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Lincoln InvestmentSolutionsSM
Lincoln Life Variable Annuity Account N
Individual Variable Annuity Contracts
Home Office:
The Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46802
www.LincolnFinancial.com
1-877-534-8255
This prospectus describes an individual flexible premium deferred variable
annuity contract that is issued by The Lincoln National Life Insurance Company
(Lincoln Life or Company). This contract is primarily for use with nonqualified
plans and qualified retirement plans under Sections 408 (IRAs) and 408A (Roth
IRAs) of the tax code. Generally, you do not pay federal income tax on the
contract's growth until it is paid out. However, IRAs provide tax deferral
whether or not the funds are invested in an annuity contract. Further, if your
contract is a Roth IRA, you generally will not pay income tax on a
distribution, provided certain conditions are met. Therefore, there should be
reasons other than tax deferral for acquiring the contract within a qualified
plan. The contract is designed to accumulate Contract Value and to provide
retirement income over a certain period of time, or for life, subject to
certain conditions. The benefits offered under this contract may be a variable
or fixed amount, if available, or a combination of both. If you die before the
Annuity Commencement Date, we will pay your Beneficiary a Death Benefit. In the
alternative, you generally may choose to receive a Death Benefit upon the death
of the Annuitant.
The state in which your contract is issued will govern whether or not certain
features, riders, restrictions, limitations, charges and fees will apply to
your contract. You should refer to your contract for these state-specific
features. Please check with your registered representative regarding their
availability.
The minimum initial Purchase Payment for the contract is $10,000. Additional
Purchase Payments, subject to certain restrictions, may be made to the contract
and must be at least $100 per payment ($25 if transmitted electronically), and
at least $300 annually.
Except as noted below, you choose whether your Contract Value accumulates on a
variable or a fixed (guaranteed) basis or both. Your contract may not offer a
fixed account or if permitted by your contract, we may discontinue accepting
Purchase Payments or transfers into the fixed side of the contract at any time.
If any portion of your Contract Value is in the fixed account, we promise to
pay you your principal and a minimum interest rate. For the life of your
contract or during certain periods, we may impose restrictions on the fixed
account. Also, an Interest Adjustment may be applied to any withdrawal,
surrender or transfer from the fixed account before the expiration date of a
Guaranteed Period.
You should carefully consider whether or not this contract is the best product
for you.
All Purchase Payments for benefits on a variable basis will be placed in
Lincoln Life Variable Annuity Account N (Variable Annuity Account [VAA]). The
VAA is a segregated investment account of Lincoln Life. You take all the
investment risk on the Contract Value and the retirement income for amounts
placed into one or more of the contract's variable options. If the Subaccounts
you select make money, your Contract Value goes up; if they lose money, it goes
down. How much it goes up or down depends on the performance of the Subaccounts
you select. We do not guarantee how any of the variable options or their funds
will perform. Also, neither the U.S. Government nor any federal agency insures
or guarantees your investment in the contract. The contracts are not bank
deposits and are not endorsed by any bank or government agency.
The available funds are listed below:
American Funds Insurance SeriesSM (Class 1):
American Funds American Protected Asset Allocation Fund
American Funds Asset Allocation Fund
American Funds Blue Chip Income and Growth Fund
American Funds Bond Fund
American Funds Global Balanced FundSM
American Funds Global Bond Fund
American Funds Global Discovery Fund
American Funds Global Growth Fund
American Funds Global Growth and Income Fund
American Funds Global Small Capitalization Fund
American Funds Growth Fund
American Funds Growth-Income Fund
American Funds High-Income Bond Fund
American Funds International Fund
American Funds International Growth and Income FundSM
American Funds Mortgage FundSM
American Funds New World Fund (Reg. TM)
American Funds U.S. Government/AAA-Rated Securities Fund
BlackRock Variable Series Funds, Inc. (Class I):
BlackRock Global Allocation V.I. Fund
Delaware VIP (Reg. TM) Trust (Standard Class):
Delaware VIP (Reg. TM) Diversified Income Series
Delaware VIP (Reg. TM) Limited-Term Diversified Income Series
DWS Variable Series II (Class A):
DWS Alternative Asset Allocation VIP Portfolio
Lincoln Variable Insurance Products Trust (Standard Class):
LVIP American Balanced Allocation Fund
LVIP American Growth Allocation Fund
LVIP American Income Allocation Fund
LVIP American Preservation Fund
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LVIP BlackRock Emerging Markets RPM Fund
(formerly LVIP BlackRock Emerging Markets Index RPM Fund)
LVIP BlackRock Inflation Protected Bond Fund
LVIP Delaware Diversified Floating Rate Fund
LVIP Dimensional Non-US Equity Fund
LVIP Dimensional U.S. Equity Fund
LVIP Dimensional/Vanguard Total Bond Fund
LVIP Money Market Fund
LVIP Protected American Balanced Allocation Fund
LVIP Protected American Growth Allocation Fund
LVIP Protected Profile Conservative Fund
LVIP Protected Profile Growth Fund
LVIP Protected Profile Moderate Fund
LVIP SSgA Bond Index Fund
LVIP SSgA Developed International 150 Fund
LVIP SSgA Emerging Markets 100 Fund
LVIP SSgA Global Tactical Allocation RPM Fund
(formerly LVIP SSgA Global Tactical Allocation Fund)
LVIP SSgA International Index Fund
LVIP SSgA Large Cap 100 Fund
LVIP SSgA S&P 500 Index Fund*
LVIP SSgA Small-Cap Index Fund
LVIP SSgA Small/Mid Cap 200 Fund
LVIP Vanguard International Equity ETF Fund
LVIP Vanguard Domestic Equity ETF Fund
* "Standard & Poor's (Reg. TM)", "S&P 500 (Reg. TM)", "Standard & Poor's 500
(Reg. TM)" and "500" are trademarks of Standard & Poor's Financial Services,
LLC, a subsidiary of The McGraw-Hill Companies, Inc. and have been licensed for
use by Lincoln Variable Insurance Products Trust and its affiliates. The
product is not sponsored, endorsed, sold or promoted by Standard & Poor's and
Standard & Poor's makes no representation regarding the advisability of
purchasing the product.
This prospectus gives you information about the contracts that you should know
before you decide to buy a contract and make Purchase Payments. You should also
review the prospectuses for the funds and keep all prospectuses for future
reference.
Neither the SEC nor any state securities commission has approved this contract
or determined that this prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
More information about the contracts is in the current Statement of Additional
Information (SAI), dated the same date as this prospectus. The SAI is
incorporated by reference into this prospectus and is legally part of this
prospectus. For a free copy of the SAI, write: The Lincoln National Life
Insurance Company, PO Box 2348, Fort Wayne, IN 46801-2348, or call
1-877-534-8255. The SAI and other information about Lincoln Life and the VAA
are also available on the SEC's website (http://www.sec.gov). There is a table
of contents for the SAI on the last page of this prospectus.
May 1, 2013
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Table of Contents
Item Page
Special Terms 4
Expense Tables 7
Summary of Common Questions 12
The Lincoln National Life Insurance Company 15
Variable Annuity Account (VAA) 16
Investments of the Variable Annuity Account 16
Charges and Other Deductions 20
The Contracts 26
Purchase Payments 27
Transfers On or Before the Annuity Commencement Date 28
Surrenders and Withdrawals 31
Death Benefit 32
Investment Requirements 36
Living Benefit Riders 38
Lincoln Lifetime IncomeSM Advantage 2.0 38
Lincoln SmartSecurity (Reg. TM) Advantage 47
4LATER (Reg. TM) Advantage Protected Funds 52
i4LIFE (Reg. TM) Advantage 55
Guaranteed Income Benefit with i4LIFE (Reg. TM) Advantage 60
Annuity Payouts 64
Fixed Side of the Contract 72
Distribution of the Contracts 75
Federal Tax Matters 75
Additional Information 80
Voting Rights 80
Return Privilege 81
Other Information 81
Legal Proceedings 81
Contents of the Statement of Additional Information (SAI)
for Lincoln Life Variable Annuity Account N 82
Appendix A - Overview of Living Benefit Riders A-1
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Special Terms
In this prospectus, the following terms have the indicated meanings:
4LATER (Reg. TM) Advantage Protected Funds-An option that provides an Income
Base during the accumulation period, which can be used to establish a
Guaranteed Income Benefit under i4LIFE (Reg. TM) Advantage with Guaranteed
Income Benefit if you adhere to certain Investment Requirements.
5% Enhancement-A feature under Lincoln Lifetime IncomeSM Advantage 2.0 and
4LATER (Reg. TM) Advantage Protected Funds in which the Income Base, minus
Purchase Payments received in that year, will be increased by 5%, subject to
certain conditions.
Access Period-Under i4LIFE (Reg. TM) Advantage, a defined period of time during
which we make Regular Income Payments to you while you still have access to
your Account Value. This means that you may make withdrawals, surrender the
contract, and have a Death Benefit.
Account or Variable Annuity Account (VAA)-The segregated investment account,
Account N, into which we set aside and invest the assets for the variable side
of the contract offered in this prospectus.
Account Value-Under i4LIFE (Reg. TM) Advantage, the initial Account Value is
the Contract Value on the Valuation Date that i4LIFE (Reg. TM) Advantage is
effective (or initial Purchase Payment if i4LIFE (Reg. TM) Advantage is
purchased at contract issue), less any applicable premium taxes. During the
Access Period, the Account Value on a Valuation Date equals the total value of
all of the Contractowner's Accumulation Units plus the Contractowner's value in
the fixed account, reduced by Regular Income Payments, Guaranteed Income
Benefit payments, and withdrawals.
Accumulation Unit-A measure used to calculate Contract Value for the variable
side of the contract before the Annuity Commencement Date and to calculate the
i4LIFE (Reg. TM) Advantage Account Value during the Access Period.
Adjustment Date-Under Lincoln SmartIncomeSM Inflation, the first day of January
each year. The Scheduled Payment and the Reserve Value will be adjusted on each
Adjustment Date.
Annuitant-The person upon whose life the annuity benefit payments are based,
and upon whose life a Death Benefit may be paid.
Annuity Commencement Date-The Valuation Date when funds are withdrawn or
converted into Annuity Units or fixed dollar payout for payment of retirement
income benefits under the Annuity Payout option you select (other than i4LIFE
(Reg. TM) Advantage).
Annuity Payout-A regularly Scheduled Payment (under any of the available
annuity options) that occurs after the Annuity Commencement Date (or Periodic
Income Commencement Date if i4LIFE (Reg. TM) Advantage has been elected).
Payments may be variable or fixed, or a combination of both.
Annuity Unit-A measure used to calculate the amount of Annuity Payouts for the
variable side of the contract after the Annuity Commencement Date. See Annuity
Payouts.
Automatic Annual Step-up-Under Lincoln Lifetime IncomeSM Advantage 2.0 and
4LATER (Reg. TM) Advantage Protected Funds, the Income Base will automatically
step-up to the contract value on each Benefit Year anniversary, subject to
certain conditions.
Beneficiary-The person you choose to receive any Death Benefit paid if you die
before the Annuity Commencement Date.
Benefit Year-Under Lincoln Lifetime IncomeSM Advantage 2.0, Lincoln
SmartSecurity (Reg. TM) Advantage and 4LATER (Reg. TM) Advantage Protected
Funds, the 12-month period starting with the effective date of the rider and
starting with each anniversary of the rider effective date after that. Under
Lincoln SmartSecurity (Reg. TM) Advantage, if the Contractowner elects a
step-up, the Benefit Year will begin on the effective date of the step-up and
each anniversary of the step-up after that.
Contractowner (you, your, owner)-The person who can exercise the rights within
the contract (decides on investment allocations, transfers, payout option,
designates the Beneficiary, etc.). Usually, but not always, the Contractowner
is the Annuitant.
Contract Value (may be referred to as Account Value in marketing materials)-At
a given time before the Annuity Commencement Date, the total value of all
Accumulation Units for a contract plus the value of the fixed side of the
contract, if any.
Contract Year-Each one-year period starting with the effective date of the
contract and starting with each contract anniversary after that.
CPI-The Consumer Price Index used to measure inflation.
CPI Adjustment-Under Lincoln SmartIncomeSM Inflation, adjustments made to the
Scheduled Payments and the Reserve Value as a result of fluctuations in the
CPI.
CPI Value-The number published monthly by the Bureau of Labor Statistics that
represents the Consumer Price Index. Under Lincoln SmartIncomeSM Inflation, the
CPI Value is used to determine if the Scheduled Payments and Reserve Value will
go up or down each year.
Death Benefit-Before the Annuity Commencement Date, the amount payable to your
designated Beneficiary if the Contractowner dies or, if selected, to the
Contractowner if the Annuitant dies. See The Contracts - Death Benefit for a
description of the various Death Benefit options.
Enhancement Period-Under Lincoln Lifetime IncomeSM Advantage 2.0 and 4LATER
(Reg. TM) Advantage Protected Funds, the 10-year period during which the 5%
Enhancement is in effect. A
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new Enhancement Period will begin each time an Automatic Annual Step-up to the
Contract Value occurs.
Excess Withdrawals-Amounts withdrawn during a Benefit Year, as specified for
each Living Benefit rider, which decrease or eliminate the guarantees under the
rider.
Good Order-The actual receipt at our Home Office of the requested transaction
in writing or by other means we accept, along with all information and
supporting legal documentation necessary to effect the transaction. The forms
we provide will identify the necessary documentation. We may, in our sole
discretion, determine whether any particular transaction request is in Good
Order, and we reserve the right to change or waive any Good Order requirements
at any time.
Guaranteed Amount-The value used to calculate your withdrawal benefit under
Lincoln SmartSecurity (Reg. TM) Advantage.
Guaranteed Amount Annuity Payout Option-A fixed Annuity Payout option available
under Lincoln SmartSecurity (Reg. TM) Advantage under which the Contractowner
(and spouse if applicable) will receive annual annuity payments equal to the
Maximum Annual Withdrawal amount for life.
Guaranteed Annual Income-The guaranteed periodic withdrawal amount available
from the contract each year for life under Lincoln Lifetime IncomeSM Advantage
2.0.
Guaranteed Annual Income Amount Annuity Payout Option-A payout option available
under Lincoln Lifetime IncomeSM Advantage 2.0 in which the Contractowner (and
spouse if applicable) will receive annual annuity payments equal to the
Guaranteed Annual Income amount for life.
Guaranteed Income Benefit-An option that provides a guaranteed minimum payout
floor for the i4LIFE (Reg. TM) Advantage Regular Income Payments. The
calculation of the Guaranteed Income Benefit or the features applicable to the
Guaranteed Income Benefit may vary based on the rider provisions applicable to
certain Contractowners.
Guaranteed Minimum Scheduled Payment-The minimum payment you will receive under
Lincoln SmartIncomeSM Inflation (as adjusted for Unscheduled Payments, charges
and taxes).
Guaranteed Period-The length of the period during which Contract Value in a
fixed account will be credited a guaranteed interest rate.
i4LIFE (Reg. TM) Advantage-An Annuity Payout option which combines periodic
variable Regular Income Payments for life and a Death Benefit with the ability
to make withdrawals during a defined period, the Access Period.
i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected Funds-i4LIFE
(Reg. TM) Advantage Guaranteed Income Benefit Protected Funds is an optional
feature under i4LIFE (Reg. TM) Advantage if you adhere to certain Investment
Requirements. i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected
Funds is only available to purchasers of 4LATER (Reg. TM) Advantage Protected
Funds.
Income Base-Under the Lincoln Lifetime IncomeSM Advantage 2.0, a value used to
calculate the Guaranteed Annual Income amount. Under 4LATER (Reg. TM) Advantage
Protected Funds, a value used to calculate the initial Guaranteed Income
Benefit. The amount of the Income Base varies based on when you elect the
rider, and is adjusted as set forth in this prospectus.
Interest Adjustment-An upward or downward adjustment on the amount of Contract
Value in the fixed account upon a transfer, withdrawal or surrender of Contract
Value from the fixed account due to fluctuations in interest rates.
Investment Requirements-Restrictions in how you may allocate your Subaccount
investments if you own certain Living Benefit riders.
Lifetime Income Period-Under i4LIFE (Reg. TM) Advantage, the period of time
following the Access Period during which we make Regular Income Payments to you
(and Secondary Life, if applicable) for the rest of your life. During the
Lifetime Income Period, you will no longer have access to your Account Value or
receive a Death Benefit.
Lincoln Life (we, us, our, Company)-The Lincoln National Life Insurance
Company.
Lincoln Lifetime IncomeSM Advantage 2.0-Provides minimum guaranteed lifetime
periodic withdrawals that may increase based on automatic enhancements and
age-based increases to the withdrawal amount, regardless of the investment
performance of the contract and provided certain conditions are met.
Lincoln SmartIncomeSM Inflation-A fixed Annuity Payout option that provides
periodic Annuity Payouts that may increase or decrease annually based on
fluctuations in the Consumer Price Index.
Lincoln SmartSecurity (Reg. TM) Advantage-Provides minimum guaranteed periodic
withdrawals for life, regardless of the investment performance of the contract
and provided certain conditions are met, that may increase due to subsequent
purchase payments and step-ups.
Living Benefit-A general reference to certain riders that may be available for
purchase that provide some type of a minimum guarantee while you are alive.
These riders are Lincoln SmartSecurity (Reg. TM) Advantage, Lincoln Lifetime
IncomeSM Advantage 2.0, 4LATER (Reg. TM) Advantage Protected Funds and i4LIFE
(Reg. TM) Advantage (with or without the Guaranteed Income Benefit). If you
select a Living Benefit rider, Excess Withdrawals may have adverse effects on
the benefit, and you may be subject to Investment Requirements.
Maximum Annual Withdrawal-The guaranteed periodic withdrawal available under
Lincoln SmartSecurity (Reg. TM) Advantage.
Nursing Home Enhancement-A feature that will increase the Guaranteed Annual
Income amount under Lincoln Lifetime IncomeSM Advantage 2.0 upon admittance to
an approved nursing care facility, subject to certain conditions.
Periodic Income Commencement Date-The Valuation Date on which the amount of
i4LIFE (Reg. TM) Advantage Regular Income Payments are determined.
Purchase Payments-Amounts paid into the contract.
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Regular Income Payments-The variable, periodic income payments paid under
i4LIFE (Reg. TM) Advantage.
Reserve Value-Under Lincoln SmartIncomeSM Inflation, the value that is
established to determine the amount available for Unscheduled Payments and the
Death Benefit, if any. The Reserve Value will be adjusted either up or down on
an annual basis depending on the percentage change of the CPI.
Rider Date-The effective date of the Lincoln SmartIncomeSM Inflation rider.
Rider Year-Under Lincoln SmartIncomeSM Inflation, each 12-month period starting
with the Rider Date and starting each Rider Date anniversary after that.
Scheduled Payments-Under Lincoln SmartIncomeSM Inflation, Annuity Payouts for
the life of the Annuitant (and Secondary Life, if applicable). The Scheduled
Payment will be adjusted either up or down on an annual basis depending on the
percentage change of the CPI.
