective Date
$
100,000
$
100,000
$
100,000
$
100,000
$
100,000
$
100,000
$
5,000
Activity
$
100,000
$
203,000
$
200,000
$
200,000
$
200,000
$
200,000
$
10,000
Year 2 Contract
Anniversary
$
208,000
$
210,000
$
208,000
$
210,000
$
210,000
$
10,500
Activity
$
20,000
$
195,000
$
200,235
$
190,000
$
0
Year 3 Contract
Anniversary
$
195,000
NA
NA
$
200,235
$
190,000
$
10,011
Year 4 Contract
Anniversary
$
215,000
NA
NA
$
215,000
$
215,000
$
10,750
•
Due to the withdrawal of $20,000 that exceeded the Protected Payment Amount in Contract
Year 2, the Protected Payment Base is reduced to $200,235 and the Remaining Protected
Balance is reduced to $190,000.
o
A (the excess withdrawal amount) = $9,500 = ($20,000 – $10,500).
o
B (the ratio for proportionate reduction) = 0.0465 = ($9,500/ ($215,000 -
$10,500); $215,000 is equal to the Contract Value immediately prior to $20,000
withdrawal.
o
Protected Payment Base = $200,235 = $210,000 x (1 – 0.0465).
o
Remaining Protected Balance = $190,000 = the lesser of:
§
$190,223 = ($210,000 – $10,500) x (1 – 0.0465); or
§
$190,000 = ($210,000 – $20,000).
o
At the Year 3 Contract Anniversary, the Protected Payment Amount is
decreased to $10,011 (5% x $200,235).
•
An Automatic Reset takes place at the Year 4 Contract Anniversary, since the Contract
Value ($215,000) is higher than the Protected Payment Base ($200,235). This increases the
Protected Payment Base and Remaining Protected Balance to $215,000. Also, the Protected
Payment Amount increases to $10,750 (5% x $215,000).
