2. Endorsement
B003710E
ENDORSEMENT - TAX DEFERRED ANNUITY - 403(b)
The following provisions are added to the contract:
1. NON-TRANSFERABLE
This contract is non-transferable in accordance with section 401(g) of the
Internal Revenue Code. It may not be sold, assigned, discounted or pledged
as collateral for a loan or as security for the performance of an
obligation or for any other purpose, to any person other than the Company.
2. BENEFIT COMMENCEMENT DATE
On the Annuity Date or, if earlier, within 90 days following receipt of
the Contract Owner's written notice of intent to commence annuity benefit
payments, annuity benefit payments will commence. The form of such benefit
payments will be determined in accordance with the provisions of the
following paragraphs.
3. COMPENSATION
For purposes of determing the maximum annual contribution that can be made
under section 415 of the Internal Revenue Code, effective for
contributions made after December 31, 1997, the Contract Owner's
compensation from the employer for the year includes any elective
deferrals made under a 401(k) plan, 403(b) plan, employer contributions
made to a SEP (simplified employer pension), and any amount which is
contributed or deferred by the employer at the election of the Contract
Owner under a plan described in section 125 of the Internal Revenue Code
(a "cafeteria plan") or section 457 of the Internal Revenue Code.
4. LIMITS ON CONTRIBUTIONS
Contributions made in any calendar year cannot exceed the annual limit on
elective deferrals under section 402(g) of the Internal Revenue Code, i.e.
$9,500 as adjusted for inflation.
Solely for a Contract Owner who has completed 15 years of service with a
single qualified employer, this limit will be increased by the lesser of:
(A) $3,000,
(B) $15,000 reduced by amounts not included in gross income for prior
taxable years by reason of this rule, or
(C) the excess of $5,000 multiplied by the Contract Owner's number of
years of service with the qualified employer, over all prior elective
deferrals made on behalf of the Contract Owner by the qualified employer
in prior taxable years.
For this purpose, a qualified employer means any educational organization,
hospital, home health service agency, health and welfare service agency,
church, or convention or association of churches, including an exempt
organization controlled by or associated with a church.
5. MULTIPLE SALARY DEFERRALS
As permitted by the employer, a Contract Owner may enter into more than
one salary reduction agreement in any calendar year to defer compensation
that has not yet been paid or made available.
6. FORM OF BENEFIT - MARRIED OWNER
The term married owner shall mean a Contract Owner who has been married to
the same spouse for at least the twelve consecutive calendar months
immediately preceding the Benefit Commencement Date. Notwithstanding what
is stated in the Annuity Payments Section of the contract to the contrary,
the form of benefit for a Married Owner shall be a Qualified Joint and 50%
Survivor Annuity which is the actuarial equivalent of a single life
annuity, unless the Contract Owner elects an optional form of benefit in
accordance with Paragraph 9 below.
7. FORM OF BENEFIT - UNMARRIED OWNER
Notwithstanding what is stated in the Annuity Payments Section of the
contract to the contrary, the form of benefit for a Contract Owner who is
not a Married Owner shall be a single life annuity unless the Contract
Owner elects an optional form of benefit.
Endorsement No. PI 1542-97 Page 4
Page 4 (con'd)
B003711E
ENDORSEMENT - TAX DEFERRED ANNUITY (CONTINUED)
8. PAYMENT OF DEATH BENEFIT
If a married Contract Owner dies before the date benefits begin, the death
benefit will be paid to the Contract Owner's surviving spouse in the form
of a single life annuity, unless the Contract Owner has designated another
form of payment available under the contract, or the surviving spouse
elects to receive a lump sum payment or another form of payment available
under the contract.