Secondary Life-Under i4LIFE (Reg. TM) Advantage, 4LATER (Reg. TM) Advantage
Protected Funds, and Lincoln SmartIncomeSM Inflation, the person designated by
the Contractowner upon whose life the Annuity Payouts will also be contingent.
Subaccount-The portion of the VAA that reflects investments in Accumulation and
Annuity Units of a class of a particular fund available under the contracts.
There is a separate Subaccount which corresponds to each class of a fund.
Unscheduled Payments-Under Lincoln SmartIncomeSM Inflation, withdrawals that
are in addition to your Scheduled Payments up to the amount of the Reserve
Value less any related charges and deductions for premium tax. Unscheduled
Payments will reduce the Scheduled Payments and Guaranteed Minimum Scheduled
Payment in the same proportion that they reduce the Reserve Value.
Valuation Date-Each day the New York Stock Exchange (NYSE) is open for trading.
Valuation Period-The period starting at the close of trading (normally 4:00
p.m. New York time) on each day that the NYSE is open for trading (Valuation
Date) and ending at the close of such trading on the next Valuation Date.
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Expense Tables
The following tables describe the fees and expenses that you will pay when
buying, owning, and surrendering the
contract.
The first table describes the fees and expenses that you will pay at the time
that you buy the contract, surrender the contract, or transfer contract value
between investment options, and/or (if available) the fixed account. State
premium taxes may also be deducted.
CONTRACTOWNER TRANSACTION EXPENSES:
Accumulation Phase:
There are no sales charges, deferred sales charges, or surrender charges associated with
this contract. We may apply
an Interest Adjustment to amounts being withdrawn, surrendered or transferred from a
Guaranteed Period account
(except for dollar cost averaging and Regular Income Payments under i4LIFE (Reg. TM)
Advantage). See Fixed Side of the
Contract.
Payout Phase:
Maximum Lincoln SmartIncomeSM Inflation Unscheduled Payment charge (as a percentage of
the Unscheduled
Payment)*.............................................................................. 7.00%
* The Unscheduled Payment charge percentage is reduced over time.
The following tables describe the fees and expenses that you will pay
periodically during the time that you own the contract, not including fund fees
and expenses. Only one table will apply to a given contractowner. The tables
differ based on whether the contractowner has purchased the i4LIFE (Reg. TM)
Advantage rider.
o Table A reflects the expenses for a contract that has not elected the i4LIFE
(Reg. TM) Advantage (Base contract).
o Table B reflects the expenses for a contract that has elected the i4LIFE
(Reg. TM) Advantage.
o Table C reflects the expenses for a contract that has elected i4LIFE (Reg.
TM) Advantage and previously purchased the Lincoln Lifetime IncomeSM
Advantage 2.0 or 4LATER (Reg. TM) Advantage Protected Funds.
TABLE A
Separate Account Annual Expenses (as a percentage of average daily net assets in the
subaccounts):1
Account Value Death Benefit
Mortality and Expense Risk Charge....................................................... 0.50%
Administrative Charge................................................................... 0.10%
Total Separate Account Expenses......................................................... 0.60%
Guarantee of Principal Death Benefit
Mortality and Expense Risk Charge....................................................... 0.55%
Administrative Charge................................................................... 0.10%
Total Separate Account Expenses......................................................... 0.65%
Enhanced Guaranteed Minimum Death Benefit (EGMDB)
Mortality and Expense Risk Charge....................................................... 0.80%
Administrative Charge................................................................... 0.10%
Total Separate Account Expenses......................................................... 0.90%
Estate Enhancement Benefit (EEB)
Mortality and Expense Risk Charge....................................................... 1.00%
Administrative Charge................................................................... 0.10%
Total Separate Account Expenses......................................................... 1.10%
1 The mortality and expense risk charge and administrative charge together are
0.60% on and after the Annuity
Commencement Date.
Single Joint
Life Life
Optional Living Benefit Rider Charges:1
Lincoln Lifetime IncomeSM Advantage 2.0:2
Guaranteed Maximum Charge.............. 2.00% 2.00%
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Single Joint
Life Life
Current Charge............................ 1.05% 1.25%
Lincoln SmartSecurity (Reg. TM) Advantage:3
Guaranteed Maximum Charge................. 1.50% 1.50%
Current Charge............................ 0.85% 1.00%
4LATER (Reg. TM) Advantage Protected Funds:4
Guaranteed Maximum Charge................. 2.00% 2.00%
Current Charge............................ 1.05% 1.25%
1 Only one Living Benefit rider may be elected from this chart.
2 As an annualized percentage of the Income Base (initial purchase payment or
contract value at the time of election), as increased for subsequent
purchase payments, Automatic Annual Step-ups, 5% Enhancements and decreased
by Excess Withdrawals. See Charges and Other Deductions - Lincoln Lifetime
IncomeSM Advantage 2.0 Charge for a discussion of these changes to the
Income Base. This charge is deducted from the contract value on a quarterly
basis.
3 As an annualized percentage of the Guaranteed Amount (initial purchase
payment or contract value at the time of election), as increased for
subsequent purchase payments and step-ups and decreased by withdrawals. This
charge is deducted from the contract value on a quarterly basis. For riders
purchased prior to December 3, 2012, the current annual percentage charge
will increase to 0.85% (single life option) and 1.00% (joint life option)
upon the next election of a step-up of the Guaranteed Amount. As of May 20,
2013, this rider will no longer be available for purchase. See Charges and
Other Deductions - Lincoln SmartSecurity (Reg. TM) Advantage Charge for
further information.
4 As an annualized percentage of the Income Base (initial purchase payment or
contract value at the time of election), as increased for subsequent
purchase payments, Automatic Annual Step-ups, 5% Enhancements and decreased
by withdrawals. See Charges and Other Deductions - 4LATER (Reg. TM)
Advantage Protected Funds for a discussion of these charges to the Income
Base.
TABLE B
i4LIFE (Reg. TM) Advantage Without Guaranteed Income Benefit (version 4):1
Account Value Death Benefit............................................. 1.00%
Guarantee of Principal Death Benefit.................................... 1.05%
Enhanced Guaranteed Minimum Death Benefit (EGMDB)....................... 1.30%
1 As an annualized percentage of Account Value, computed daily. This charge is
assessed on and after the effective date of i4LIFE (Reg. TM) Advantage. See
Charges and Other Deductions - i4LIFE (Reg. TM) Advantage Charge for further
information. These charges continue during the Access Period. The i4LIFE
(Reg. TM) Advantage charge is reduced to 1.00% during the Lifetime Income
Period.
Single Joint
Life Life
i4LIFE (Reg. TM) Advantage With Guaranteed Income Benefit (version 4):1
Account Value Death Benefit
Guaranteed Maximum Charge............................................ 3.00% 3.00%
Current Charge....................................................... 1.65% 1.85%
Guarantee of Principal Death Benefit
Guaranteed Maximum Charge............................................ 3.05% 3.05%
Current Charge....................................................... 1.70% 1.90%
Enhanced Guaranteed Minimum Death Benefit (EGMDB)
Guaranteed Maximum Charge............................................ 3.30% 3.30%
Current Charge....................................................... 1.95% 2.15%
1 As an annualized percentage of Account Value, computed daily. This charge is
assessed only on and after the effective date of the Guaranteed Income
Benefit. The current annual charge for Guaranteed Income Benefit (version 4)
is 0.65% of Account Value for the single life option and 0.85% of Account
Value for the joint life option with a guaranteed maximum charge of 2.00%.
These charges are added to i4LIFE (Reg. TM) Advantage charges to comprise
the total charges reflected. See Charges and Other Deductions - i4LIFE (Reg.
TM) Advantage with Guaranteed Income Benefit Charge for further information.
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TABLE C
Single Joint
Life Life
i4LIFE (Reg. TM) Advantage With Guaranteed Income Benefit (version 4) for purchasers who
previously purchased
Lincoln Lifetime IncomeSM Advantage 2.01 or 4LATER (Reg. TM) Advantage Protected Funds2:
Separate Account Annual Expenses (as a percentage of average daily net assets in the
subaccounts):
Account Value Death Benefit............................................................. 0.60% 0.60%
Guarantee of Principal Death Benefit.................................................... 0.65% 0.65%
Enhanced Guaranteed Minimum Death Benefit (EGMDB)....................................... 0.90% 0.90%
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit (version 4)
Guaranteed Maximum Charge............................................................... 2.00% 2.00%
Current Charge.......................................................................... 1.05% 1.25%
- As an annualized percentage of the greater of the Income Base (the Lincoln
Lifetime IncomeSM Advantage 2.0 Income Base less the Guaranteed Annual
Income amounts paid since the last step-up) or contract value prior to
electing i4LIFE (Reg. TM) Advantage. This charge is deducted from Account
Value on a quarterly basis and only on and after the effective date of
i4LIFE (Reg. TM) Advantage. In the event of an automatic step-up in the
Guaranteed Income Benefit, the dollar amount of the charge will increase by
a two part formula: 1) the charge will increase by the same percentage that
the Guaranteed Income Benefit payment increases and 2) the dollar amount of
the charge will also increase by the percentage increase, if any, to the
Lincoln Lifetime IncomeSM Advantage 2.0 current charge rate. (The Lincoln
Lifetime IncomeSM Advantage 2.0 charge continues to be a factor in
determining the i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit
charge.) See Charges and Other Deductions - i4LIFE (Reg. TM) Advantage with
Guaranteed Income Benefit (version 4) for purchasers who previously
purchased Lincoln Lifetime IncomeSM Advantage 2.0 or 4LATER (Reg. TM)
Advantage Protected Funds.
- As an annualized percentage of the greater of the Income Base (associated
with the 4LATER (Reg. TM) Advantage Protected Funds) or contract value prior
to electing i4LIFE (Reg. TM) Advantage. This charge is deducted from Account
Value on a quarterly basis and only on and after the effective date of
i4LIFE (Reg. TM) Advantage. In the event of an automatic step-up in the
Guaranteed Income Benefit, the dollar amount of the charge will increase by
a two part formula: 1) the charge will increase by the same percentage that
the Guaranteed Income Benefit payment increases and 2) the dollar amount of
the charge will also increase by the percentage increase, if any, to the
4LATER (Reg. TM) Advantage Protected Funds current charge rate. (The 4LATER
(Reg. TM) Advantage Protected Funds charge continues to be a factor in
determining the i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit
charge.) See Charges and Other Deductions - i4LIFE (Reg. TM) Advantage with
Guaranteed Income Benefit (version 4) for purchasers who previously
purchased Lincoln Lifetime IncomeSM Advantage 2.0 or 4LATER (Reg. TM)
Advantage Protected Funds.
The next item shows the minimum and maximum total annual operating expenses
charged by the funds that you may pay periodically during the time that you own
the contract. The expenses are for the year ended December 31, 2012. More
detail concerning each fund's fees and expenses is contained in the prospectus
for each fund.
Minimum Maximum
--------- --------
Total Annual Fund Operating Expenses (expenses that are deducted from
fund assets, including management fees, distribution and/or service
(12b-1) fees, and other expenses)................................... 0.28% 1.97%
Total Annual Fund Operating Expenses (after contractual waivers/
reimbursements*).................................................... 0.28% 1.67%
* Some of the funds have entered into contractual waiver or reimbursement
arrangements that may reduce fund management and other fees and/or expenses
during the period of the arrangement. These arrangements vary in length, but
no arrangement will terminate before April 20, 2013.
The following table shows the expenses charged by each fund for the year ended
December 31, 2012:
(as a percentage of each fund's average net assets):
Other
Management 12b-1 Fees Expenses
Fees (before (before any (before any
any waivers/ waivers/ waivers/
reimburse- reimburse- reimburse-
ments) + ments) + ments) +
American Funds American Protected Asset Allocation Fund(19) 0.25% 0.00% 0.33%
American Funds Asset Allocation Fund 0.30% 0.00% 0.01%
American Funds Blue Chip Income and Growth Fund 0.41% 0.00% 0.01%
American Funds Bond Fund 0.36% 0.00% 0.02%
American Funds Global Balanced Fund(SM)(1) 0.66% 0.00% 0.03%
American Funds Global Bond Fund 0.53% 0.00% 0.03%
Total
Total Total Expenses
Expenses Contractual (after
Acquired (before any waivers/ Contractual
Fund waivers/ reimburse- waivers/
Fees and reimburse- ments reimburse-
Expenses = ments) (if any) ments)
American Funds American Protected Asset Allocation Fund(19) 0.30% 0.88% 0.10% 0.75%
American Funds Asset Allocation Fund 0.00% 0.31% 0.00% 0.31%
American Funds Blue Chip Income and Growth Fund 0.00% 0.42% 0.00% 0.42%
American Funds Bond Fund 0.00% 0.38% 0.00% 0.38%
American Funds Global Balanced Fund(SM)(1) 0.00% 0.69% 0.00% 0.69%
American Funds Global Bond Fund 0.00% 0.56% 0.00% 0.56%
9
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Other
Management 12b-1 Fees Expenses
Fees (before (before any (before any
any waivers/ waivers/ waivers/
reimburse- reimburse- reimburse-
ments) + ments) + ments) +
American Funds Global Discovery Fund 0.58% 0.00% 0.02%
American Funds Global Growth and Income Fund 0.59% 0.00% 0.02%
American Funds Global Growth Fund 0.53% 0.00% 0.02%
American Funds Global Small Capitalization Fund 0.70% 0.00% 0.04%
American Funds Growth Fund 0.32% 0.00% 0.02%
American Funds Growth-Income Fund 0.27% 0.00% 0.01%
American Funds High-Income Bond Fund 0.46% 0.00% 0.01%
American Funds International Fund 0.49% 0.00% 0.04%
American Funds International Growth and Income Fund 0.69% 0.00% 0.04%
American Funds Mortgage Fund(1) 0.42% 0.00% 0.00%
American Funds New World Fund 0.73% 0.00% 0.05%
American Funds U.S. Government/AAA-Rated Securities Fund 0.33% 0.00% 0.01%
BlackRock Global Allocation V.I. Fund(2) 0.64% 0.00% 0.14%
Delaware VIP (Reg. TM) Diversified Income Series 0.59% 0.00% 0.09%
Delaware VIP (Reg. TM) Limited-Term Diversified Income Series 0.49% 0.00% 0.09%
DWS Alternative Asset Allocation Plus VIP Portfolio(3) 0.27% 0.00% 0.34%
LVIP American Balanced Allocation Fund(4) 0.25% 0.00% 0.05%
LVIP American Growth Allocation Fund(4) 0.25% 0.00% 0.05%
LVIP American Income Allocation Fund(4) 0.25% 0.00% 0.13%
LVIP American Preservation Fund(17) 0.25% 0.00% 0.30%
LVIP BlackRock Emerging Markets RPM Fund(18) 0.55% 0.00% 0.68%
LVIP BlackRock Inflation Protected Bond Fund(5) 0.45% 0.00% 0.07%
LVIP Delaware Diversified Floating Rate Fund 0.60% 0.00% 0.11%
LVIP Dimensional Non-U.S. Equity Fund Standard Class(6) 0.25% 0.00% 1.27%
LVIP Dimensional U.S. Equity Fund Standard Class(6) 0.25% 0.00% 0.83%
LVIP Dimensional/Vanguard Total Bond Fund Standard Class(7) 0.25% 0.00% 0.43%
LVIP Money Market Fund 0.36% 0.00% 0.07%
LVIP Protected American Balanced Allocation Fund 0.25% 0.00% 0.05%
LVIP Protected American Growth Allocation Fund 0.25% 0.00% 0.05%
LVIP Protected Profile Conservative Fund(8) 0.25% 0.00% 0.05%
LVIP Protected Profile Growth Fund(8) 0.25% 0.00% 0.03%
LVIP Protected Profile Moderate Fund(8) 0.25% 0.00% 0.03%
LVIP SSgA Bond Index Fund(9) 0.40% 0.00% 0.09%
LVIP SSgA Developed International 150 Fund(10) 0.75% 0.00% 0.12%
LVIP SSgA Emerging Markets 100 Fund(11) 1.09% 0.00% 0.17%
LVIP SSgA Global Tactical Allocation RPM Fund 0.25% 0.00% 0.08%
LVIP SSgA International Index Fund(12) 0.40% 0.00% 0.18%
LVIP SSgA Large-Cap 100 Fund(13) 0.52% 0.00% 0.07%
LVIP SSgA S&P 500 Index Fund 0.20% 0.00% 0.08%
LVIP SSgA Small/Mid-Cap 200 Fund(14) 0.69% 0.00% 0.10%
LVIP SSgA Small-Cap Index Fund 0.32% 0.00% 0.10%
LVIP Vanguard Domestic Equity ETF Fund Standard Class(15) 0.25% 0.00% 0.32%
LVIP Vanguard International Equity ETF Fund(16) 0.25% 0.00% 0.21%
Total
Total Total Expenses
Expenses Contractual (after
Acquired (before any waivers/ Contractual
Fund waivers/ reimburse- waivers/
Fees and reimburse- ments reimburse-
Expenses = ments) (if any) ments)
American Funds Global Discovery Fund 0.00% 0.60% 0.00% 0.60%
American Funds Global Growth and Income Fund 0.00% 0.61% 0.00% 0.61%
American Funds Global Growth Fund 0.00% 0.55% 0.00% 0.55%
American Funds Global Small Capitalization Fund 0.00% 0.74% 0.00% 0.74%
American Funds Growth Fund 0.00% 0.34% 0.00% 0.34%
American Funds Growth-Income Fund 0.00% 0.28% 0.00% 0.28%
American Funds High-Income Bond Fund 0.00% 0.47% 0.00% 0.47%
American Funds International Fund 0.00% 0.53% 0.00% 0.53%
American Funds International Growth and Income Fund 0.00% 0.73% 0.00% 0.73%
American Funds Mortgage Fund(1) 0.00% 0.42% 0.00% 0.42%
American Funds New World Fund 0.00% 0.78% 0.00% 0.78%
American Funds U.S. Government/AAA-Rated Securities Fund 0.00% 0.34% 0.00% 0.34%
BlackRock Global Allocation V.I. Fund(2) 0.02% 0.80% 0.00% 0.80%
Delaware VIP (Reg. TM) Diversified Income Series 0.00% 0.68% 0.00% 0.68%
Delaware VIP (Reg. TM) Limited-Term Diversified Income Series 0.00% 0.58% 0.00% 0.58%
DWS Alternative Asset Allocation Plus VIP Portfolio(3) 1.30% 1.91% -0.24% 1.67%
LVIP American Balanced Allocation Fund(4) 0.41% 0.71% -0.05% 0.66%
LVIP American Growth Allocation Fund(4) 0.43% 0.73% -0.05% 0.68%
LVIP American Income Allocation Fund(4) 0.39% 0.77% -0.05% 0.72%
LVIP American Preservation Fund(17) 0.39% 0.94% -0.30% 0.64%
LVIP BlackRock Emerging Markets RPM Fund(18) 0.00% 1.23% -0.43% 0.80%
LVIP BlackRock Inflation Protected Bond Fund(5) 0.03% 0.55% 0.00% 0.55%
LVIP Delaware Diversified Floating Rate Fund 0.00% 0.71% 0.00% 0.71%
LVIP Dimensional Non-U.S. Equity Fund Standard Class(6) 0.45% 1.97% -1.22% 0.75%
LVIP Dimensional U.S. Equity Fund Standard Class(6) 0.26% 1.34% -0.78% 0.56%
LVIP Dimensional/Vanguard Total Bond Fund Standard Class(7) 0.17% 0.85% -0.38% 0.47%
LVIP Money Market Fund 0.00% 0.43% 0.00% 0.43%
LVIP Protected American Balanced Allocation Fund 0.41% 0.71% 0.00% 0.71%
LVIP Protected American Growth Allocation Fund 0.44% 0.74% 0.00% 0.74%
LVIP Protected Profile Conservative Fund(8) 0.50% 0.80% 0.00% 0.80%
LVIP Protected Profile Growth Fund(8) 0.52% 0.80% 0.00% 0.80%
LVIP Protected Profile Moderate Fund(8) 0.52% 0.80% 0.00% 0.80%
LVIP SSgA Bond Index Fund(9) 0.00% 0.49% -0.10% 0.39%
LVIP SSgA Developed International 150 Fund(10) 0.00% 0.87% -0.40% 0.47%
LVIP SSgA Emerging Markets 100 Fund(11) 0.00% 1.26% -0.74% 0.52%
LVIP SSgA Global Tactical Allocation RPM Fund 0.33% 0.66% 0.00% 0.66%
LVIP SSgA International Index Fund(12) 0.00% 0.58% -0.04% 0.54%
LVIP SSgA Large-Cap 100 Fund(13) 0.00% 0.59% -0.20% 0.39%
LVIP SSgA S&P 500 Index Fund 0.00% 0.28% 0.00% 0.28%
LVIP SSgA Small/Mid-Cap 200 Fund(14) 0.00% 0.79% -0.31% 0.48%
LVIP SSgA Small-Cap Index Fund 0.00% 0.42% 0.00% 0.42%
LVIP Vanguard Domestic Equity ETF Fund Standard Class(15) 0.13% 0.70% -0.27% 0.43%
LVIP Vanguard International Equity ETF Fund(16) 0.21% 0.67% -0.16% 0.51%
10
<PAGE>
(1) Total Expenses are estimated by annualizing actual expenses for a partial
year.
