OPTIONS FOR THE START OF DISTRIBUTIONS

OPTIONS FOR THE METHOD OF DISTRIBUTIONS

You may choose to receive your distributions in any of the following methods:

• A one-time lump-sum payment of the entire amount.
• A portion of your account in a specific lump-sum dollar amount
• Periodic installments paid monthly for a specified number of years (you must indicate full years).
• A combination of a specific lump-sum dollar amount with subsequent installment payments for a specified number of years.

When electing any combination of lump-sum payment with subsequent installment payments, the installments can only occur as long as you leave at least $5,000 in you account for the start of the installment payments.

MODIFYING DISTRIBUTION ALTERNATIVES

You may change your method of distribution up to one business day before the date of your first payment. For example, you could switch from installment payments to a lump-sum payment, or vice-versa. To make a change, you must file a new Distribution Election form.

After payments begin, you may change the date and/or method that you have selected for payments from your account. However, a Distribution Election form indicating the change must be received by the Plan no later than one business day prior to the scheduled payment date.

If you elect an initial lump-sum payment with subsequent installment payments, you can request, at a later date, a second lump-sum payment. If this decreases your balance to less than $5,000, it will void the scheduled installment payments and will result in a lump-sum distribution on the date your installment payments are scheduled to begin.

INVESTMENT OF ACCOUNT BALANCES

You will always have the option to change your investment selections for the money that remains in your account. You may transfer your account balances among the investment options by filing a Investment Allocation Change/Exchange Request form. Transfers may be made once each month.

DIRECT DEPOSIT

The Plan offers direct deposit of most distribution payments. You may call Prudential at 1-866-NJSEDCP for the authorization form or you may download the form from the Web site at: www.prudential.com/njsedcp

VALUATION

Accounts are valued daily. Account distributions are based on your account value as of the close of business on the day prior to each payment date.

TAXABILITY

The New Jersey State Employees Deferred Compensation Plan is an eligible state deferred compensation plan under section 457(b) of the Internal Revenue Code. The distributions do not qualify for special 5-year or 10-year averaging. Distributions also will not qualify as "compensation" for an individual to be eligible to make contributions to an IRA.

Distributions from the Plan are defined as pension payments and are subject to federal income tax unless rolled over to a qualified plan. Tax withholding will be determined by the eligibility of your funds for rollover to other plans. If directly rolled over to another pension plan, nothing will be withheld. Since the funds are eligible for rollover, if paid directly to you, 20 percent will be withheld. However, if you elect installments for more than 10 years, taxes will be withheld based on your withholding election. At the end of every year in which you receive a distribution, you will be issued a Form 1099R indicating your distribution and any tax withheld.

If you were a New Jersey taxpayer while participating in the Plan, contributions to the Plan were included in your New Jersey gross income when they were made. Therefore, only the distributions that you receive in excess of the total amount of your contributions will be included in your New Jersey taxable income.

Distributions received from the Plan by a New Jersey non-resident are not subject to New Jersey gross income tax and should not be reported on Form NJ-1040NR.

This taxability information has been developed from information obtained from various federal and state taxpayer publications. These rules may be changed at any time and the Plan makes no guarantees as to the validity of these statements. Therefore, you may want to consult a professional tax advisor before you take a distribution from the Plan. Additional information concerning the taxability of your distribution from this eligible IRC § 457 plan should be directed to the Internal Revenue Service 1-800-829-1040, the New Jersey Taxpayer Hotline (609)-292-6400 or your home state's revenue collection authority.

ROLLOVER

Distributions may be eligible for direct rollover to a qualified 401(k), 403(b), IRA or 457(b) program in which you are actively participating. You can choose a direct rollover of all or any portion of your payment that is eligible for rollover. In a direct rollover, the distribution is paid directly from the Plan to an IRA or eligible employer plan that accepts the rollover. For additional rollover information contact Prudential or visit the Web site.

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