9. NOTICE AND ELECTION
X. Xxxxxx
The Company must provide a Contract Owner written notice within the 30
to 90 day period before the date benefits are to begin. Such written
notice shall explain:
1. The terms and conditions of the automatic forms of benefits, the
alternative forms of benefits that the Contract Owner can choose,
and information about the relative values of each form of benefits;
2. The Contract Owner's right to waive the automatic form of benefit
and the effect of such waiver;
3. The rights of the Contract Owner's spouse regarding a waiver; and 4.
The Contract Owner's right to revoke such waiver and the effect of
such revocation.
B. Election
A Contract Owner may elect a form of benefit other than the automatic
form in writing at any time during the 90 day period which ends on the
date on which payments are to begin; provided, however, that no
election can be made earlier than the date the Contract Owner receives
the notice described in Subsection A above.
If the married Contract Owner, after receiving the notice described
above in Subsection A, elects one of the available forms of
distribution and the Contract Owner's spouse consents to the form of
distribution (if necessary), payments may begin before the end of the
30 day period after the notice was given to the Contract Owner, as long
as
(A) the Contract Owner has been advised of his right to a 30 day period
to consider whether to waive the automatic form of benefit and consent
to a form of distribution other than the automatic form of benefit;
(B) payments do not begin to be paid to the Contract Owner until after
the Contract Owner receives the notice;
(C) payments do not begin before 7 days have elapsed after the notice
is provided to the Contract Owner; and
(D) the Contract Owner may revoke the election of a form of payment
until the end of the 7 day period described in (C) or the date payments
begin, if later.
Spousal Consent Requirement
A Contract Owner will automatically receive a Qualified Joint and 50%
Survivor Annuity unless the Company is satisfied that he or she is not
married on the date benefit payments are to begin. The Contract Owner
may elect an alternate form of benefit only if:
(A) the Contract Owner's spouse (or the spouse's legal guardian)
consents in writing that he or she consents to the Contract Owner's
election to waive the Qualified Joint and 50% Survivor Annuity; to the
specific alternative form elected by the Contract Owner, or to the
Contract Owner's right to choose any alternative form without any
further consent by the spouse. If a beneficiary other than the spouse
is selected, the spouse must also consent in writing to either the
specific Beneficiary or Beneficiaries designated by the Contract Owner
or to the Contract Owner's right to designate any Beneficiary or
Beneficiaries without any further consent by the spouse. The written
consent also must acknowledge the effect of the election and be
witnessed by a notary public; or
Endorsement No. PI 1542-97
ENDORSEMENT - TAX DEFERRED ANNUITY (CONTINUED)
B003712E
(B) the Contract Owner satisfies the Company that his or her spouse cannot
be located, or furnishes a court order establishing that the Contract
Owner is legally separated or has been abandoned (within the meaning of
local law), unless a qualified domestic relations order pertaining to
the Contract Owner provides that the spouse's consent must be obtained.
Spousal consent shall not be effective with respect to any other
spouses of the Contract Owner, and shall become void if the
circumstances causing the consent of the spouse not to be required
cease to exist prior to the date that the Contract Owner's payments
commence.
Revocation of Election
A Contract Owner may revoke an election to waive the automatic form of
payment at any time during the election period. revocation shall not
void any prospectively effective consent given by his or her spouse in
connection with the revoked election.
10. OPTIONAL FORMS OF BENEFIT
Subject to the conditions and limitations in Paragraph 9 above, a Contract
Owner may elect any annuity payment option set forth in the Annuity
Options Section or Annuity Payments Section of the contract. The form of
benefit may not be changed after the Benefit Commencement Date.
11. BENEFIT RESTRICTIONS
Any benefits payable under the Annuity Payments Section, or the Withdrawal
Section are subject to the following added provisions:
A. Effective after December 31, 1988, withdrawals attributable to
contributions made pursuant to a salary reduction agreement may be made
only when the Contract Owner is over age 59 1/2, leaves the employment
of the employer who purchased the contract, dies, becomes disabled as
defined in section 72(m)(7) of the Code, or establishes hardship as
defined in the Code. In the case of hardship withdrawal, no income
attributable to such contributions may be withdrawn.