(2) Other Expenses have been restated to reflect current fees.
(3) Effective October 1, 2012 through April 30, 2013, the Advisor has
contractually agreed to waive all or a portion of its management fee and
reimburse or pay operating expenses of the portfolio to the extent
necessary to maintain the portfolio's operating expenses at 0.37% for
Class A shares, excluding certain expenses such as extraordinary expenses,
taxes, brokerage, interest expense and acquired funds (underlying funds)
fees and expenses (estimated at 1.30%). The agreement may be terminated
with the consent of the fund's Board.
(4) The Total Annual Operating Expenses do not correlate to the ratio of
expenses to the average net assets appearing in the Financial Highlights
table which reflects only the operating expenses of the fund and does not
include AFFE. Lincoln Investment Advisors Corporation (LIA) has
contractually agreed to waive the following portion of its advisory fee
for the fund: 0.05% of average daily net assets of the fund. The agreement
will continue at least through April 30, 2013.
(5) The Total Annual Fund Operating Expenses do not correlate to the ratio of
expenses to the average net assets appearing in the Financial Highlights
table which reflects only the operating expenses of the Fund and does not
include AFFE.
(6) The Total Annual Fund Operating Expenses do not correlate to the ratio of
expenses to the average net assets appearing in the Financial Highlights
table which reflects only the operating expenses of the fund and does not
include AFFE. Lincoln Investment Advisors Corporation (LIA) has
contractually agreed waive the following portion of its advisory fee for
the fund: 0.05% of average daily net assets of the fund. LIA has also
contractually agreed to reimburse the fund's Standard Class to the extent
that the Total Annual Fund Operating Expenses (excluding acquired fund
fees and expenses) exceed 0.30% of average daily net assets of the fund.
Both agreements will continue at least through April 30, 2013.
(7) The AFFE has been restated to reflect the current expenses of the Fund. The
Total Annual Fund Operating Expenses do not correlate to the ratio of
expenses to the average net assets appearing in the Financial Highlights
table which reflects only the operating expenses of the fund and does not
include AFFE. Lincoln Investment Advisors Corporation (LIA) has
contractually agreed waive the following portion of its advisory fee for
the fund: 0.05% of average daily net assets of the fund. LIA has also
contractually agreed to reimburse the fund's Standard Class to the extent
that the Total Annual Fund Operating Expenses (excluding acquired fund
fees and expenses) exceed 0.30% of average daily net assets of the fund.
Both agreements will continue at least through April 30, 2013.
(8) The AFFE has been restated to reflect the current expenses of the Fund. The
Total Annual Fund Operating Expenses do not correlate to the ratio of
expenses to the average net assets appearing in the Financial Highlights
table which reflects only the operating expenses of the Fund and does not
include AFFE.
(9) Lincoln Investment Advisors Corporation (LIA) has contractually agreed to
waive the following portion of its advisory fee for the fund: 0.07% on the
first $500 million of average daily net assets of the fund and 0.12% of
average daily net assets of the fund in excess of $500 million. This
waiver will continue at least through April 30, 2013.
(10) Lincoln Investment Advisors Corporation (LIA) has contractually agreed to
waive the following portion of its advisory fee for the fund: 0.35% on the
first $100 million of average daily net assets of the fund and 0.43% of
average daily net assets of the fund in excess of $100 million. The
agreement will continue at least through April 30, 2013.
(11) Lincoln Investment Advisors Corporation (LIA) has contractually agreed to
waive the following portion of its advisory fee for the fund: 0.69% on the
first $100 million of average daily net assets of the Fund and 0.76% of
average daily net assets of the fund in excess of $100 million. The
agreement will continue at least through April 30, 2013.
(12) Lincoln Investment Advisors Corporation (LIA) has contractually agreed to
waive the following portion of its advisory fee for the fund: 0.03% on the
first $500 million of average daily net assets of the fund and 0.05% of
average daily net assets of the fund in excess of $500 million. The
agreement will continue at least through April 30, 2013.
(13) Lincoln Investment Advisors Corporation (LIA) has contractually agreed to
waive the following portion of its advisory fee for the fund: 0.12% on the
first $100 million of average daily net assets of the fund and 0.22% of
average daily net assets of the fund in excess of $100 million. The
agreement will continue at least through April 30, 2013.
(14) Lincoln Investment Advisors Corporation (LIA) has contractually agreed to
waive the following portion of its advisory fee for the fund: 0.29% on the
first $100 million of average daily net assets of the fund and 0.39% of
average daily net assets of the fund in excess of $100 million. The
agreement will continue at least through April 30, 2013.
(15) The Total Annual Fund Operating Expenses do not correlate to the ratio of
expenses to the average net assets appearing in the Financial Highlights
table which reflects only the operating expenses of the fund and does not
include AFFE. Lincoln Investment Advisors Corporation (LIA) has
contractually agreed waive the following portion of its advisory fee for
the fund: 0.05% of average daily net assets of the fund. LIA has also
contractually agreed to reimburse the fund's Standard Class to the extent
that the Total Annual Fund Operating Expenses (excluding acquired fund
fees and expenses) exceed 0.30% of average daily net assets of the fund.
Both agreements will continue at least through April 30, 2013.
(16) The AFFE has been restated to reflect the current expenses of the fund.
The Total Annual Fund Operating Expenses do not correlate to the ratio of
expenses to the average net assets appearing in the Financial Highlights
table which reflects only the operating expenses of the fund and does not
include AFFE. Lincoln Investment Advisors Corporation (LIA) has
contractually agreed waive the following portion of its advisory fee for
the fund: 0.05% of average daily net assets of the fund. LIA has also
contractually agreed to reimburse the fund's Standard Class to the extent
that the Total Annual Fund Operating Expenses (excluding acquired fund
fees and expenses) exceed 0.30% of average daily net assets of the fund.
Both agreements will continue at least through April 30, 2013.
(17) Other Expenses and AFFE are based on estimated amounts for the current
fiscal year. Lincoln Investment Advisors Corporation (the "adviser") has
contractually agreed to waive the following portion of its advisory fee
for the Fund: 0.10% of average daily net assets of the Fund. The adviser
has also contractually agreed to reimburse the Fund to the extent that the
Total Annual Fund Operating Expenses (excluding acquired fund fees and
expenses) exceed 0.25% of average daily net assets of the Fund. Both
agreements will continue at least through April 30, 2014 and cannot be
terminated before that date without the mutual agreement of the Trust's
board of trustees and the adviser.
(18) Other Expenses are based on estimated amounts for the current fiscal year.
Lincoln Investment Advisors Corporation (the "adviser") has contractually
agreed to waive the following portion of its advisory fee for the Fund:
0.05% of average daily net assets of the Fund. The adviser has also
contractually agreed to reimburse the Fund to the extent that the Total
Annual Fund Operating Expenses exceed 0.80% of average daily net assets of
the Fund. Both agreements will continue at least through April 30, 2014
and cannot be terminated before that date without the mutual agreement of
the Trust's board of trustees and the adviser.
(19) Other Expenses and AFFE are based on estimated amounts for the current
fiscal year. Capital Research and Management Company (the "adviser") is
currently waiving a portion of its management fee equal to 0.05% of the
fund's net assets. In addition, the investment adviser is currently
reimbursing a portion of the other expenses so that they will not exceed
.28%. This waiver and reimbursement will be in effect through at lease
December 31, 2013, unless modified or terminated by the fund's board.
Certain underlying funds have reserved the right to impose fees when fund
shares are redeemed within a specified period of time of purchase ("redemption
fees") which are not reflected in the table above. As of the date of this
prospectus, none have done so. See The Contracts - Market Timing for a
discussion of redemption fees.
For information concerning compensation paid for the sale of the contracts, see
Distribution of the Contracts.
11
<PAGE>
EXAMPLES
The following Examples are intended to help you compare the cost of investing
in the contract with the cost of investing in other variable annuity contracts.
These costs include Contractowner transaction expenses, separate account annual
expenses, and fund fees and expenses. The Examples have been calculated using
the fees and expenses of the funds prior to the application of any contractual
waivers and/or reimbursements.
The first Example assumes that you invest $10,000 in the contract for the time
periods indicated. The Example also assumes that your investment has a 5%
return each year, the maximum fees and expenses of any of the funds and that
the i4LIFE (Reg. TM) Advantage with the EGMDB Death Benefit and Guaranteed
Income Benefit (version 4) at guaranteed maximum charge are in effect. Although
your actual costs may be higher or lower, based on these assumptions, your
costs would be:
1) If you surrender your contract at the end of the applicable time period:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
$526 $1,575 $2,617 $5,199
2) If you annuitize or do not surrender your contract at the end of the
applicable time period:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
$526 $1,575 $2,617 $5,199
The next Example assumes that you invest $10,000 in the contract for the time
periods indicated. The Example also assumes that your investment has a 5%
return each year, the maximum fees and expenses of any of the funds and that
the EEB Death Benefit and Lincoln Lifetime IncomeSM Advantage 2.0 at the
guaranteed maximum charge are in effect. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
1) If you surrender your contract at the end of the applicable time period:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
$508 $1,552 $2,636 $5,531
2) If you annuitize or do not surrender your contract at the end of the
applicable time period:
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
$508 $1,552 $2,636 $5,531
For more information, see Charges and Other Deductions in this prospectus, and
the prospectuses for the funds. Premium taxes may also apply, although they do
not appear in the examples. Different fees and expenses not reflected in the
examples may be imposed during a period in which Annuity Payouts are made. See
The Contracts - Annuity Payouts, including Lincoln SmartIncomeSM Inflation.
These examples should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
Summary of Common Questions
What kind of contract am I buying? This contract is an individual deferred
flexible premium variable annuity contract between you and Lincoln Life. You
may allocate your Purchase Payments to the VAA or to the fixed account. This
prospectus primarily describes the variable side of the contract. See The
Contracts. This contract and certain riders, benefits, service features and
enhancements may not be available in all states, and the charges may vary in
certain states. You should refer to your contract for any state specific
provisions as not all state variations are discussed in this prospectus. Please
check with your registered representative regarding their availability.
Who can purchase this contract? This contract may be issued as part of a
Fee-Based Financial Plan. A Fee-Based Financial Plan generally refers to a wrap
account, managed account or other investment program whereby an investment
firm/professional offers asset allocation and/or investment advice for a fee.
Such programs can be offered by broker-dealers, banks and registered investment
advisors, trust companies and other firms. Under this arrangement, the
Contractowner pays the investment firm/professional directly for services.
What is the Variable Annuity Account (VAA)? It is a separate account we
established under Indiana insurance law, and registered with the SEC as a unit
investment trust. VAA assets are allocated to one or more Subaccounts,
according to your investment choices. VAA assets are not chargeable with
liabilities arising out of any other business which we may conduct. See
Variable Annuity Account.
What are Investment Requirements? If you elect a Living Benefit rider (except
i4LIFE (Reg. TM) Advantage without Guaranteed Income Benefit), you will be
subject to certain requirements for your Subaccount investments, which means
you may be limited in how much you
12
<PAGE>
can invest in certain Subaccounts. 4LATER (Reg. TM) Advantage Protected Funds
and i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected Funds will
have more restrictive Investment Requirements. See The Contracts - Investment
Requirements.
What are my investment choices? You may allocate your Purchase Payments to the
VAA or to the fixed account, if available. Based upon your instruction for
Purchase Payments, the VAA applies your purchase payments to buy shares in one
or more of the investment options. In turn, each fund holds a portfolio of
securities consistent with its investment policy. See Investments of the
Variable Annuity Account - Description of the Funds.
Who invests my money? Several different investment advisers manage the
investment options. See Investments of the Variable Annuity Account -
Description of the Funds.
How does the contract work? If we approve your application, we will send you a
contract. When you make Purchase Payments during the accumulation phase, you
buy Accumulation Units. If you decide to receive an Annuity Payout, your
Accumulation Units are converted to Annuity Units. Your Annuity Payouts will be
based on the number of Annuity Units you receive and the value of each Annuity
Unit on payout days. See The Contracts.
What charges do I pay under the contract? We apply a charge to the daily net
asset value of the VAA that consists of a mortality and expense risk charge
according to the Death Benefit you select. There is an administrative charge in
addition to the mortality and expense risk charge. The charges for any riders
applicable to your contract will also be deducted from your Contract Value, or
Account Value if i4LIFE (Reg. TM) Advantage is elected. See Charges and Other
Deductions.
We will deduct any applicable premium tax from Purchase Payments or Contract
Value, unless the governmental entity dictates otherwise, at the time the tax
is incurred or at another time we choose.
See Expense Tables and Charges and Other Deductions for additional fees and
expenses in these contracts.
The funds' investment management fees, expenses and expense limitations, if
applicable, are more fully described in the prospectuses for the funds.
The surrender, withdrawal or transfer of value from a Guaranteed Period may be
subject to the Interest Adjustment, if applicable. See Fixed Side of the
Contract.
Charges may also be imposed during the regular income or annuity payout period,
including i4LIFE (Reg. TM) Advantage, if elected. See The Contracts and Annuity
Payouts.
For information about the compensation we pay for sales of contracts, see The
Contracts - Distribution of the Contracts.
What Purchase Payments do I make, and how often? Subject to the minimum and
maximum payment amounts, your payments are completely flexible. See The
Contracts - Purchase Payments.
Am I limited in the amount of Purchase Payments I can make into the contract?
Yes, Purchase Payments totaling $1 million or more are subject to Home Office
approval. This amount takes into consideration the total Purchase Payments for
all contracts issued by the Company (or its affiliates) in which you are the
Contractowner and/or Annuitant. In addition, if you elect a Living Benefit
rider, you may be subject to additional restrictions in terms of your ability
to make Purchase Payments. For more information about these restrictions and
limitations, please see The Contracts - Purchase Payments section in this
prospectus.
How will my Annuity Payouts be calculated? If you decide to annuitize, you may
select an annuity option and start receiving Annuity Payouts from your contract
as a fixed option or variable option or a combination of both. See Annuity
Payouts - Annuity Options. Remember that participants in the VAA benefit from
any gain, and take a risk of any loss, in the value of the securities in the
funds' portfolios.
What happens if I die before I annuitize? Your Beneficiary will receive Death
Benefit proceeds based upon the Death Benefit you select. Your Beneficiary has
options as to how the Death Benefit is paid. In the alternative, you may choose
to receive a Death Benefit on the death of the Annuitant. See The Contracts -
Death Benefit.
May I transfer Contract Value between variable options and between the variable
and fixed sides of the contract? Yes, subject to certain restrictions.
Generally, transfers made before the Annuity Commencement Date are restricted
to no more than twelve (12) per Contract Year. The minimum amount that can be
transferred to the fixed account is $2,000 (unless the total amount in the
Subaccounts is less than $2,000). If transferring funds from the fixed account
to the Subaccount, you may only transfer 25% of the total value invested in the
fixed account in any 12-month period. The minimum amount that may be
transferred is $300. Transfers from the fixed account may be subject to an
Interest Adjustment. If permitted by your contract, we may discontinue
accepting transfers into the fixed side of the contract at any time. See The
Contracts - Transfers On or Before the Annuity Commencement Date and Transfers
After the Annuity Commencement Date. For further information, see also the
Fixed Side of the Contract and Guaranteed Periods.
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<PAGE>
What are Living Benefit riders? Living Benefit riders are optional riders
available to purchase for an additional fee. These riders offer either a
minimum withdrawal benefit (Lincoln SmartSecurity (Reg. TM) Advantage and
Lincoln Lifetime IncomeSM Advantage 2.0) or a minimum Annuity Payout (4LATER
(Reg. TM) Advantage Protected Funds and i4LIFE (Reg. TM) Advantage). If you
select a Living Benefit rider, Excess Withdrawals may have adverse effects on
the benefit (especially during times of poor investment performance), and you
will be subject to Investment Requirements (unless you elect i4LIFE (Reg. TM)
Advantage without the Guaranteed Income Benefit). Excess Withdrawals under
certain Living Benefit riders may result in a reduction or premature
termination of those benefits or of those riders. If you are not certain how an
Excess Withdrawal will reduce your future guaranteed amounts, you should
contact either your registered representative or us prior to requesting a
withdrawal to find out what, if any, impact the Excess Withdrawal will have on
any guarantees under the Living Benefit rider. These riders are discussed in
detail in this prospectus. In addition, an overview of these riders is provided
as an appendix to this prospectus. Any guarantees under the contract that
exceed your Contract Value are subject to our financial strength and
claims-paying ability.
What is Lincoln Lifetime IncomeSM Advantage 2.0? Lincoln Lifetime IncomeSM
Advantage 2.0 is a rider that you may purchase for an additional charge and
which provides on an annual basis guaranteed lifetime periodic withdrawals up
to a guaranteed amount based on an Income Base, a 5% Enhancement to the Income
Base (less Purchase Payments received in that year) or Automatic Annual
Step-ups to the Income Base, and age-based increases to the guaranteed periodic
withdrawal amount. Withdrawals may be made up to the Guaranteed Annual Income
amount as long as that amount is greater than zero. The Income Base is not
available as a separate benefit upon death or surrender and is increased by
subsequent Purchase Payments, 5% Enhancements to the Income Base (less Purchase
Payments received in that year), Automatic Annual Step-ups to the Income Base
and is decreased by certain withdrawals in accordance with provisions described
in this prospectus. See The Contracts - Lincoln Lifetime IncomeSM Advantage
2.0. You may not simultaneously elect Lincoln Lifetime IncomeSM Advantage 2.0
and another one of the Living Benefit riders. By electing this rider you will
be subject to Investment Requirements. See The Contracts - Investment
Requirements.
