Annuity

Market Volatility – Information about Prudential’s Guaranteed Long Term Account

To read the letter from Prudential's President and CEO about the company's financial position - click here

If you would like to view Prudential Retirement Insurance and Annuity Company's financial strength review - please click here

Q.  What kind of protection do I have if something happens to Prudential, or my employer?  Could I get my money out?

A.  In general, the money in a Qualified Retirement plan is segregated from the finances of the Plan’s recordkeeper (in this case, Prudential Retirement Insurance and Annuity Company – PRIAC) or the Plan Sponsor (ie, employer).  Therefore, if something happens to either Prudential or the Plan Sponsor the participant’s account is safe from liquidation and/or debt collection.

      If PRIAC’s financial condition is judged critical, applicable state law provides for the supervision and, if necessary, liquidation of the life insurance company by the insurance commissioner.

      In general, policy claims (such as your account) represent one of the first significant categories of claims, ahead of general creditor and stockholder claims.

Q.  Is Prudential FDIC insured? If so, for how much?  If not, is Prudential insured in some other way?  If so, for how much?

A.  Prudential Retirement Insurance and Annuity Company (PRIAC) is the recordkeeper for your retirement plan and is not FDIC-insured. 

      Your Defined Benefit plan is protected by the PBGC.  The PBGC, or Pension Benefit Guarantee Guaranty Corporation, is an independent agency of the United States government that was created by the Employee Retirement Income Security Act of 1974 (ERISA) to continue the maintenance of defined benefit pension plans after the sponsoring organization has terminated.  Subject to other statutory limitations, the PBGC insurance program pays pension benefits up to the maximum guaranteed benefit set by law to participants who retire at age 65.  The benefits payable to insured retirees who start their benefits at ages other than 65, or who elect survivor coverage, are adjusted to be equivalent in value.

      Your Defined Contribution plan is not protected by the PBGC, but the        assets that make up our defined contribution plan are subject to certain protections offered under state insurance laws.

Q.  What would happen to money in my stable value (GLTA) investment option if Prudential were to go bankrupt?

A.  There are various statutory safeguards that protect our customers.  In fact, the best guarantee is the strong financial condition of our company. 

      In addition:

o       The scope of state regulation is broad, extending to areas such as required levels of capital and surplus, the calculation of policy reserves, investments, sales practices, market conduct, product design and company operations.  State regulators have imposed on life insurers very stringent capital requirements and close scrutiny of their liquidity management.

o       Life insurance companies are also subject to rigorous audits by the state authorities to gain firsthand knowledge on their financial condition.  These audits are performed "on-site," and independent accounting firms are retained to assist the state examiners.

      As you can see, there are a number of important safeguards afforded to retirement plans by state statute and regulations.  However, these should be regarded simply as that - safeguards.

Q.  What makes the stable value product (GLTA) safer than other investments, and how is the money in the GLTA protected from bank failures?

A.  Participants in these products do not experience the direct market value volatility in their account balances that is experienced by most holders of equity and bond mutual funds. 

      The GLTA participant account values are backed by a guarantee from Prudential Retirement Insurance and Annuity Company (PRIAC).  PRIAC is a wholly-owned subsidiary of The Prudential Insurance Company of America, a Prudential Financial company.

      PRIAC maintains large and well diversified portfolios to back-up its obligations as well as large surplus of cash to meet our obligations to customers.  If the investments held directly by the portfolio are insufficient to meet our obligation to you, then PRIAC is obligated to use its surplus to do so.  Other investments such as equity and bond mutual funds do not have this guarantee.

Q.  What is a Separate Account? 

A.  A separate account is an account held by an insurance company not in         its general account.  A separate account allows an investor to choose an investment category according to his individual risk tolerance, and desire for performance.  An account may be a generic conservative or aggressive investment allocation, or a specific mutual fund-type account.

      For retirement plan purposes, it means that participant investments in assets within the separate account may only be used to satisfy the contractual liabilities of a particular separate account.  Thus, general account customers (as well as other creditors) have no claim on the assets of a separate account.

Specifically:

o       For our PRIAC clients:  Our separate accounts for qualified plans are established in accordance with Section 38a-459 of the       Connecticut Statutes.  The law provides that amounts allocated to insurance company separate accounts "shall not be chargeable with liabilities arising out of any other business the company may conduct." 

      In contrast, the general account supports our Guaranteed Long Term Account (GLTA).   With this product, PRIAC declares a rate of interest in advance, and contributions and credited interest are guaranteed by Prudential Retirement Insurance and Annuity Company, backed by all of the company's general assets.

The Guaranteed Fund Rate for 2008 is 4.35%. 

Your Annuity Account is managed by Prudential.

If you would like to view your account click here, which will take you to 

www.prudential.com/online/retirement 

or call Toll Free - 877-PRU-2100 (877-778-2100)

You may need to set up your account if you are a first time user.

• The Annuity Plan was established as the result of the collective bargaining agreements between the employers and the Union. It is financed by employer contributions and flexible benefit credits through the Flexible Benefit Plan (which became effective on July 1, 1991) With the exception of flexible benefit credits, employees do not contribute to the Plan.
• The Annuity Fund is administered by a Board of Trustees consisting of an equal number of the Union and representatives of the employers. They serve without compensation. The Annuity Fund is a separate trust fund established for the purpose of paying the benefits provided under the Plan. The Plan has been qualified by the Internal Revenue Service.
• You are covered by the Annuity Plan if you are an employee working under a collective bargaining agreement between the Union and an employer providing for contributions to this Fund.
• The primary purpose of the Plan is to provide participants additional financial security during their retirement years. While other provisions of the plan provide for in-service withdrawals during times of financial necessity, they are secondary to the primary objective of retirement income.

If you would like to "Roll In" assets from another Qualified Plan, ie 401(k), click here for the Roll In Contribution form.