B. Notwithstanding any provisions of this contract to the contrary, the
distribution of an individual's interest shall be made in accordance
with the requirements of section 401(a)(31) of the Code and the minimum
distribution requirements of section 403(b)(10) of the Code and the
regulations thereunder, including the incidental death benefit
provisions of section 1.401(a)(9)-2 of the proposed regulations, all of
which are herein incorporated by reference.
C. The Contract Owner's entire interest in the contract must be
distributed, or begin to be distributed, by the Contract Owner's
required beginning date, which effective January 1, 1997, is the April
1 of the calendar year following the later of (i) the calendar year in
which the Contract Owner reaches age 70 1/2, or (ii) the calendar year
in which the Contract Owner retires. For a Contract Owner who is a 5%
owner of the employer in the plan year ending in the calendar year in
which the Contract Owner reaches age 70 1/2, such Contract Owner's
required beginning date is the April 1 following the calendar year in
which that Contract Owner reaches 70 1/2.
For each succeeding year, a distribution must be made on or before
December 31. By the required beginning date the Contract Owner may
elect to have the balance in the contract distributed in one of the
following forms:
a. a single sum payment;
b. equal or substantially equal periodic payments over the life of the
Contract Owner;
c. equal or substantially equal periodic payments over the lives of
the Contract Owner and his or her designated beneficiary;
d. equal or substantially equal periodic payments over a specified
period that may not be longer than the Contract Owner's life
expectancy ;
e. equal or substantially equal periodic payments over a specified
period that may not be longer than the joint life and last survivor
expectancy of the Contract Owner and his or her designated
beneficiary.
Endorsement No. PI 1542-97 Page 4 (con'd)
Page 4 (con'd)
B003713E
ENDORSEMENT - TAX DEFERRED ANNUITY (CONTINUED)
D. If the Contract Owner dies before his or her entire interest is
distributed, the entire remaining interest will be distributed as
follows:
a. If the Contract Owner dies when or after distributions have begun
under Paragraph 11.C of this endorsement, the entire remaining
interest must be distributed at least as rapidly as provided under
Paragraph 11.C.
b. If the Contract Owner dies before distributions have begun under
Paragraph 11.C, the entire remaining interest must be distributed
as elected by the Contract Owner or, if the Contract Owner has not
so elected, as elected by the beneficiary or beneficiaries, as
follows:
1) by December 31st of the year containing the fifth anniversary of
the Contract Owner's death; or
2) in equal or substantially equal periodic payments over the life
or life expectancy of the designated beneficiary or beneficiaries
starting by December 31st of the year following the year of the
Contract Owner's death. If, however, the beneficiary is the
Contract Owner's surviving spouse, then this distribution is not
required to begin before December 31st of the year in which the
Contract Owner would have turned 70 1/2.
Unless otherwise elected by the Contract Owner prior to the
commencement of distributions under Paragraph 11.B or, if
applicable, by the surviving spouse where the Contract Owner dies
before distributions have commenced, life expectancies of a
Contract Owner or spouse beneficiary shall be recalculated annually
for purposes of distributions under Paragraphs 11.B and 11.C. An
election not to recalculate shall be irrevocable and shall apply to
all subsequent years. The life expectancy of a non-spouse
beneficiary shall not be recalculated.
An individual may satisfy the minimum distribution requirements under
sections 403(b)(10) of the Code by receiving a distribution from one TDA
that is equal to the amount required to satisfy the minimum distribution
requirements for two or more TDAs. For this purpose, the Contract Owner of
two or more TDAs may use the `alternative method' described in Notice
88-39, 1988-1 C.B. 525, to satisfy the minimum distribution requirements
described above.
12. EFFECTIVE DATE
The Effective Date of this endorsement is the Contract Date unless another
Effective Date is shown below.
Wilmington, Delaware The Penn Insurance and Annuity Company
/s/ Xxxxx X. Xxxx
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Endorsement No. PI 1542-97