What is Lincoln SmartSecurity (Reg. TM) Advantage? This benefit, which may be
available for purchase at an additional charge, provides a Guaranteed Amount
equal to the initial Purchase Payment (or Contract Value at the time of
election) as adjusted. You may access this benefit through periodic
withdrawals. Excess Withdrawals will adversely affect the Guaranteed Amount.
See The Contracts - Lincoln SmartSecurity (Reg. TM) Advantage. You cannot
simultaneously elect Lincoln SmartSecurity (Reg. TM) Advantage with any other
Living Benefit rider. As of May 20, 2013, this rider will no longer be
available for purchase. By electing this benefit, you will be subject to
Investment Requirements. See The Contracts - Investment Requirements.
What is i4LIFE (Reg. TM) Advantage? i4LIFE (Reg. TM) Advantage is an Annuity
Payout option, available for purchase at an additional charge, that provides
periodic variable lifetime income payments, a Death Benefit, and the ability to
make withdrawals during a defined period of time (Access Period). For an
additional charge, you may purchase a minimum payout floor, the Guaranteed
Income Benefit. We assess a charge, imposed only during the i4LIFE (Reg. TM)
Advantage payout phase, based on the i4LIFE (Reg. TM) Advantage Death Benefit
you choose and whether or not the Guaranteed Income Benefit is in effect.
What is i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected Funds?
i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected Funds is an
optional feature under i4LIFE (Reg. TM) Advantage with Guaranteed Income
Benefit if you adhere to more restrictive Investment Requirements. See The
Contracts - Investment Requirements. i4LIFE (Reg. TM) Advantage Guaranteed
Income Benefit Protected Funds is only available to purchasers of 4LATER (Reg.
TM) Advantage Protected Funds. All other terms and conditions of i4LIFE (Reg.
TM) Advantage continue to apply to i4LIFE (Reg. TM) Advantage Guaranteed Income
Benefit Protected Funds.
What is the Guaranteed Income Benefit? The Guaranteed Income Benefit provides a
minimum payout floor for your i4LIFE (Reg. TM) Advantage Regular Income
Payments. By electing this benefit, you will be subject to Investment
Requirements. See The Contracts - Investment Requirements. The Guaranteed
Income Benefit is purchased when you elect i4LIFE (Reg. TM) Advantage or any
time during the Access Period subject to terms and conditions at that time. The
minimum floor is based on the Account Value at the time you elect i4LIFE (Reg.
TM) Advantage with the Guaranteed Income Benefit. Certain Living Benefit riders
have features that may be used to establish the amount of the Guaranteed Income
Benefit. You may use your Guaranteed Amount from Lincoln SmartSecurity (Reg.
TM) Advantage or your Income Base from Lincoln Lifetime IncomeSM Advantage 2.0
or 4LATER (Reg. TM) Advantage Protected Funds to establish the Guaranteed
Income Benefit at the time you terminate that rider to purchase i4LIFE (Reg.
TM) Advantage. See The Contracts - Living Benefit Riders - i4LIFE (Reg. TM)
Advantage Guaranteed Income Benefit, 4LATER (Reg. TM) Advantage Protected
Funds, and Lincoln Lifetime IncomeSM Advantage 2.0 - i4LIFE (Reg. TM) Advantage
option.
What is 4LATER (Reg. TM) Advantage Protected Funds? 4LATER (Reg. TM) Advantage
Protected Funds is a rider that provides an Income Base which will be used to
establish the amount of the Guaranteed Income Benefit payment upon the election
of the i4LIFE (Reg. TM) Advantage rider. If you elect 4LATER (Reg. TM)
Advantage Protected Funds, you must later elect the i4LIFE (Reg. TM) Advantage
Guaranteed Income Benefit Protected Funds feature under i4LIFE (Reg. TM)
Advantage Guaranteed Income Benefit (version 4) to receive a benefit from
4LATER (Reg. TM) Advantage Protected Funds. There is an additional charge for
this rider, and you will be subject to more restrictive. See The Contracts -
Investment Requirements.
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What is Lincoln SmartIncomeSM Inflation? Lincoln SmartIncomeSM Inflation is a
fixed Annuity Payout option that provides periodic Annuity Payouts that may
increase or decrease each year based on changes in a consumer price index that
measures inflation. Lincoln SmartIncomeSM Inflation also provides a guaranteed
minimum payout, a Death Benefit and access to a Reserve Value from which
Unscheduled Payments may be taken. See The Contracts - Annuity Payouts -
Lincoln SmartIncomeSM Inflation.
May I surrender the contract or make a withdrawal? Yes, subject to contract
requirements and to the restrictions of any qualified retirement plan for which
the contract was purchased. See The Contracts - Surrenders and Withdrawals. A
portion of surrender or withdrawal proceeds may be taxable. In addition, if you
decide to take a distribution before age 591/2, a 10% Internal Revenue Service
(IRS) tax penalty may apply. A surrender or a withdrawal also may be subject to
20% withholding. See Federal Tax Matters.
Do I get a free look at this contract? Yes. You can cancel the contract within
ten days (in some states longer) of the date you first receive the contract.
You need to return the contract, postage prepaid, to our Home Office. In most
states you assume the risk of any market drop on Purchase Payments you allocate
to the variable side of the contract. See Return Privilege.
Where may I find more information about Accumulation Unit values? (To be Filed
by Amendment).
Investment Results
At times, the VAA may compare its investment results to various unmanaged
indices or other variable annuities in reports to shareholders, sales
literature and advertisements. The results will be calculated on a total return
basis for various periods, with or without surrender charges. Results
calculated without surrender charges will be higher. Total returns include the
reinvestment of all distributions, which are reflected in changes in unit
value. The money market Subaccount's yield is based upon investment performance
over a 7-day period, which is then annualized.
Note that there can be no assurance that any money market fund will be able to
maintain a stable net asset value per share. During extended periods of low
interest rates, and due in part to the contract fees and expenses, the yields
of any Subaccount investing in a money market fund may also become extremely
low and possibly negative.
The money market yield figure and annual performance of the Subaccounts are
based on past performance and do not indicate or represent future performance.
The Lincoln National Life Insurance Company
The Lincoln National Life Insurance Company (Lincoln Life or Company),
organized in 1905, is an Indiana-domiciled insurance company, engaged primarily
in the direct issuance of life insurance contracts and annuities. Lincoln Life
is wholly owned by Lincoln National Corporation (LNC), a publicly held
insurance and financial services holding company incorporated in Indiana.
Lincoln Life is obligated to pay all amounts promised to policy owners under
the policies.
Depending on when you purchased your contract, you may be permitted to make
allocations to the fixed account, which is part of our general account. See The
Fixed Side of the Contract. In addition, any guarantees under the contract that
exceed your Contract Value, such as those associated with Death Benefit options
and Living Benefit riders are paid from our general account (not the VAA).
Therefore, any amounts that we may pay under the contract in excess of Contract
Value are subject to our financial strength and claims-paying ability and our
long-term ability to make such payments. With respect to the issuance of the
contracts, Lincoln Life does not file periodic financial reports with the SEC
pursuant to the exemption for life insurance companies provided under Rule
12h-7 of the Securities Exchange Act of 1934.
We issue other types of insurance policies and financial products as well, and
we also pay our obligations under these products from our assets in the general
account. Moreover, unlike assets held in the VAA, the assets of the general
account are subject to the general liabilities of the Company and, therefore,
to the Company's general creditors. In the event of an insolvency or
receivership, payments we make from our general account to satisfy claims under
the contract would generally receive the same priority as our other
Contractowner obligations.
Our Financial Condition. Among the laws and regulations applicable to us as an
insurance company are those which regulate the investments we can make with
assets held in our general account. In general, those laws and regulations
determine the amount and type of investments which we can make with general
account assets.
In addition, state insurance regulations require that insurance companies
calculate and establish on their financial statements, a specified amount of
reserves in order to meet the contractual obligations to pay the claims of our
policyholders. In order to meet our claims-paying obligations, we regularly
monitor our reserves to ensure we hold sufficient amounts to cover actual or
expected contract and claims payments. However, it is important to note that
there is no guarantee that we will always be able to meet our claims paying
obligations, and that there are risks to purchasing any insurance product.
State insurance regulators also require insurance companies to maintain a
minimum amount of capital in excess of liabilities, which acts as a cushion in
the event that the insurer suffers a financial impairment, based on the
inherent risks in the insurer's operations.
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These risks include those associated with losses that we may incur as the
result of defaults on the payment of interest or principal on assets held in
our general account, which include bonds, mortgages, general real estate
investments, and stocks, as well as the loss in value of these investments
resulting from a loss in their market value.
How to Obtain More Information. We encourage both existing and prospective
policyholders to read and understand our financial statements. We prepare our
financial statements on both a statutory basis and according to Generally
Accepted Accounting Principles (GAAP). Our audited GAAP financial statements,
as well as the financial statements of the VAA, are located in the SAI. If you
would like a free copy of the SAI, please write to us at: PO Box 2348, Fort
Wayne, IN 46801-2348 , or call 1-877-534-8255. In addition, the Statement of
Additional Information is available on the SEC's website at http://www.sec.gov.
You may obtain our audited statutory financial statements and any unaudited
statutory financial statements that may be available by visiting our website at
www.LincolnFinancial.com.
You also will find on our website information on ratings assigned to us by one
or more independent rating organizations. These ratings are opinions of an
operating insurance company's financial capacity to meet the obligations of its
insurance and annuity contracts based on its financial strength and/or
claims-paying ability. Additional information about rating agencies is included
in the Statement of Additional Information.
Lincoln Financial Group is the marketing name for Lincoln National Corporation
(NYSE:LNC) and its affiliates. Through its affiliates, Lincoln Financial Group
offers annuities, life, group life and disability insurance, 401(k) and 403(b)
plans, and comprehensive financial planning and advisory services.
Variable Annuity Account (VAA)
On November 3, 1997, the VAA was established as an insurance company separate
account under Indiana law. It is registered with the SEC as a unit investment
trust under the provisions of the Investment Company Act of 1940 (1940 Act).
The VAA is a segregated investment account, meaning that its assets may not be
charged with liabilities resulting from any other business that we may conduct.
Income, gains and losses, whether realized or not, from assets allocated to the
VAA are, in accordance with the applicable annuity contracts, credited to or
charged against the VAA. They are credited or charged without regard to any
other income, gains or losses of Lincoln Life. We are the issuer of the
contracts and the obligations set forth in the contract, other than those of
the Contractowner, are ours. The VAA satisfies the definition of a separate
account under the federal securities laws. We do not guarantee the investment
performance of the VAA. Any investment gain or loss depends on the investment
performance of the funds. You assume the full investment risk for all amounts
placed in the VAA.
The VAA is used to support other annuity contracts offered by us in addition to
the contracts described in this prospectus. The other annuity contracts
supported by the VAA generally invest in the same funds as the contracts
described in this prospectus. These other annuity contracts may have different
charges that could affect the performance of their Subaccounts, and they offer
different benefits.
Financial Statements
The December 31, 2012 financial statements of the VAA and the December 31, 2012
consolidated financial statements of Lincoln Life are located in the SAI. If
you would like a free copy of the SAI, complete and mail the request on the
last page of this prospectus, or call 1-877-534-8255.
Investments of the Variable Annuity Account
You decide the Subaccount(s) to which you allocate Purchase Payments. There is
a separate Subaccount which corresponds to each class of each fund. You may
change your allocation without penalty or charges. Shares of the funds will be
sold at net asset value with no initial sales charge to the VAA in order to
fund the contracts. The funds are required to redeem fund shares at net asset
value upon our request.
Investment Advisers
As compensation for its services to the funds, each investment adviser for each
fund receives a fee from the funds which is accrued daily and paid monthly.
This fee is based on the net assets of each fund, as defined in the
prospectuses for the funds.
Certain Payments We Receive with Regard to the Funds
With respect to a fund, including affiliated funds, the adviser and/or
distributor, or an affiliate thereof, may make payments to us (or an
affiliate). It is anticipated that such payments will be based on a percentage
of assets of the particular fund attributable to the contracts along with
certain other variable contracts issued or administered by us (or an
affiliate). These percentages are negotiated and vary with each fund. Some
funds may pay us significantly more than other funds and the amount we receive
may be substantial.
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These percentages currently range up to 0.50%, and as of the date of this
prospectus, we were receiving payments from each fund family. We (or our
affiliates) may profit from these payments or use these payments for a variety
of purposes, including payment of expenses that we (and our affiliates) incur
in promoting, marketing, and administering the contracts and, in our role as
intermediary, the funds. These payments may be derived, in whole or in part,
from the investment advisory fee deducted from fund assets. Contractowners,
through their indirect investment in the funds, bear the costs of these
investment advisory fees (see the funds' prospectuses for more information).
Additionally, a fund's adviser and/or distributor or its affiliates may provide
us with certain services that assist us in the distribution of the contracts
and may pay us and/or certain affiliates amounts for marketing programs and
sales support, as well as amounts to participate in training and sales
meetings.
Description of the Funds
Each of the Subaccounts of the VAA is invested solely in shares of one of the
funds available under the contract. Each fund may be subject to certain
investment policies and restrictions which may not be changed without a
majority vote of shareholders of that fund.
We select the funds offered through the contract based on several factors,
including, without limitation, asset class coverage, the strength of the
manager's reputation and tenure, brand recognition, performance, and the
capability and qualification of each sponsoring investment firm. Another factor
we consider during the initial selection process is whether the fund or an
affiliate of the fund will make payments to us or our affiliates. We review
each fund periodically after it is selected. Upon review, we may remove a fund
or restrict allocation of additional Purchase Payments to a fund if we
determine the fund no longer meets one or more of the factors and/or if the
fund has not attracted significant Contractowner assets. Finally, when we
develop a variable annuity product in cooperation with a fund family or
distributor (e.g., a "private label" product), we generally will include funds
based on recommendations made by the fund family or distributor, whose
selection criteria may differ from our selection criteria.
Certain funds offered as part of this contract have similar investment
objectives and policies to other portfolios managed by the adviser. The
investment results of the funds, however, may be higher or lower than the other
portfolios that are managed by the adviser or sub-adviser. There can be no
assurance, and no representation is made, that the investment results of any of
the funds will be comparable to the investment results of any other portfolio
managed by the adviser or sub-adviser, if applicable.
Certain funds invest substantially all of their assets in other funds. As a
result, you will pay fees and expenses at both fund levels. This will reduce
your investment return. These arrangements are referred to as funds of funds or
master-feeder funds. Funds of funds or master-feeder structures may have higher
expenses than funds that invest directly in debt or equity securities.
Certain funds may employ hedging strategies to provide for downside protection
during sharp downward movements in equity markets. The cost of these hedging
strategies could limit the upside participation of the fund in rising equity
markets relative to other funds. The Death Benefits and Living Benefit riders
offered under the contract also provide protection in the event of a market
downturn. Likewise, there are additional costs associated with the Death
Benefits and Living Benefit riders, which can limit the contract's upside
participation in the markets. You should consult with your financial
representative to determine which combination of investment choices and Death
Benefit and/or rider purchases (if any) are appropriate for you.
Following are brief summaries of the fund descriptions. More detailed
information may be obtained from the current prospectus for each fund. You
should read each fund prospectus carefully before investing. Prospectuses for
each fund are available by contacting us. In addition, if you receive a summary
prospectus for a fund, you may obtain a full statutory prospectus by referring
to the contact information for the fund company on the cover page of the
summary prospectus. Please be advised that there is no assurance that any of
the funds will achieve their stated objectives.
American Funds Insurance SeriesSM, advised by Capital Research and Management
Company.
o American Protected Asset Allocation Fund: High total return consistent with
the preservation of capital over the long-term.
o Asset Allocation Fund: High total return (including income and capital
gains) consistent with preservation of capital over the long term.
o Blue Chip Income and Growth Fund: To produce income exceeding the average
yield on U.S. stocks generally and to provide an opportunity for growth of
principal consistent with sound common stock investing.
o Bond Fund: To provide as high a level of current income as is consistent
with the preservation of capital.
o Global Balanced FundSM: The balanced accomplishment of three objectives:
long-term growth of capital, conservation of principal and current income.
o Global Bond Fund: To provide, over the long term, with a high level of
total return consistent with prudent investment management.
o Global Discovery Fund: Long-term growth of capital; current income is a
secondary consideration.
o Global Growth Fund: Long-term growth of capital.
o Global Growth and Income Fund: Long-term growth of capital while providing
current income.
o Global Small Capitalization Fund: Long-term capital growth.
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o Growth Fund: Capital growth.
o Growth-Income Fund: Long-term growth of capital and income.
o High-Income Bond Fund: To provide investors with a high level of current
income; capital appreciation is the secondary consideration.
o International Fund: Long-term growth of capital.
o International Growth and Income FundSM: Long-term growth of capital while
providing current income.
o Mortgage FundSM: To provide current income and preservation of capital.
o New World Fund (Reg. TM): Long-term capital appreciation.
o U.S. Government/AAA Rated Securities Fund: To provide a high level of
current income consistent with preservation of capital.
BlackRock Variable Series Funds, Inc., advised by BlackRock Advisors, LLC and
sub advised by BlackRock Investment Management, LLC.
o BlackRock Global Allocation V.I. Fund: High total investment return.
Delaware VIP (Reg. TM) Trust, advised by Delaware Management Company.*
o Delaware VIP (Reg. TM) Diversified Income Series: Maximum long-term total
return consistent with reasonable risk.
o Delaware VIP (Reg. TM) Limited-Term Diversified Income Series: Maximum
total return, consistent with reasonable risk.
DWS Variable Series II, advised by Deutsche Investment Management Americas,
Inc. and sub-advised by RREEF America L.L.C.
o DWS Alternative Asset Allocation VIP Portfolio: Capital appreciation; a
fund of funds.
Lincoln Variable Insurance Products Trust, advised by Lincoln Investment
Advisors Corporation.
o LVIP American Balanced Allocation Fund: A balance between a high level of
current income and growth of capital, with an emphasis on growth of
capital; a fund of funds.
o LVIP American Growth Allocation Fund: A balance between a high level of
current income and growth of capital, with a greater emphasis on growth of
capital; a fund of funds.
o LVIP American Income Allocation Fund: A high level of current income with
some consideration given to growth of capital; a fund of funds.
o LVIP American Preservation Fund: Current income, consistent with the
preservation of capital; a fund of funds.
o LVIP BlackRock Emerging Markets RPM Fund: To approximate as closely as
possible, before fees and expenses, the performance of a broad-based
emerging markets index while seeking to control the level of portfolio
volatility.
