Prudential Insurance sponsors two primary retirement plans: the Merged Retirement Plan, which is a retirement plan subject to ERISA and the qualification rules of the Internal Revenue Code, and the Supplemental Retirement Plan, which is designed to provide benefits larger than those permitted under the qualification rules.

The Merged Retirement Plan has two formulas under which employees may have their retirement benefits determined: the "traditional" pension formula or the "cash balance" pension formula.

Traditional Pension Formula

The following table shows the estimated annual retirement benefits payable, assuming retirement at age 65, to participants under the Prudential Traditional Retirement Plan component of the Merged Retirement Plan and the Supplemental Retirement Plan (collectively, the traditional pension plan) at the levels of Final Average Earnings and years of credited service contained in the respective plans.

Pension Plan Table
Estimated Annual Retirement Plans Benefits—Traditional Pension Plan

			Years of Credited Service
Final Average Earnings
			10			15			20			25			30			35			40			45
$     800,000			$	157,581		$	236,372		$	315,162		$	393,953		$	433,488		$	473,023		$	512,744		$	552,744
$  1,200,000			$	237,581		$	356,372		$	475,162		$	593,953		$	653,488		$	713,023		$	772,744		$	832,744
$  1,600,000			$	317,581		$	476,372		$	635,162		$	793,953		$	873,488		$	953,023		$	1,032,744		$	1,112,744
$  2,000,000			$	397,581		$	596,372		$	795,162		$	993,953		$	1,093,488		$	1,193,023		$	1,292,744		$	1,392,744
$  2,400,000			$	477,581		$	716,372		$	955,162		$	1,193,953		$	1,313,488		$	1,433,023		$	1,552,744		$	1,672,744
$  2,800,000			$	557,581		$	836,372		$	1,115,162		$	1,393,953		$	1,533,488		$	1,673,023		$	1,812,744		$	1,952,744
$  3,200,000			$	637,581		$	956,372		$	1,275,162		$	1,593,953		$	1,753,488		$	1,913,023		$	2,072,744		$	2,232,744
$  3,600,000			$	717,581		$	1,076,372		$	1,435,162		$	1,793,953		$	1,973,488		$	2,153,023		$	2,332,744		$	2,512,744
$  4,000,000			$	797,581		$	1,196,372		$	1,595,162		$	1,993,953		$	2,193,488		$	2,393,023		$	2,592,744		$	2,792,744
$  4,400,000			$	877,581		$	1,316,372		$	1,755,162		$	2,193,953		$	2,413,488		$	2,633,023		$	2,852,744		$	3,072,744
$  4,800,000			$	957,581		$	1,436,372		$	1,915,162		$	2,393,953		$	2,633,488		$	2,873,023		$	3,112,744		$	3,352,744

The benefits shown above are stated in the form of a straight life annuity for the participant. Other optional forms of payment are available. Benefits payable under the traditional pension plan are not subject to offset for Social Security benefits. Final Average Earnings is generally defined as the average of annual earnings during the Earnings Base Period, not including the two years of lowest annual earnings. The Earnings Base Period for 2001 began on January 1, 1994. Compensation considered in determining annual earnings includes base salary and payments earned under the Annual Incentive Plan.

All of the Named Executives were covered under the traditional pension formula through 2001. As of December 31, 2001, the estimated Final Average Earnings and years of credited service of the Named Executives under the traditional pension plan were: Mr. Ryan, $4,212,480 and 7 years; Mr. Strangfeld, $1,351,032 and 24 years; Ms. Banta, $2,054,856 and 2 years; Mr. Grier, $1,596,060 and 7 years; Mr. Sakaguchi, $1,059,228 and 22 years; and Mr. Lawson, $1,545,804 and 6 years.

Cash Balance Pension Formula

Effective January 1, 2001, a cash balance pension plan formula was added to the Merged Retirement Plan for employees hired on or after January1, 2001. In 2001, we offered a Pension Choice program to employees of Prudential Financial and its affiliates, who are covered under the traditional pension plan formula of the Merged Retirement Plan, through which an employee chose whether to have retirement benefits determined under the traditional pension formula or the cash balance pension formula.

Pension benefits under the Prudential Cash Balance Pension Plan component of the Merged Retirement Plan and the Supplemental Retirement Plan (collectively, the cash balance pension plan) are generally stated as a lump sum amount, although participants may also elect to have benefits distributed as an annuity. Benefits are computed using a cash balance methodology that provides for basic credits equal to 2 to 14 percent (depending on age and service) of eligible earnings. Interest credits are made to the participant's hypothetical account each month. The cash balance pension plan sets the interest rate each year based on the average yield on 30-year U.S. Treasury securities (constant maturities) for October of the prior year, with a minimum rate of 4.25%.

Employees who chose to have their benefits determined under the cash balance pension plan through the Pension Choice process had their accrued benefits under the traditional pension plan as of January 1, 2002, converted to cash balance accounts based on the present value of the accrued benefits as of that date. The accrued benefit under the traditional pension plan will be frozen as of January 1, 2002, and will represent a minimum plan benefit. These participants also receive transition credits of 2.5 percent of eligible earnings through December 31, 2006.

Benefits payable under the cash balance pension plan are not subject to offset for Social Security benefits. Eligible earnings include base salary and payments earned under the Annual Incentive Plan.

Three of our Named Executives chose participation in the traditional pension plan and three chose participation in the cash balance pension plan, effective January 1, 2002.

Prudential Insurance Supplemental Executive Retirement Plan/Prudential Financial, Inc. Supplemental Executive Retirement Plan

In 1998, Prudential Insurance adopted the Executive Supplemental Retirement Plan, which was designed, in part, to compensate executives hired after 1998 for retirement benefits lost when the executive left his or her employer. Under the plan, we estimate the benefit the executive would have received from his or her former employer, assuming he or she had continued to be employed by the former employer but giving effect to the compensation paid by us and time of service with us. We offset this amount against any amount the executive is eligible to receive under his or her former employer's pension plan, as well as against any amounts payable under both the Merged Retirement Plan and Supplemental Retirement Plan.

Mr. Ryan and the other Named Executives are not currently participants in this plan. However, in 2002, we are amending, renaming and restating the Executive Supplemental Retirement Plan to be the Prudential Insurance Supplemental Executive Retirement Plan ("Prudential Insurance Retirement Plan"), as well as adding a new comparable plan for individuals employed by entities other than Prudential Insurance (to be known as the Prudential Financial, Inc. Supplemental Executive Retirement Plan). The new plans will provide "Mid-Career Hire Benefits" for eligible individuals, and the benefit calculation will be changed to include the prior employer's service in the benefits calculation under the Merged Retirement Plan and Supplemental Retirement Plan. Mr. Ryan will be designated as a participant under the Prudential Insurance Retirement Plan, upon the approval of the Prudential Insurance Retirement Plan by the New Jersey Commissioner of Banking and Insurance in accordance with New Jersey law. Such designation would be intended to honor a commitment to provide this type of benefit that had been made in an employment agreement that has expired.

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