(Sub-advised by BlackRock Investment Management, LLC)
(formerly LVIP BlackRock Emerging Markets Index RPM Fund)
o LVIP BlackRock Inflation Protected Bond Fund: To maximize real return,
consistent with preservation of real capital and prudent investment
management.
(Sub-advised by BlackRock Financial Management, Inc.)
o LVIP Delaware Diversified Floating Rate Fund: Total return.
(Sub-advised by Delaware Management Company)*
o LVIP Dimensional Non-US Equity Fund: Long-term capital appreciation; a fund
of funds.
o LVIP Dimensional U.S. Equity Fund: Long-term capital appreciation; a fund
of funds.
o LVIP Dimensional/Vanguard Total Bond Fund: Total return consistent with
capital appreciation.
o LVIP Money Market Fund: To maximize current income while maintaining a
stable value of your shares (providing stability of net asset value) and
preserving the value of your initial investment (preservation of capital).
(Sub-advised by Delaware Management Company)*
o LVIP Protected American Balanced Allocation Fund: A balance between a high
level of current income and growth of capital; a fund of funds.
o LVIP Protected American Growth Allocation Fund: A balance between a high
level of current income and growth of capital, with a greater emphasis on
growth of capital; a fund of funds.
o LVIP Protected Profile Conservative Fund: A high level of current income
with some consideration given to growth of capital; a fund of funds.
o LVIP Protected Profile Growth Fund: A balance between a high level of
current income and growth of capital, with a greater emphasis on growth of
capital; a fund of funds.
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o LVIP Protected Profile Moderate Fund: A balance between a high level of
current income and growth of capital, with an emphasis on growth of
capital; a fund of funds.
o LVIP SSgA Bond Index Fund: To match as closely as practicable, before fees
and expenses, the performance of the Barclays Capital U.S. Aggregate
Index.
(Sub-advised by SSgA Funds Management, Inc.)
o LVIP SSgA Developed International 150 Fund: To maximize long-term capital
appreciation.
(Sub-advised by SSgA Funds Management, Inc.)
o LVIP SSgA Emerging Markets 100 Fund: To maximize long-term capital
appreciation.
(Sub-advised by SSgA Funds Management, Inc.)
o LVIP SSgA Global Tactical Allocation RPM Fund: Long-term growth of capital;
a fund of funds.
(Sub-advised by SSgA Funds Management, Inc.)
(formerly LVIP SSgA Global Tactical Allocation Fund)
o LVIP SSgA International Index Fund: To approximate as closely as
practicable, before fees and expenses, the performance of a broad market
index of non-U.S. foreign securities.
(Sub-advised by SSgA Funds Management, Inc.)
o LVIP SSgA Large Cap 100 Fund: To maximize long-term capital appreciation.
(Sub-advised by SSgA Funds Management, Inc.)
o LVIP SSgA S&P 500 Index Fund: To approximate as closely as practicable,
before fees and expenses, the total rate of return of common stocks
publicly traded in the United States, as represented by the S&P 500 Index.
(Sub-advised by SSgA Funds Management, Inc.)
o LVIP SSgA Small-Cap Index Fund: To approximate as closely as practicable,
before fees and expenses, the performance of the Russell 2000 (Reg. TM)
Index*, which emphasizes stocks of small U.S. companies.
(Sub-advised by SSgA Funds Management, Inc.)
o LVIP SSgA Small-Mid Cap 200 Fund: To maximize long-term capital
appreciation.
(Sub-advised by SSgA Funds Management, Inc.)
o LVIP Vanguard International Equity ETF Fund: Long-term capital
appreciation; a fund of funds.
o LVIP Vanguard Domestic Equity ETF Fund: Long-term capital appreciation; a
fund of funds.
* Investments in Delaware Investments VIP Series or LVIP Delaware Funds
managed by Delaware Management Company, a series of Delaware Management
Business Trust, are not and will not be deposits with or liabilities of
Macquarie Bank Limited ABN 46008 583 542 and its holding companies,
including their subsidiaries or related companies, and are subject to
investment risk, including possible delays in prepayment and loss of income
and capital invested. No Macquarie Group company guarantees or will
guarantee the performance of the Series or Funds, the repayment of capital
from the Series or Funds, or any particular rate of return. In addition,
performance is not guaranteed with respect to any of the other funds
offered under the contract.
Fund Shares
We will purchase shares of the funds at net asset value and direct them to the
appropriate Subaccounts of the VAA. We will redeem sufficient shares of the
appropriate funds to pay Annuity Payouts, Death Benefits, surrender/withdrawal
proceeds or for other purposes described in the contract. If you want to
transfer all or part of your investment from one Subaccount to another, we may
redeem shares held in the first and purchase shares of the other. Redeemed
shares are retired, but they may be reissued later.
Shares of the funds are not sold directly to the general public. They are sold
to us, and may be sold to other insurance companies, for investment of the
assets of the Subaccounts established by those insurance companies to fund
variable annuity and variable life insurance contracts.
When a fund sells any of its shares both to variable annuity and to variable
life insurance separate accounts, it is said to engage in mixed funding. When a
fund sells any of its shares to separate accounts of unaffiliated life
insurance companies, it is said to engage in shared funding.
The funds currently engage in mixed and shared funding. Therefore, due to
differences in redemption rates or tax treatment, or other considerations, the
interest of various Contractowners participating in a fund could conflict. Each
of the fund's Board of Directors will monitor for the existence of any material
conflicts, and determine what action, if any, should be taken. The funds do not
foresee any disadvantage to Contractowners arising out of mixed or shared
funding. If such a conflict were to occur, one of the separate accounts might
withdraw its investment in a fund. This might force a fund to sell portfolio
securities at disadvantageous prices. See the prospectuses for the funds.
Reinvestment of Dividends and Capital Gain Distributions
All dividends and capital gain distributions of the funds are automatically
reinvested in shares of the distributing funds at their net asset value on the
date of distribution. Dividends are not paid out to Contractowners as
additional units, but are reflected as changes in unit values.
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Addition, Deletion or Substitution of Investments
We reserve the right, within the law, to make certain changes to the structure
and operation of the VAA at our discretion and without your consent. We may
add, delete, or substitute funds for all Contractowners or only for certain
classes of Contractowners. New or substitute funds may have different fees and
expenses, and may only be offered to certain classes of Contractowners.
Substitutions may be made with respect to existing investments or the
investment of future Purchase Payments, or both. We may close Subaccounts to
allocations of Purchase Payments or Contract Value, or both, at any time in our
sole discretion. The funds, which sell their shares to the Subaccounts pursuant
to participation agreements, also may terminate these agreements and
discontinue offering their shares to the Subaccounts. Substitutions might also
occur if shares of a fund should no longer be available, or if investment in
any fund's shares should become inappropriate, in the judgment of our
management, for the purposes of the contract, or for any other reason in our
sole discretion and, if required, after approval from the SEC.
We also may:
o remove, combine, or add Subaccounts and make the new Subaccounts available
to you at our discretion;
o transfer assets supporting the contracts from one Subaccount to another or
from the VAA to another separate account;
o combine the VAA with other separate accounts and/or create new separate
accounts;
o deregister the VAA under the 1940 Act; and
o operate the VAA as a management investment company under the 1940 Act or as
any other form permitted by law.
We may modify the provisions of the contracts to reflect changes to the
Subaccounts and the VAA and to comply with applicable law. We will not make any
changes without any necessary approval by the SEC. We will also provide you
written notice.
Charges and Other Deductions
We will deduct the charges described below to cover our costs and expenses,
services provided and risks assumed under the contracts. We incur certain costs
and expenses for the distribution and administration of the contracts and for
providing the benefits payable thereunder.
Our administrative services include:
o processing applications for and issuing the contracts;
o processing purchases and redemptions of fund shares as required (including
dollar cost averaging, portfolio rebalancing, and automatic withdrawal
services - See Additional Services and the SAI for more information on
these programs);
o maintaining records;
o administering Annuity Payouts;
o furnishing accounting and valuation services (including the calculation and
monitoring of daily Subaccount values);
o reconciling and depositing cash receipts;
o providing contract confirmations;
o providing toll-free inquiry services; and
o furnishing telephone and other electronic surrenders, withdrawals and fund
transfer services.
The risks we assume include:
o the risk that Annuitants receiving Annuity Payouts, including Lincoln
SmartIncomeSM Inflation payouts, live longer than we assumed when we
calculated our guaranteed rates (these rates are incorporated in the
contract and cannot be changed);
o the risk that lifetime payments to individuals from Lincoln SmartSecurity
(Reg. TM) Advantage or Lincoln Lifetime IncomeSM Advantage 2.0 will exceed
the Contract Value;
o the risk that Death Benefits paid will exceed the actual Contract Value;
o the risk that, if i4LIFE (Reg. TM) Advantage with the Guaranteed Income
Benefit is in effect, the required Regular Income Payments will exceed the
Account Value; and
o the risk that our costs in providing the services will exceed our revenues
from contract charges (which we cannot change).
The amount of a charge may not necessarily correspond to the costs associated
with providing the services or benefits indicated by the description of the
charge. Any remaining expenses will be paid from our general account which may
consist, among other things, of proceeds derived from mortality and expense
risk charges deducted from the account. We may profit from one or more of the
fees and charges deducted under the contract. We may use these profits for any
corporate purpose, including financing the distribution of the contracts.
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Deductions from the VAA
For the base contract, we apply to the average daily net asset value of the
Subaccounts a charge which is equal to an annual rate of:
With Estate Enhanced Guaranteed Guarantee of
Enhancement Minimum Death Principal Death Account Value
Benefit Rider (EEB) Benefit (EGMDB) Benefit Death Benefit
--------------------- --------------------- ----------------- --------------
Mortality and expense risk
charge...................... 1.00% 0.80% 0.55% 0.50%
Administrative charge... 0.10% 0.10% 0.10% 0.10%
---- ---- ---- ----
Total annual charge for
each Subaccount............. 1.10% 0.90% 0.65% 0.60%
Rider Charges
A fee or expense may also be deducted in connection with any benefits added to
the contract by rider or endorsement.
Lincoln Lifetime IncomeSM Advantage 2.0 Charge. While this rider is in effect,
there is a charge for the Lincoln Lifetime IncomeSM Advantage 2.0. The rider
charge is currently equal to an annual rate of 1.05% (0.2625% quarterly) for
the Lincoln Lifetime IncomeSM Advantage 2.0 single life option and 1.25%
(0.3125% quarterly) for the Lincoln Lifetime IncomeSM Advantage 2.0 joint life
option. There is no additional charge for Lincoln Lifetime IncomeSM Advantage
2.0 Protected Funds over and above the charge for Lincoln Lifetime IncomeSM
Advantage 2.0.
The charge is applied to the Income Base (initial Purchase Payment if purchased
at contract issue, or Contract Value at the time of election) as increased for
subsequent Purchase Payments, Automatic Annual Step-ups, 5% Enhancements, and
decreased for Excess Withdrawals. We will deduct the cost of this rider from
the Contract Value on a quarterly basis, with the first deduction occurring on
the Valuation Date on or next following the three-month anniversary of the
rider's effective date. This deduction will be made in proportion to the value
in each Subaccount and any fixed account of the contract on the Valuation Date
the rider charge is assessed. The amount we deduct will increase or decrease as
the Income Base increases or decreases, because the charge is based on the
Income Base. Refer to the Lincoln Lifetime IncomeSM Advantage 2.0 Income Base
section for a discussion and example of the impact of the changes to the Income
Base.
The annual rider percentage charge may increase each time the Income Base
increases as a result of the Automatic Annual Step-up, but the charge will
never exceed the guaranteed maximum annual percentage charge of 2.00%. An
Automatic Annual Step-up is a feature that will increase the Income Base to
equal the Contract Value on a Benefit Year anniversary if all conditions are
met. The Benefit Year is a 12-month period starting with the effective date of
the rider and starting with each anniversary of the rider effective date after
that. Therefore, your percentage charge for this rider could increase every
Benefit Year anniversary. If your percentage charge is increased, you may opt
out of the Automatic Annual Step-up by giving us notice within 30 days after
the Benefit Year anniversary if you do not want your percentage charge to
change. If you opt out of the step-up, your current charge will remain in
effect and the Income Base will be returned to the prior Income Base. This opt
out will only apply for this particular Automatic Annual Step-up. You will need
to notify us each time the percentage charge increases if you do not want the
Automatic Annual Step-up.
The 5% Enhancement to the Income Base (less Purchase Payments received in that
year) occurs if a 10-year Enhancement Period is in effect as described further
in the Lincoln Lifetime IncomeSM Advantage 2.0 section. During the first ten
Benefit Years an increase in the Income Base as a result of the 5% Enhancement
will not cause an increase in the annual rider percentage charge but will
increase the dollar amount of the charge. After the 10th Benefit Year
anniversary the annual rider percentage charge may increase each time the
Income Base increases as a result of the 5% Enhancement, but the charge will
never exceed the guaranteed maximum annual percentage charge of 2.00%. If your
percentage charge is increased, you may opt-out of the 5% Enhancement by giving
us notice within 30 days after the Benefit Year anniversary if you do not want
your percentage charge to change. If you opt out of the 5% Enhancement, your
current charge will remain in effect and the Income Base will be returned to
the prior Income Base. This opt-out will only apply for this particular 5%
Enhancement. You will need to notify us each time thereafter (if an Enhancement
would cause your percentage charge to increase) if you do not want the 5%
Enhancement.
The rider percentage charge will increase to the then current rider percentage
charge, if after the first Benefit Year anniversary, cumulative Purchase
Payments added to the contract, equal or exceed $100,000. You may not opt-out
of this rider charge increase. See The Contracts - Living Benefit Riders -
Lincoln Lifetime IncomeSM Advantage 2.0 - Income Base.
The rider charge will be discontinued upon termination of the rider. The
pro-rata amount of the rider charge will be deducted upon termination of the
rider (except for death) or surrender of the contract.
If the Contract Value is reduced to zero while the Contractowner is receiving a
Guaranteed Annual Income, no rider charge will be deducted.
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4LATER (Reg. TM) Advantage Protected Funds Charge. While this rider is in
effect, there is a charge for the 4LATER (Reg. TM) Advantage Protected Funds.
The rider charge is currently equal to an annual rate of 1.05% (0.2625%
quarterly) for the single life option and 1.25% (0.3125% quarterly) for the
joint life option.
The charge is applied to the Income Base (initial Purchase Payment if purchased
at contract issue, or Contract Value at the time of election) as increased for
subsequent Purchase Payments, Automatic Annual Step-ups, 5% Enhancements and
decreased for withdrawals. We will deduct the cost of this rider from the
Contract Value on a quarterly basis, with the first deduction occurring on the
Valuation Date on or next following the three-month anniversary of the rider's
effective date. This deduction will be made in proportion to the value in each
Subaccount and any fixed account of the contract on the Valuation Date the
rider charge is assessed. The amount we deduct will increase or decrease as the
Income Base increases or decreases, because the charge is based on the Income
Base. Refer to the 4LATER (Reg. TM) Advantage Protected Funds Income Base
section for a discussion and example of the impact of the changes to the Income
Base.
The annual rate for the charge may increase each time the Income Base increases
as a result of the Automatic Annual Step-up, but the charge will never exceed
the guaranteed maximum annual percentage charge of 2.00%. An Automatic Annual
Step-up is a feature that will increase the Income Base to equal the Contract
Value on a Benefit Year anniversary if all conditions are met. The Benefit Year
is a 12-month period starting with the effective date of the rider and starting
with each anniversary of the rider effective date after that. Therefore, your
percentage charge could increase every Benefit Year anniversary. If your
percentage charge is increased, you may opt-out of the Automatic Annual Step-up
by giving us notice within 30 days after the Benefit Year anniversary if you do
not want your percentage charge to change. If you opt out of the step-up, your
current charge will remain in effect and the Income Base will be returned to
the prior Income Base subject to withdrawals. This opt-out will only apply for
this particular Automatic Annual Step-up. You will need to notify us each time
the percentage charge increases if you do not want the Automatic Annual
Step-up.
The 5% Enhancement to the Income Base (less Purchase Payments received in that
year) occurs if a 10-year Enhancement Period is in effect as described further
in the 4LATER (Reg. TM) Advantage Protected Funds section. During the first 10
Benefit Years an increase in the Income Base as a result of the 5% Enhancement
will not cause an increase in the annual rider percentage charge but will
increase the dollar amount of charge. After the 10th Benefit Year anniversary
the percentage charge may increase each time the Income Base increases as a
result of the 5% Enhancement, but the percentage charge will never exceed the
guaranteed maximum annual percentage charge of 2.00%. If your percentage charge
is increased, you may opt-out of the 5% Enhancement by giving us notice within
30 days after the Benefit Year anniversary if you do not want your percentage
charge to change. If you opt out of the 5% Enhancement, your current percentage
charge will remain in effect and the Income Base will be returned to the prior
Income Base adjusted for withdrawals. This opt-out will only apply for this
particular 5% Enhancement. You will need to notify us each time thereafter (if
an Enhancement would cause your percentage charge to increase) if you do not
want the 5% Enhancement.
The percentage charge will increase to the then current annual percentage
charge, if after the first Benefit Year anniversary, cumulative Purchase
Payments added to the contract equal or exceed $100,000. You may not opt-out of
this rider charge increase. See the 4LATER (Reg. TM) Advantage Protected Funds
- Income Base. The rider charge will be discontinued upon termination of the
rider. The pro-rata amount of the rider charge will be deducted upon
termination of the rider (except for death) or surrender of the contract.
Lincoln SmartSecurity (Reg. TM) Advantage Charge. While this rider is in
effect, there is a charge for Lincoln SmartSecurity (Reg. TM) Advantage. The
rider charge is currently equal to an annual rate of:
1) 0.85% of the Guaranteed Amount (0.2125% quarterly) for the Lincoln
SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up, single life
option (for riders purchased prior to December 3, 2012, the current annual
percentage charge will increase from 0.65% to 0.85% at the end of the 10-year
annual step-up period if a new 10-year period is elected); or
2) 1.00% of the Guaranteed Amount (0.25% quarterly) for Lincoln SmartSecurity
(Reg. TM) Advantage - 1 Year Automatic Step-up, joint life option (for riders
purchased prior to December 3, 2012, the current annual percentage charge will
increase from 0.85% to 1.00% at the end of the 10-year annual step-up period if
a new 10-year period is elected). See The Contracts - Lincoln SmartSecurity
(Reg. TM) Advantage - Guaranteed Amount for a description of the calculation of
the Guaranteed Amount.
If you purchase this rider in the future, the percentage charge will be the
current charge in effect at the time of purchase. As of May 20, 2013, this
rider will no longer be available for purchase.
The charge is applied to the Guaranteed Amount (initial Purchase Payment, if
purchased at contract issue, or Contract Value at the time of election) as
increased for subsequent Purchase Payments and step-ups and decreased for
withdrawals. We will deduct the cost of this rider from the Contract Value on a
quarterly basis, with the first deduction occurring on the Valuation Date on or
next following the three-month anniversary of the effective date of the rider.
This deduction will be made in proportion to the value in each Subaccount and
any fixed account of the contract on the Valuation Date the rider charge is
assessed. The amount we deduct will increase or decrease as the Guaranteed
Amount increases or decreases, because the charge is based on the Guaranteed
Amount. Refer to Lincoln SmartSecurity (Reg. TM) Advantage, Guaranteed Amount
section, for a discussion and example of the impact of changes to the
Guaranteed Amount.
Under Lincoln SmartSecurity (Reg. TM) Advantage, the Guaranteed Amount will
automatically step-up to the contract value on each Benefit Year anniversary up
to and including the 10th Benefit Year if conditions are met as described in
the Lincoln SmartSecurity (Reg. TM) Advantage
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<PAGE>
section. Additional 10-year periods of step-ups may be elected. The annual
rider percentage charge will not change upon each automatic step-up of the
Guaranteed Amount within the 10-year period.
If you elect to step-up the Guaranteed Amount for another 10-year step-up
period (including if we administer the step-up election for you or if you make
a change from a joint life to a single life option after a death or divorce), a
pro-rata deduction of the rider charge based on the Guaranteed Amount
immediately prior to the step-up will be made on the valuation date of the
step-up. This deduction covers the cost of the rider from the time of the
previous deduction to the date of the step-up. After a Contractowner's step-up,
we will deduct the rider charge for the stepped-up Guaranteed Amount on a
quarterly basis, beginning on the Valuation Date on or next following the
three-month anniversary of the step-up. At the time of the elected step-up, the
rider percentage charge will change to the current charge in effect at that
time (if the current charge has changed), but it will never exceed the
guaranteed maximum annual percentage charge of 1.50% of the Guaranteed Amount.
If you never elect to step-up your Guaranteed Amount, your rider percentage
charge will never change, although the amount we deduct will change as the
Guaranteed Amount changes. The rider charge will be discontinued upon the
earlier of the Annuity Commencement Date, election of i4LIFE (Reg. TM)
Advantage or termination of the rider. The pro-rata amount of the rider charge
will be deducted upon termination of the rider or surrender of the contract.
i4LIFE (Reg. TM) Advantage Charge. While this rider is in effect, there is a
daily charge for i4LIFE (Reg. TM) Advantage. i4LIFE (Reg. TM) Advantage is
subject to a daily charge that is based on your Account Value. The initial
Account Value is your Contract Value on the Valuation Date i4LIFE (Reg. TM)
Advantage becomes effective (or your initial Purchase Payment if i4LIFE (Reg.
TM) Advantage is purchased at contract issue), less any applicable premium
taxes. During the Access Period, your Account Value on a Valuation Date equals
the total value of all of the Contractowner's Accumulation Units plus the
Contractowner's value in the fixed account, and will be reduced by Regular
Income Payments and Guaranteed Income Benefit payments made, as well as
withdrawals. i4LIFE (Reg. TM) Advantage provides Regular Income Payments for
your life, subject to certain conditions, during two time periods: the Access
Period and the Lifetime Income Period. During the Access Period, you have
access to your Account Value. You select when the Access Period begins and ends
at the time you elect i4LIFE (Reg. TM) Advantage. The Lifetime Income Period
begins immediately after the Access Period ends. The Lifetime Income Period
ends when you die (or upon the death of a Secondary Life, if any).
The annual rate of the i4LIFE (Reg. TM) Advantage charge during the Access
Period is: 1.00% for the i4LIFE (Reg. TM) Advantage Account Value Death
Benefit; 1.05% for the i4LIFE (Reg. TM) Advantage Guarantee of Principal Death
Benefit; and 1.30% for the i4LIFE (Reg. TM) Advantage EGMDB. During the
Lifetime Income Period, the charge for all Death Benefit options is 1.00%. This
charge consists of a mortality and expense risk charge, and an administrative
charge. These charges replace the Separate Account Annual Expenses for the base
contract. Purchasers of Lincoln Lifetime IncomeSM Advantage 2.0 and 4LATER
(Reg. TM) Advantage Protected Funds pay different charges for i4LIFE (Reg. TM)
Advantage. If i4LIFE (Reg. TM) Advantage is elected at the time the contract is
issued, i4LIFE (Reg. TM) Advantage will become effective as of the contract's
effective date, and we will begin deducting the charge at that time. If i4LIFE
(Reg. TM) is elected at any point after the contract has been issued, i4LIFE
(Reg. TM) Advantage will become effective as of the next Valuation Date after
we receive a completed election form in Good Order at our Home Office. We will
begin deducting the charge at that time. Refer to the i4LIFE (Reg. TM)
Advantage section for explanations of the Account Value, the Access Period, and
the Lifetime Income Period.
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit Charge. The
Guaranteed Income Benefit (version 4) which is available for purchase with
i4LIFE (Reg. TM) Advantage is subject to a current annual charge of 0.65% of
the Account Value (single life option), which is added to the i4LIFE (Reg. TM)
Advantage charge for a total current percentage charge of the Account Value,
computed daily as follows: 1.65% for the i4LIFE (Reg. TM) Advantage Account
Value Death Benefit; 1.70% for the i4LIFE (Reg. TM) Advantage Guarantee of
Principal death benefit; and 1.95% for the i4LIFE (Reg. TM) Advantage EGMDB.
If you elect the joint life option, the charge for the Guaranteed Income
Benefit (version 4) which is purchased with i4LIFE (Reg. TM) Advantage will be
subject to a current annual charge of 0.85% of the Account Value which is added
to the i4LIFE (Reg. TM) Advantage charge for a total current percentage charge
of the Account Value, computed daily as follows: 1.85% for the i4LIFE (Reg. TM)
Advantage Account Value Death Benefit; 1.90% for the i4LIFE (Reg. TM) Advantage
Guarantee of Principal Death Benefit; and 2.15% for the i4LIFE (Reg. TM)
Advantage EGMDB. These charges replace the Separate Account Annual Expenses for
the base contract. There is no additional charge for i4LIFE (Reg. TM) Advantage
Guaranteed Income Benefit Protected Funds over and above the charge for i4LIFE
(Reg. TM) Advantage Guaranteed Income Benefit (version 4).
The Guaranteed Income Benefit percentage charge will not change until there is
an automatic step up of the Guaranteed Income Benefit (version 4) during which
the Guaranteed Income Benefit is stepped-up to 75% of the current Regular
Income Payment (described later in the i4LIFE (Reg. TM) Advantage section of
this prospectus). At the time of the step-up the Guaranteed Income Benefit
percentage charge will change to the current charge in effect at that time (if
the current charge has changed) up to the guaranteed maximum annual charge of
2.00% of the Account Value. If we automatically administer the step-up for you
and your percentage charge is increased, you may ask us to reverse the step-up
by giving us notice within 30 days after the date on which the step-up
occurred. If we receive notice of your request to reverse the step-up, on a
going forward basis, we will decrease the percentage charge to the percentage
charge in effect before the step-up occurred. Any increased charges paid
between the time of the step-up and the date we receive your notice to reverse
the step-up will not be reimbursed. For version 4, future step-ups will
continue even after you decline a current step-up. We will provide you with
written notice when a step-up will result in an increase to the current charge
so that you may give us timely notice if you wish to reverse a step-up.
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After the Periodic Income Commencement Date, if the Guaranteed Income Benefit
is terminated, the Guaranteed Income Benefit annual charge will also terminate
but the i4LIFE (Reg. TM) Advantage charge will continue.
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit (version 4) Charge
for purchasers who previously purchased Lincoln Lifetime IncomeSM Advantage 2.0
or 4LATER (Reg. TM) Advantage Protected Funds. Purchasers who previously
purchased Lincoln Lifetime IncomeSM Advantage 2.0 may carry over certain
features of the Lincoln Lifetime IncomeSM Advantage 2.0 rider to elect i4LIFE
(Reg. TM)Advantage with Guaranteed Income Benefit (version 4). Purchasers who
previously purchased 4LATER (Reg. TM) Advantage Protected Funds may carry over
certain features of 4LATER (Reg. TM) Advantage Protected Funds to elect i4LIFE
(Reg. TM) Advantage Guaranteed Income Benefit Protected Funds. If you make this
election, then the current Lincoln Lifetime IncomeSM Advantage 2.0 or 4LATER
(Reg. TM) Advantage Protected Funds charge will be your initial charge for
i4LIFE (Reg. TM) Advantage and the Guaranteed Income Benefit (version 4). This
charge is in addition to the daily mortality and expense risk and
administrative charge of the base contract for your Death Benefit option set
out under Deductions of the VAA. The charges and calculations described earlier
for i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit will not apply.
For purchasers who previously purchased Lincoln Lifetime IncomeSM Advantage 2.0
or 4LATER (Reg. TM) Advantage Protected Funds, the charges for i4LIFE (Reg. TM)
Advantage with Guaranteed Income Benefit (version 4) are combined into a single
charge that is deducted quarterly, starting with the first three-month
anniversary of the effective date of i4LIFE (Reg. TM) Advantage and every three
months thereafter. The current initial charge for i4LIFE (Reg. TM) Advantage
with Guaranteed Income Benefit (version 4) is equal to an annual rate of 1.05%
(0.2625% quarterly) for the single life option and 1.25% (0.3125% quarterly)
for the joint life option. The charge is a percentage of the greater of the
Income Base (the Lincoln Lifetime IncomeSM Advantage 2.0 Income Base less the
Lincoln Lifetime IncomeSM Advantage 2.0 Guaranteed Annual Income amounts paid
since the last Automatic Step-up or 4LATER (Reg. TM) Advantage Protected Funds
Income Base), or the Account Value. Refer to Lincoln Lifetime IncomeSM
Advantage 2.0 or 4LATER (Reg. TM) Advantage Protected Funds for a description
of the Income Base. The total annual Subaccount charges of 0.90% for the EGMDB,
0.65% for the Guarantee of Principal Death Benefit and 0.60% for the Account
Value Death Benefit also apply. Purchasers of Lincoln Lifetime IncomeSM
Advantage 2.0 or 4LATER (Reg. TM) Advantage Protected Funds are guaranteed that
in the future the guaranteed maximum initial charge for both i4LIFE (Reg. TM)
Advantage with Guaranteed Income Benefit (version 4) will be the guaranteed
maximum charge then in effect at the time they purchase Lincoln Lifetime
IncomeSM Advantage 2.0 or 4LATER (Reg. TM) Advantage Protected Funds.
The charge for i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit
(version 4) for purchasers of Lincoln Lifetime IncomeSM Advantage 2.0 or 4LATER
(Reg. TM) Advantage Protected Funds will not change until there is an automatic
step-up of the Guaranteed Income Benefit (described later in the i4LIFE (Reg.
TM) Advantage section of this prospectus). At such time, the dollar amount of
the charge will increase by a two part formula: 1) the charge will increase by
the same percentage that the Guaranteed Income Benefit payment increased and 2)
the charge will also increase by the percentage of any increase to the Lincoln
Lifetime IncomeSM Advantage 2.0 or 4LATER (Reg. TM) Advantage Protected Funds
current charge rate. (The Lincoln Lifetime IncomeSM Advantage 2.0 or 4LATER
(Reg. TM) Advantage Protected Funds charge continues to be used as a factor in
determining the i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit
charge.) The charge rate is based upon surrender experience, mortality
experience, Contractowner investment experience, solvency and profit margins,
and the goals and objectives of the Lincoln hedging experience. Significant
changes in one or more of these categories could result in an increase in the
charge. This means that the charge may change annually. The charge may also be
reduced if a withdrawal above the Regular Income Payment is taken. The dollar
amount of the rider charge will be reduced in the same proportion that the
withdrawal reduced the Account Value. The annual dollar amount is divided by
four (4) to determine the quarterly charge.
The following example shows how the initial charge for i4LIFE (Reg. TM)
Advantage with Guaranteed Income Benefit (version 4) for purchasers of Lincoln
Lifetime IncomeSM Advantage 2.0 and 4LATER (Reg. TM) Advantage Protected Funds
is calculated as well as adjustments due to increases to the Guaranteed Income
Benefit (version 4) and the Lincoln Lifetime IncomeSM Advantage 2.0 charge. The
example is a nonqualified contract and assumes the Contractowner is 60 years
old on the effective date of electing the i4LIFE (Reg. TM) Advantage with
Guaranteed Income Benefit (version 4). Pursuant to the provisions of the
Guaranteed Income Benefit (version 4) the initial Guaranteed Income Benefit is
set at 4% of the Income Base based upon the Contractowner's age (see Guaranteed
Income Benefit (version 4) for a more detailed description). The example also
assumes that the current charge for Lincoln Lifetime IncomeSM Advantage 2.0 is
1.05%. The first example demonstrates how the initial charge is determined for
an existing contract with an Account Value and Income Base.
1/1/13 Initial i4LIFE (Reg. TM) Advantage Account Value................................... $ 100,000
1/1/13 Income Base as of the last Valuation Date under Lincoln Lifetime IncomeSM $ 125,000
Advantage 2.0 .
1/1/13 Initial Annual Charge for i4LIFE (Reg. TM) Advantage with Guaranteed Income
Benefit (version 4) ($125,000 * 1.05%
current charge for Lincoln Lifetime IncomeSM Advantage 2.0) (charge is assessed against
the Income Base since it is
larger than the Account Value)........................................................... $1,312.50
1/2/13 Amount of initial i4LIFE (Reg. TM) Advantage Regular Income Payment (an example of
how the Regular Income Payment
is calculated is shown in the SAI)....................................................... $ 5,051
1/2/13 Initial Guaranteed Income Benefit (4% * $125,000 Income Base) . $ 5,000
The next example shows how the charge will increase if the Guaranteed Income
Benefit is stepped up to 75% of the Regular Income Payment.
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1/2/14 Recalculated Regular Income Payment (due to market gain in Account Value)......... $ 6,900
1/2/14 New Guaranteed Income Benefit (75% * $6,900 Regular Income Payment)............... $ 5,175
1/2/14 Annual Charge for i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit
(version 4) ($1,312.50 * ($5,175/$5,000))
Prior charge * [ratio of increased Guaranteed Income Benefit to prior Guaranteed Income $1,358.44
Benefit] .
If the Lincoln Lifetime IncomeSM Advantage 2.0 charge has also increased,
subject to a maximum charge of 2.00%, the i4LIFE (Reg. TM) Advantage with
Guaranteed Income Benefit (version 4) charge will increase upon a step-up. (The
Lincoln Lifetime IncomeSM Advantage 2.0 charge continues to be used in the
calculation of the i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit
charge.)
Continuing the above example:
1/2/14 Annual Charge for i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit $1,358.44
(version 4) .
1/2/15 Recalculated Regular Income Payment (due to Account Value increase)................ $ 7,400
1/2/15 New Guaranteed Income Benefit (75% * $7,400 Regular Income Payment) . $ 5,550
Assume the Lincoln Lifetime IncomeSM Advantage 2.0 charge increases from 1.05% to 1.15%.
1/2/15 Annual Charge for i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit
($1,358.44 * ($5,550/$5,175) *
(1.15%/1.05%))........................................................................... $1,595.63
The new annual charge for i4LIFE (Reg. TM) Advantage with Guaranteed Income
Benefit (version 4) is $1,595.63 which is equal to the current annual charge of
$1,358.44 multiplied by the percentage increase of the Guaranteed Income
Benefit ($5,550/$5,175) times the percentage increase to the Lincoln Lifetime
IncomeSM Advantage 2.0 current charge (1.15%/1.05%).
If the Lincoln Lifetime IncomeSM Advantage 2.0 or 4LATER (Reg. TM) Advantage
Protected Funds percentage charge is increased, we will notify you in writing.
You may contact us in writing or at the telephone number listed on the first
page of this prospectus to reverse the step-up within 30 days after the date on
which the step-up occurred. If we receive this notice, we will decrease the
percentage charge, on a going forward basis, to the percentage charge in effect
before the step-up occurred. Any increased charges paid between the time of the
step-up and the date we receive your notice to reverse the step-up will not be
reimbursed. If the Guaranteed Income Benefit increased due to the step-up we
would decrease the Guaranteed Income Benefit to the Guaranteed Income Benefit
in effect before the step-up occurred, reduced by any Excess Withdrawals.
Future step-ups as described in the rider would continue.
After the Periodic Income Commencement Date, if the Guaranteed Income Benefit
is terminated, i4LIFE (Reg. TM) Advantage will also be terminated and the
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit charge will cease.
Deductions for Premium Taxes
Any premium tax or other tax levied by any governmental entity as a result of
the existence of the contracts or the VAA will be deducted from the Contract
Value, unless the governmental entity dictates otherwise, when incurred, or at
another time of our choosing.
The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administrative interpretation or by judicial action. These premium tax rates
generally depend upon the law of your state of residence. The tax rates range
from zero to 3.5%.
Other Charges and Deductions
The surrender, withdrawal or transfer of value from a Guaranteed Period may be
subject to the Interest Adjustment if applicable. See Fixed Side of the
Contract.
The mortality and expense risk and administrative charge of 0.60% of the value
in the VAA will be assessed on all variable Annuity Payouts (except for the
i4LIFE (Reg. TM) Advantage, which has a different charge), including options
that may be offered that do not have a life contingency and therefore no
mortality risk. This charge covers the expense risk and administrative services
listed previously in this prospectus. The expense risk is the risk that our
costs in providing the services will exceed our revenues from contract charges.
There are additional deductions from and expenses paid out of the assets of the
underlying funds that are more fully described in the prospectuses for the
funds.
Charges for Lincoln SmartIncomeSM Inflation. There is no charge for Lincoln
SmartIncomeSM Inflation unless Unscheduled Payments are taken. The following
table describes the Unscheduled Payment charge for the Lincoln SmartIncomeSM
Inflation on and after the Annuity Commencement Date. See The Contracts -
Annuity Payouts for a complete description of Lincoln SmartIncomeSM Inflation.
Lincoln SmartIncomeSM Inflation Unscheduled Payment charge
(as a percentage of the Unscheduled Payment)*
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Rider Year
--------------------------------------
1 2 3 4 5 6 7 8
---- ---- ---- ---- ---- ---- ---- ---
Charge.......... 7% 7% 7% 6% 5% 4% 3% 0%
* A new Rider Year starts on each Rider Date anniversary. The charge is applied
only to amounts in excess of the annual 10% Reserve Value free amount. See
The Contracts - Annuity Payouts, Annuity Options for a detailed description
of Reserve Value.
Unscheduled Payments of up to 10% of the then current Reserve Value may be
taken each Rider Year without charge, as long as the then current Reserve Value
is greater than zero. The Unscheduled Payment charge is assessed against
Unscheduled Payments in excess of 10% of the then current Reserve Value in a
Rider Year. Unscheduled Payments that do not exceed on a cumulative basis more
than 10% of the then current Reserve Value each year are not subject to an
Unscheduled Payment charge. If an Unscheduled Payment is subject to an
Unscheduled Payment charge, the charge will be deducted from the Unscheduled
Payment so that you will receive less than the amount requested. If the
Annuitant or Secondary Life is diagnosed with a terminal illness or confined to
an extended care facility after the first Rider Year, then no Unscheduled
Payment charges are assessed on any Unscheduled Payment. The Unscheduled
Payment charge is also waived upon payment of a Death Benefit as described in
the Lincoln SmartIncomeSM Inflation section of this prospectus.
Additional Information
The charges described previously may be reduced or eliminated for any
particular contract. However, these reductions may be available only to the
extent that we anticipate lower distribution and/or administrative expenses, or
that we perform fewer sales or administrative services than those originally
contemplated in establishing the level of those charges, or when required by
law. Lower distribution and administrative expenses may be the result of
economies associated with:
o the use of mass enrollment procedures,
o the performance of administrative or sales functions by the employer,
o the use by an employer of automated techniques in submitting deposits or
information related to deposits on behalf of its employees, or
o any other circumstances which reduce distribution or administrative
expenses.
The exact amount of charges and fees applicable to a particular contract will
be stated in that contract.
The Contracts
Purchase of Contracts
If you wish to purchase a contract, you must apply for it through a sales
representative authorized by us. The completed application is sent to us and we
decide whether to accept or reject it. If the application is accepted, a
contract is prepared and executed by our legally authorized officers. The
contract is then sent to you through your sales representative. See
Distribution of the Contracts. The purchase of multiple contract with identical
Contractowners, Annuitants and Beneficiaries will be allowed only upon Home
Office approval.
When a completed application and all other information necessary for processing
a purchase order is received in Good Order at our Home Office, an initial
Purchase Payment will be priced no later than two business days after we
receive the order. If you submit your application and/or initial Purchase
Payment to your agent, we will not begin processing your purchase order until
we receive the application and initial Purchase Payment from your agent's
broker-dealer. While attempting to finish an incomplete application, we may
hold the initial Purchase Payment for no more than five business days unless we
receive your consent to our retaining the payment until the application is
completed. If the incomplete application cannot be completed within those five
days and we have not received your consent, you will be informed of the
reasons, and the Purchase Payment will be returned immediately. Once the
application is complete, we will allocate your initial Purchase Payment within
two business days.
Who Can Invest
To apply for a contract, you must be of legal age in a state where the
contracts may be lawfully sold and also be eligible to participate in any of
the qualified and nonqualified plans for which the contracts are designed. At
the time of issue, the Contractowner, joint owner and Annuitant must be under
age 86. Certain Death Benefit options may not be available at all ages. To help
the government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person who opens an account. When you open an
account, we will ask for your name, address, date of birth, and other
information that will allow us to identify you. We may also ask to see your
driver's license, photo i.d. or other identifying documents.
In accordance with money laundering laws and federal economic sanction policy,
the Company may be required in a given instance to reject a Purchase Payment
and/or freeze a Contractowner's account. This means we could refuse to honor
requests for transfers,
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withdrawals, surrenders or Death Benefits. Once frozen, monies would be moved
from the VAA to a segregated interest-bearing account maintained for the
Contractowner, and held in that account until instructions are received from
the appropriate regulator.
Do not purchase this contract if you plan to use it, or any of its riders, for
speculation, arbitrage, viatical arrangement, or other similar investment
scheme. The contract may not be resold, traded on any stock exchange, or sold
on any secondary market.
If you are purchasing the contract through a tax-favored arrangement, including
traditional IRAs and Roth IRAs, you should consider carefully the costs and
benefits of the contract (including annuity income benefits) before purchasing
the contract, since the tax-favored arrangement itself provides tax-deferred
growth.
Replacement of Existing Insurance
Careful consideration should be given prior to surrendering or withdrawing
money from an existing insurance contract to purchase the contract described in
this prospectus. Surrender charges may be imposed on your existing contract. An
investment representative or tax adviser should be consulted prior to making an
exchange. Cash surrenders from an existing contract may be subject to tax and
tax penalties.
Purchase Payments
You may make Purchase Payments to the contract at any time, subject to certain
conditions. You are not required to make any additional Purchase Payments after
the initial Purchase Payment. The minimum initial Purchase Payment is $10,000.
The minimum annual amount for additional Purchase Payments is $300. Please
check with your registered representative about making additional Purchase
Payments since the requirements of your state may vary. The minimum payment to
the contract at any one time must be at least $100 ($25 if transmitted
electronically). If a Purchase Payment is submitted that does not meet the
minimum amount, we will contact you to ask whether additional money will be
sent, or whether we should return the Purchase Payment to you.
Purchase Payments totaling $1 million or more are subject to Home Office
approval. This amount takes into consideration the total Purchase Payments for
all contracts issued by the Company (or its affiliates) in which you are a
Contractowner and/or Annuitant. If you elect a Living Benefit rider, you may be
subject to further restrictions in terms of your ability to make additional
Purchase Payments, as more fully described below. If you stop making Purchase
Payments, the contract will remain in force, however, we may terminate the
contract as allowed by your state's non-forfeiture law for individual deferred
annuities. We will not surrender your contract if you are receiving guaranteed
payments from us under one of the Living Benefit riders. Purchase Payments may
be made or, if stopped, resumed at any time until the Annuity Commencement
Date, the surrender of the contract, or the death of the Contractowner,
whichever comes first. Upon advance written notice, we reserve the right to
further limit Purchase Payments made to the contract.
If you elect a Living Benefit rider (other than i4LIFE (Reg. TM) Advantage with
the Guaranteed Income Benefit ), after the first anniversary of the rider
effective date, once cumulative additional Purchase Payments exceed $100,000,
additional Purchase Payments will be limited to $50,000 per Benefit Year. State
variations may apply. Please see your contract or contact your registered
representative for more information. If you elect i4LIFE (Reg. TM) Advantage
with the Guaranteed Income Benefit, no additional Purchase Payments can be
made. This means that you will be limited in your ability to build your
Contract Value and/or increase the amount of any guaranteed benefit under a
Living Benefit rider by making additional Purchase Payments to the contract.
You should carefully consider these limitations, and any other limitations of
the contract, and how they may impact your long-term investment plans,
especially if you intend to build Contract Value by making additional Purchase
Payments over a long period of time. See the Living Benefit Riders section of
this prospectus for additional information on any restrictions that may apply
to your Living Benefit rider.
Valuation Date
Accumulation and Annuity Units will be valued once daily at the close of
trading (normally, 4:00 p.m., New York time) on each day the New York Stock
Exchange is open (Valuation Date). On any date other than a Valuation Date, the
Accumulation Unit value and the Annuity Unit value will not change.
Allocation of Purchase Payments
Purchase Payments allocated to the variable account are placed into the VAA's
Subaccounts, according to your instructions. You may also allocate Purchase
Payments in the fixed account, if available.
The minimum amount of any Purchase Payment which can be put into any one
Subaccount is $20. The minimum amount of any Purchase Payment which can be put
into a Guaranteed Period of the fixed account is $2,000, subject to state
approval.
If we receive your Purchase Payment from you or your broker-dealer in Good
Order at our Home Office prior to 4:00 p.m., New York time, we will use the
Accumulation Unit value computed on that Valuation Date when processing your
purchase payment. If we receive your Purchase Payment in Good Order at or after
4:00 p.m., New York time, we will use the Accumulation Unit value computed on
the next Valuation Date. If you submit your Purchase Payment to your
representative, we will generally not begin processing
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the Purchase Payment until we receive it from your representative's
broker-dealer. If your broker-dealer submits your Purchase Payment to us
through the Depository Trust and Clearing Corporation (DTCC) or, pursuant to
terms agreeable to us, uses a proprietary order placement system to submit your
Purchase Payment to us, and your Purchase Payment was placed with your
broker-dealer prior to 4:00 p.m., New York time, then we will use the
Accumulation Unit value computed on that Valuation Date when processing your
Purchase Payment. If your Purchase Payment was placed with your broker-dealer
at or after 4:00 p.m., New York time, then we will use the Accumulation Unit
value computed on the next Valuation Date.
The number of Accumulation Units determined in this way is not impacted by any
subsequent change in the value of an Accumulation Unit. However, the dollar
value of an Accumulation Unit will vary depending not only upon how well the
underlying fund's investments perform, but also upon the expenses of the VAA
and the underlying funds.
Valuation of Accumulation Units
Purchase Payments allocated to the VAA are converted into Accumulation Units.
This is done by dividing the amount allocated by the value of an Accumulation
Unit for the Valuation Period during which the Purchase Payments are allocated
to the VAA. The Accumulation Unit value for each Subaccount was or will be
established at the inception of the Subaccount. It may increase or decrease
from Valuation Period to Valuation Period. Accumulation Unit values are
affected by investment performance of the funds, fund expenses, and the
contract charges. The Accumulation Unit value for a Subaccount for a later
Valuation Period is determined as follows:
1. The total value of the fund shares held in the Subaccount is calculated by
multiplying the number of fund shares owned by the Subaccount at the
beginning of the Valuation Period by the net asset value per share of the
fund at the end of the Valuation Period, and adding any dividend or other
distribution of the fund if an ex-dividend date occurs during the Valuation
Period; minus
2. The liabilities of the Subaccount at the end of the Valuation Period; these
liabilities include daily charges imposed on the Subaccount, and may
include a charge or credit with respect to any taxes paid or reserved for
by us that we determine result from the operations of the VAA; and
3. The result is divided by the number of Subaccount units outstanding at the
beginning of the Valuation Period.
The daily charges imposed on a Subaccount for any Valuation Period are equal to
the daily mortality and expense risk charge and the daily administrative charge
multiplied by the number of calendar days in the Valuation Period. Contracts
with different features have different daily charges, and therefore, will have
different corresponding Accumulation Unit values on any given day. In certain
circumstances (for example, when separate account assets are less than $1,000),
and when permitted by law, it may be prudent for us to use a different standard
industry method for this calculation, called the Net Investment Factor method.
We will achieve substantially the same result using either method.
Transfers On or Before the Annuity Commencement Date
After the first 30 days from the effective date of your contract, you may
transfer all or a portion of your investment from one Subaccount to another. A
transfer involves the surrender of Accumulation Units in one Subaccount and the
purchase of Accumulation Units in the other Subaccount. A transfer will be done
using the respective Accumulation Unit values determined at the end of the
Valuation Date on which the transfer request is received.
Transfers (among the variable Subaccounts and as permitted between the variable
and fixed accounts) are limited to twelve (12) per Contract Year unless
otherwise authorized by us. This limit does not apply to transfers made under
the automatic transfer programs of dollar cost averaging or portfolio
rebalancing elected on forms available from us. See Additional Services and the
SAI for more information on these programs. These transfer rights and
restrictions also apply during the i4LIFE (Reg. TM) Advantage Access Period
(the time period during which you may make withdrawals from the i4LIFE (Reg.
TM) Advantage Account Value). See i4LIFE (Reg. TM) Advantage.
The minimum amount which may be transferred between Subaccounts is $300 (or the
entire amount in the Subaccount, if less than $300). If the transfer from a
Subaccount would leave you with less than $300 in the Subaccount, we may
transfer the total balance of the Subaccount.
Requests for transfers will be processed on the Valuation Date that they are
received when they are received in Good Order at our Home Office before the end
of the Valuation Date (normally 4:00 p.m., New York time). If we receive a
transfer request in Good Order at or after 4:00 p.m., New York time, we will
process the request using the Accumulation Unit value computed on the next
Valuation Date.
If your contract offers a fixed account, you may also transfer all or any part
of the Contract Value from the Subaccount(s) to the fixed side of the contract,
except during periods when (if permitted by your contract) we have discontinued
accepting transfers into the fixed side of the contract. The minimum amount
which can be transferred to a fixed account is $2,000 or the total amount in
the Subaccount if less than $2,000. However, if a transfer from a Subaccount
would leave you with less than $300 in the Subaccount, we may transfer the
total amount to the fixed side of the contract.
You may also transfer part of the Contract Value from a fixed account to the
variable Subaccount(s) subject to the following restrictions:
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o total fixed account transfers are limited to 25% of the value of that fixed
account in any 12-month period; and
o the minimum amount that can be transferred is $300 or, if less, the amount
in the fixed account.
Because of these restrictions, it may take several years to transfer all of the
Contract Value in the fixed accounts to the variable Subaccounts. You should
carefully consider whether the fixed account meets your investment criteria.
Transfers of all or a portion of a fixed account (other than automatic transfer
programs and i4LIFE (Reg. TM) Advantage transfers) may be subject to Interest
Adjustments, if applicable. For a description of the Interest Adjustment, see
the Fixed Side of the Contract - Guaranteed Periods and Interest Adjustment.
Transfers may be delayed as permitted by the 1940 Act. See Delay of Payments.
Telephone and Electronic Transactions
A surrender, withdrawal, or transfer request may be made to our Home Office
using a fax or other electronic means. In addition, withdrawal and transfer
requests may be made by telephone, subject to certain restrictions. In order to
prevent unauthorized or fraudulent transfers, we may require certain
identifying information before we will act upon instructions. We may also
assign the Contractowner a Personal Identification Number (PIN) to serve as
identification. We will not be liable for following instructions we reasonably
believe are genuine. Telephone and other electronic requests will be recorded
and written confirmation of all transactions will be mailed to the
Contractowner on the next Valuation Date.
Please note that the telephone and/or electronic devices may not always be
available. Any telephone, fax machine or other electronic device, whether it is
yours, your service provider's, or your agent's, can experience outages or
slowdowns for a variety of reasons. These outages or slowdowns may delay or
prevent our processing of your request. Although we have taken precautions to
limit these problems, we cannot promise complete reliability under all
circumstances. If you are experiencing problems, you should make your request
by writing to our Home Office.
Market Timing
Frequent, large, or short-term transfers among Subaccounts and the fixed
account, such as those associated with "market timing" transactions, can affect
the funds and their investment returns. Such transfers may dilute the value of
the fund shares, interfere with the efficient management of the fund's
portfolio, and increase brokerage and administrative costs of the funds. As an
effort to protect our Contractowners and the funds from potentially harmful
trading activity, we utilize certain market timing policies and procedures (the
"Market Timing Procedures"). Our Market Timing Procedures are designed to
detect and prevent such transfer activity among the Subaccounts and the fixed
account that may affect other Contractowners or fund shareholders.
In addition, the funds may have adopted their own policies and procedures with
respect to frequent purchases and redemptions of their respective shares. The
prospectuses for the funds describe any such policies and procedures, which may
be more or less restrictive than the frequent trading policies and procedures
of other funds and the Market Timing Procedures we have adopted to discourage
frequent transfers among Subaccounts. While we reserve the right to enforce
these policies and procedures, Contractowners and other persons with interests
under the contracts should be aware that we may not have the contractual
authority or the operational capacity to apply the frequent trading policies
and procedures of the funds. However, under SEC rules, we are required to: (1)
enter into a written agreement with each fund or its principal underwriter that
obligates us to provide to the fund promptly upon request certain information
about the trading activity of individual Contractowners, and (2) execute
instructions from the fund to restrict or prohibit further purchases or
transfers by specific Contractowners who violate the excessive trading policies
established by the fund.
You should be aware that the purchase and redemption orders received by the
funds generally are "omnibus" orders from intermediaries such as retirement
plans or separate accounts funding variable insurance contracts. The omnibus
orders reflect the aggregation and netting of multiple orders from individual
retirement plan Participants and/or individual owners of variable insurance
contracts. The omnibus nature of these orders may limit the funds' ability to
apply their respective disruptive trading policies and procedures. We cannot
guarantee that the funds (and thus our Contractowners) will not be harmed by
transfer activity relating to the retirement plans and/or other insurance
companies that may invest in the funds. In addition, if a fund believes that an
omnibus order we submit may reflect one or more transfer requests from policy
owners engaged in disruptive trading activity, the fund may reject the entire
omnibus order.
Our Market Timing Procedures detect potential "market timers" by examining the
number of transfers made by Contractowners within given periods of time. In
addition, managers of the funds might contact us if they believe or suspect
that there is market timing. If requested by a fund company, we may vary our
Market Timing Procedures from Subaccount to Subaccount to comply with specific
fund policies and procedures.
We may increase our monitoring of Contractowners who we have previously
identified as market timers. When applying the parameters used to detect market
timers, we will consider multiple contracts owned by the same Contractowner if
that Contractowner has been identified as a market timer. For each
Contractowner, we will investigate the transfer patterns that meet the
parameters being
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used to detect potential market timers. We will also investigate any patterns
of trading behavior identified by the funds that may not have been captured by
our Market Timing Procedures.
Once a Contractowner has been identified as a "market timer" under our Market
Timing Procedures, we will notify the Contractowner in writing that future
transfers (among the Subaccounts and/or the fixed account) will be temporarily
permitted to be made only by original signature sent to us by U.S. mail,
first-class delivery for the remainder of the Contract Year (or calendar year
if the contract is an individual contract that was sold in connection with an
employer sponsored plan). Overnight delivery or electronic instructions (which
may include telephone, facsimile, or Internet instructions) submitted during
this period will not be accepted. If overnight delivery or electronic
instructions are inadvertently accepted from a Contractowner that has been
identified as a market timer, upon discovery, we will reverse the transaction
within 1 or 2 business days. We will impose this "original signature"
restriction on that Contractowner even if we cannot identify, in the particular
circumstances, any harmful effect from that Contractowner's particular
transfers.
Contractowners seeking to engage in frequent, large, or short-term transfer
activity may deploy a variety of strategies to avoid detection. Our ability to
detect such transfer activity may be limited by operational systems and
technological limitations. The identification of Contractowners determined to
be engaged in such transfer activity that may adversely affect other
Contractowners or fund shareholders involves judgments that are inherently
subjective. We cannot guarantee that our Market Timing Procedures will detect
every potential market timer. If we are unable to detect market timers, you may
experience dilution in the value of your fund shares and increased brokerage
and administrative costs in the funds. This may result in lower long-term
returns for your investments.
Our Market Timing Procedures are applied consistently to all Contractowners. An
exception for any Contractowner will be made only in the event we are required
to do so by a court of law. In addition, certain funds available as investment
options in your contract may also be available as investment options for owners
of other, older life insurance policies issued by us. Some of these older life
insurance policies do not provide a contractual basis for us to restrict or
refuse transfers which are suspected to be market timing activity. In addition,
because other insurance companies and/or retirement plans may invest in the
funds, we cannot guarantee that the funds will not suffer harm from frequent,
large, or short-term transfer activity among subaccounts and the fixed accounts
of variable contracts issued by other insurance companies or among investment
options available to retirement plan Participants.
In our sole discretion, we may revise our Market Timing Procedures at any time
without prior notice as necessary to better detect and deter frequent, large,
or short-term transfer activity to comply with state or federal regulatory
requirements, and/or to impose additional or alternate restrictions on market
timers (such as dollar or percentage limits on transfers). If we modify our
Market Timing Procedures, they will be applied uniformly to all Contractowners
or as applicable to all Contractowners investing in underlying funds.
Some of the funds have reserved the right to temporarily or permanently refuse
payments or transfer requests from us if, in the judgment of the fund's
investment adviser, the fund would be unable to invest effectively in
accordance with its investment objective or policies, or would otherwise
potentially be adversely affected. To the extent permitted by applicable law,
we reserve the right to defer or reject a transfer request at any time that we
are unable to purchase or redeem shares of any of the funds available through
the VAA, including any refusal or restriction on purchases or redemptions of
the fund shares as a result of the funds' own policies and procedures on market
timing activities. If a fund refuses to accept a transfer request we have
already processed, we will reverse the transaction within 1 or 2 business days.
We will notify you in writing if we have reversed, restricted or refused any of
your transfer requests. Some funds also may impose redemption fees on
short-term trading (i.e., redemptions of mutual fund shares within a certain
number of business days after purchase). We reserve the right to administer and
collect any such redemption fees on behalf of the funds. You should read the
prospectuses of the funds for more details on their redemption fees and their
ability to refuse or restrict purchases or redemptions of their shares.
Transfers After the Annuity Commencement Date
You may transfer all or a portion of your investment in one Subaccount to
another Subaccount or to the fixed side of the contract, as permitted under
your contract. Those transfers will be limited to three times per Contract
Year. You may also transfer from a variable annuity payment to a fixed annuity
payment. You may not transfer from a fixed annuity payment to a variable
annuity payment. Once elected, the fixed annuity payment is irrevocable.
These provisions also apply during the i4LIFE (Reg. TM) Advantage Lifetime
Income Period. See i4LIFE (Reg. TM) Advantage.
Ownership
The owner on the date of issue will be the person or entity designated in the
contract specifications. If no owner is designated, the Annuitant(s) will be
the owner. The owner may name a joint owner.
As Contractowner, you have all rights under the contract. According to Indiana
law, the assets of the VAA are held for the exclusive benefit of all
Contractowners and their designated Beneficiaries; and the assets of the VAA
are not chargeable with liabilities arising from any other business that we may
conduct. We reserve the right to approve all ownership and Annuitant changes.
Nonqualified contracts may not be sold, discounted, or pledged as collateral
for a loan or for any other purpose. Qualified contracts are not transferable
unless allowed under applicable law. Non-qualified contracts may not be
collaterally assigned. Assignments may have an
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adverse impact on any Death Benefits or Living Benefits in this product. We
assume no responsibility for the validity or effect of any assignment. Consult
your tax adviser about the tax consequences of an assignment.
Joint Ownership
If a contract has joint owners, the joint owners shall be treated as having
equal undivided interests in the contract. Either owner, independently of the
other, may exercise any ownership rights in this contract. Not more than two
owners (an owner and joint owner) may be named and contingent owners are not
permitted.
Annuitant
The following rules apply prior to the Annuity Commencement Date. You may name
only one Annuitant [unless you are a tax-exempt entity, then you can name two
joint Annuitants]. You (if the Contractowner is a natural person) have the
right to change the Annuitant at any time by notifying us of the change,
however we reserve the right to approve all Annuitant changes. This may not be
allowed if certain riders are in effect. The new Annuitant must be under age 86
as of the effective date of the change. This change may cause a reduction in
the Death Benefits or living benefits. See The Contracts - Death Benefit. A
contingent Annuitant may be named or changed by notifying us in writing.
Contingent Annuitants are not allowed on contracts owned by non-natural owners.
On or after the Annuity Commencement Date, the Annuitant or joint Annuitants
may not be changed and contingent Annuitant designations are no longer
applicable.
Surrenders and Withdrawals
Before the Annuity Commencement Date, we will allow the surrender of the
contract or a withdrawal of the Contract Value upon your written request on an
approved Lincoln distribution request form (available from the Home Office),
fax, or other electronic means. Withdrawal requests may be made by telephone,
subject to certain restrictions. All surrenders and withdrawals may be made in
accordance with the rules discussed below. Surrender or withdrawal rights after
the Annuity Commencement Date depend on the Annuity Payout option selected.
The amount available upon surrender/withdrawal is the Contract Value less any
applicable charges, fees, and taxes at the end of the Valuation Period during
which the written request for surrender/withdrawal is received in Good Order at
the Home Office. If we receive a surrender or withdrawal request in Good Order
at or after 4:00 p.m., New York time, we will process the request using the
Accumulation Unit value computed on the next Valuation Date. The minimum amount
which can be withdrawn is $300. Unless a request for withdrawal specifies
otherwise, withdrawals will be made from all subaccounts within the VAA and
from the fixed account in the same proportion that the amount of withdrawal
bears to the total Contract Value. Surrenders and withdrawals from the fixed
account may be subject to the Interest Adjustment. See Fixed Side of the
Contract. Unless prohibited, surrender/withdrawal payments will be mailed
within seven days after we receive a valid written request at the Home Office.
The payment may be postponed as permitted by the 1940 Act.
The tax consequences of a surrender/withdrawal are discussed later in this
booklet. See Federal Tax Matters - Taxation of Withdrawals and Surrenders.
Additional Services
These are the additional services available to you under your contract:
dollar-cost averaging (DCA), automatic withdrawal service (AWS) and portfolio
rebalancing. Currently, there is no charge for these services. However, we
reserve the right to impose one after appropriate notice to Contractowners. In
order to take advantage of one of these services, you will need to complete the
appropriate election form that is available from our Home Office. For further
detailed information on these services, please see Additional Services in the
SAI.
Dollar-cost averaging allows you to transfer amounts from the DCA fixed
account, if available, or certain variable Subaccounts into the variable
Subaccounts on a monthly basis or in accordance with other terms we make
available.
You may elect to participate in the DCA program at the time of application or
at anytime before the Annuity Commencement Date by completing an election form
available from us. The minimum amount to be dollar cost averaged (DCA'd) is
$1,500 over any period between six and 60 months. Once elected, the program
will remain in effect until the earlier of:
o the Annuity Commencement Date;
o the value of the amount being DCA'd is depleted; or
o you cancel the program by written request or by telephone if we have your
telephone authorization on file.
We reserve the right to restrict access to this program at any time.
A transfer made as part of this program is not considered a transfer for
purposes of limiting the number of transfers that may be made, or assessing any
charges or Interest Adjustment which may apply to transfers. Upon receipt of an
additional Purchase Payment
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allocated to the DCA fixed account, the existing program duration will be
extended to reflect the end date of the new DCA program. However, the existing
interest crediting rate will not be extended. The existing interest crediting
rate will expire at its originally scheduled expiration date and the value
remaining in the DCA account from the original amount as well as any additional
Purchase Payments will be credited with interest at the standard DCA rate at
the time. If you cancel the DCA program, your remaining Contract Value in the
DCA program will be allocated to the variable Subaccounts according to your
allocation instructions. We reserve the right to discontinue or modify this
program at any time. DCA does not assure a profit or protect against loss.
The automatic withdrawal service (AWS) provides for an automatic periodic
withdrawal of your Contract Value. Withdrawals under AWS are subject to
applicable Interest Adjustments. See Fixed Side of the Contract - Interest
Adjustment.
Portfolio rebalancing is an option that restores to a pre-determined level the
percentage of Contract Value allocated to each variable account Subaccount. The
rebalancing may take place monthly, quarterly, semi-annually or annually.
Only one of the two additional services (DCA and portfolio rebalancing) may be
used at one time. For example, you cannot have DCA and portfolio rebalancing
running simultaneously.
Death Benefit
The chart below provides a brief overview of how the Death Benefit proceeds
will be distributed if death occurs prior to i4LIFE (Reg. TM) Advantage
elections or prior to the Annuity Commencement Date. Refer to your contract for
the specific provisions applicable upon death.
UPON DEATH OF: AND...
Contractowner There is a surviving joint owner
Contractowner There is no surviving joint owner
Contractowner There is no surviving joint owner
and the Beneficiary predeceases the
Contractowner
Annuitant The Contractowner is living
Annuitant The Contractowner is living
Annuitant** The Contractowner is a trust or
other non-natural person
UPON DEATH OF: AND... DEATH BENEFIT PROCEEDS PASS TO:
Contractowner The Annuitant is living or deceased joint owner
Contractowner The Annuitant is living or deceased designated Beneficiary
Contractowner The Annuitant is living or deceased Contractowner's estate
Annuitant There is no contingent Annuitant The youngest Contractowner
becomes the contingent Annuitant
and the contract continues. The
Contractowner may waive* this
continuation and receive the Death
Benefit proceeds.
Annuitant The contingent Annuitant is living contingent Annuitant becomes the
Annuitant and the contract continues
Annuitant** No contingent Annuitant allowed designated Beneficiary
with non-natural Contractowner
* Notification from the Contractowner to select the Death Benefit proceeds
must be received within 75 days of the death of the Annuitant.
** Death of Annuitant is treated like death of the Contractowner.
If the Contractowner (or a joint owner) or Annuitant dies prior to the Annuity
Commencement Date, a Death Benefit may be payable. You can choose the Death
Benefit. Only one Death Benefit may be in effect at any one time and this Death
Benefit terminates if you elect i4LIFE (Reg. TM) Advantage or elect any other
annuitization option. Generally, the more expensive the Death Benefit the
greater the protection.
You should consider the following provisions carefully when designating the
Beneficiary, Annuitant, any contingent Annuitant and any joint owner, as well
as before changing any of these parties. The identity of these parties under
the contract may significantly affect the amount and timing of the Death
Benefit or other amount paid upon a Contractowner's or Annuitant's death.
You may designate a Beneficiary during your lifetime and change the Beneficiary
by filing a written request with our Home Office. Each change of Beneficiary
revokes any previous designation. We reserve the right to request that you send
us the contract for endorsement of a change of Beneficiary.
Upon the death of the Contractowner, a Death Benefit will be paid to the
Beneficiary. Upon the death of a joint owner, the Death Benefit will be paid to
the surviving joint owner. If the Contractowner is a corporation or other
non-individual (non-natural person), the death of the Annuitant will be treated
as death of the Contractowner.
If an Annuitant who is not the Contractowner or joint owner dies, then the
contingent Annuitant, if named, becomes the Annuitant and no Death Benefit is
payable on the death of the Annuitant. If no contingent Annuitant is named, the
Contractowner (or younger of joint owners) becomes the Annuitant.
Alternatively, a Death Benefit may be paid to the Contractowner (and joint
owner, if applicable, in
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equal shares). Notification of the election of this Death Benefit must be
received by us within 75 days of the death of the Annuitant. The contract
terminates when any Death Benefit is paid due to the death of the Annuitant.
Only the Contract Value as of the Valuation Date we approve the payment of the
death claim is available as a Death Benefit if a Contractowner, joint owner or
Annuitant was added or changed subsequent to the effective date of this
contract unless the change occurred because of the death of a prior
Contractowner, joint owner or Annuitant. If your Contract Value equals zero, no
Death Benefit will be paid.
Account Value Death Benefit. If you elect the Account Value Death Benefit
contract option, we will pay a Death Benefit equal to the Contract Value on the
Valuation Date the Death Benefit is approved by us for payment. No additional
Death Benefit is provided. Once you have selected this Death Benefit option, it
cannot be changed. (Your contract may refer to this benefit as the Contract
Value Death Benefit.)
Guarantee of Principal Death Benefit. If you do not select a Death Benefit, the
Guarantee of Principal Death Benefit will apply to your contract. If the
Guarantee of Principal Death Benefit is in effect, the Death Benefit will be
equal to the greater of:
o the current Contract Value as of the Valuation Date we approve the payment
of the claim; or
o the sum of all Purchase Payments decreased by withdrawals in the same
proportion that withdrawals reduced the Contract Value (withdrawals less
than or equal to the Guaranteed Annual Income amount under the Lincoln
Lifetime IncomeSM Advantage 2.0 rider may reduce the sum of all purchase
payments amount on a dollar for dollar basis. See The Contracts - Lincoln
Lifetime IncomeSM Advantage 2.0).
In a declining market, withdrawals deducted in the same proportion that
withdrawals reduce the contract value may have a magnified effect on the
reduction of the death benefit payable. All references to withdrawals include
deductions for any applicable charges associated with those withdrawals and
premium taxes, if any.
The Guarantee of Principal Death Benefit may be discontinued by completing the
Death Benefit Discontinuance form and sending it to our Home Office. The
benefit will be discontinued as of the valuation date we receive the request
and the Account Value Death Benefit will apply. We will deduct the charge for
the Account Value Death Benefit as of that date. See Charges and Other
Deductions.
Enhanced Guaranteed Minimum Death Benefit (EGMDB). If the EGMDB is in effect,
the Death Benefit paid will be the greatest of:
o The current Contract Value as of the Valuation Date we approve the payment
of the claim; or
o the sum of all Purchase Payments decreased by withdrawals in the same
proportion that withdrawals reduced the Contract Value (withdrawals less
than or equal to the Guaranteed Annual Income amount under the Lincoln
Lifetime IncomeSM Advantage 2.0 rider may reduce the sum of all purchase
payments amount on a dollar for dollar basis. See The Contracts - Lincoln
Lifetime IncomeSM Advantage 2.0); or
o the highest Contract Value which the contract attains on any contract
anniversary (including the inception date) (determined before the
allocation of any Purchase Payments on that contract anniversary) prior to
the 81st birthday of the deceased and prior to the death of the
Contractowner, joint owner (if applicable) or Annuitant for whom the death
claim is approved for payment. The highest Contract Value is increased by
Purchase Payments and is decreased by withdrawals subsequent to that
anniversary date in the same proportion that withdrawals reduced the
Contract Value.
In a declining market, withdrawals deducted in the same proportion that
withdrawals reduce the contract value may have a magnified effect on the
reduction of the death benefit payable. All references to withdrawals include
deductions for any applicable charges associated with those withdrawals and
premium taxes, if any.
The EGMDB is not available under contracts issued to a Contractowner, or joint
owner or Annuitant, who is age 80 or older at the time of issuance.
You may discontinue the EGMDB at any time by completing the Death Benefit
Discontinuance form and sending it to our Home Office. The benefit will be
discontinued as of the Valuation Date we receive the request, and the Guarantee
of Principal Death Benefit will apply. We will deduct the applicable charge for
the new Death Benefit as of that date. See Charges and Other Deductions.
Estate Enhancement Benefit Rider (EEB Rider). The amount of Death Benefit
payable under this rider is the greatest of the following amounts:
o the current Contract Value as of the Valuation Date we approve the payment
of the claim; or
o the sum of all Purchase Payments decreased by withdrawals in the same
proportion that withdrawals reduced the Contract Value (withdrawals less
than or equal to the Guaranteed Annual Income amount under the Lincoln
Lifetime IncomeSM Advantage 2.0 rider may reduce the sum of all purchase
payments amount on a dollar for dollar basis. See The Contracts - Lincoln
Lifetime IncomeSM Advantage 2.0); or
o the highest contract value on any contract anniversary (including the
inception date) (determined before the allocation of any purchase payments
on that contract anniversary) prior to the 81st birthday of the deceased
contractowner, joint owner (if applicable), or annuitant and prior to the
death of the contractowner, joint owner or annuitant for whom a death claim
is approved for payment. The highest contract value is adjusted for certain
transactions. It is increased by purchase payments made on or after that
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contract anniversary on which the highest contract value is obtained. It is
decreased by withdrawals subsequent to that contract anniversary date in the
same proportion that withdrawals reduced the contract value; or
o the current Contract Value as of the Valuation Date we approve the payment
of the claim plus an amount equal to the Enhancement Rate times the lesser
of:
o the contract earnings; or
o the covered earnings limit.
Note: If there are no contract earnings, there will not be an amount provided
under this item.
In a declining market, withdrawals deducted in the same proportion that
withdrawals reduce the contract value may have a magnified effect on the
reduction of the death benefit payable. All references to withdrawals include
deductions for any applicable charges associated with that withdrawal and
premium taxes, if any.
The Enhancement Rate is based on the age of the oldest Contractowner, joint
owner (if applicable), or Annuitant on the date when the rider becomes
effective. If the oldest is under age 70, the rate is 40%. If the oldest is age
70 to 75, the rate is 25%. The EEB rider is not available if the oldest
Contractowner, joint owner (if applicable), or Annuitant is age 76 or older at
the time the rider would become effective.
Contract earnings equal:
o the Contract Value as of the date of death of the individual for whom a
death claim is approved by us for payment; minus
o the Contract Value as of the effective date of this rider (determined before
the allocation of any Purchase Payments on that date); minus
o each Purchase Payment that is made to the contract on or after the effective
date of the rider, and prior to the date of death of the individual for
whom a death claim is approved for payment; plus
o any contractual basis that has previously been withdrawn, which is the
amount by which each withdrawal made on or after the effective date of the
rider, and prior to the date of death of the individual for whom a death
claim is approved for payment, exceeded the contract earnings immediately
prior to the withdrawal.
The previously withdrawn contractual basis associated with each withdrawal made
on or after the effective date of the rider is an amount equal to the greater
of $0 and (A), where
(A) is the amount of the withdrawal minus the greater of $0 and (B); where
(B) is the result of [(i) - (ii)]; where
(i) is the Contract Value immediately prior to the withdrawal; and
(ii) is the amount of Purchase Payments made into the contract prior to
the withdrawal.
The covered earnings limit equals 200% of:
o the Contract Value as of the effective date of this rider (determined before
the allocation of any Purchase Payments on that date); plus
o each Purchase Payment that is made to the contract on or after the effective
date of the rider, and prior to the date of death of the individual for
whom a death claim is approved for payment, and prior to the contract
anniversary immediately preceding the 76th birthday of the oldest of the
Contractowner, joint owner (if applicable) or Annuitant; minus
o any contractual basis that has previously been withdrawn, which is the
amount by which each withdrawal made on or after the effective date of the
rider, and prior to the date of death of the individual for whom a death
claim is approved for payment, exceeded the contract earnings immediately
prior to the withdrawal.
The previously withdrawn contractual basis associated with each withdrawal made
on or after the effective date of the rider is an amount equal to the greater
of $0 and (A), where
(A) is the amount of the withdrawal minus the greater of $0 and (B); where
(B) is the result of [(i) - (ii)]; where
(i) is the Contract Value immediately prior to the withdrawal; and
(ii) is the amount of Purchase Payments made into the contract prior to
the withdrawal.
The EEB rider may not be available in all states. Please check with your
investment representative regarding availability of this rider. The EEB rider
can only be elected at the time the contract is purchased.
The EEB rider may not be terminated unless you surrender the contract or the
contract is in the Annuity Payout period.
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General Death Benefit Information
Only one of these Death Benefits may be in effect at any one time. This benefit
terminates if you elect i4LIFE (Reg. TM) Advantage (which provides a Death
Benefit) or if you elect an annuitization option.
If there are joint owners, upon the death of the first Contractowner, we will
pay a Death Benefit to the surviving joint owner. The surviving joint owner
will be treated as the primary, designated Beneficiary. Any other Beneficiary
designation on record at the time of death will be treated as a contingent
Beneficiary. If the surviving joint owner is the spouse of the deceased joint
owner, he/she may continue the contract as sole Contractowner. Upon the death
of the spouse who continues the contract, we will pay a Death Benefit to the
designated Beneficiary(s).
If the Beneficiary is the spouse of the Contractowner, then the spouse may
elect to continue the contract as the new Contractowner. Pursuant to the
Federal Defense of Marriage Act, same-sex marriages are not recognized for
purposes of federal law. Therefore, the favorable tax treatment provided by
federal tax law to an opposite-sex spouse is not available to a same-sex
spouse. Same-sex spouses should consult a tax advisor prior to purchasing
annuity products that provide benefits based upon status as a spouse, and prior
to exercising any spousal rights under an annuity. Should the surviving spouse
elect to continue the contract, a portion of the Death Benefit may be credited
to the contract. Any portion of the Death Benefit that would have been payable
(if the contract had not been continued) that exceeds the current Contract
Value on the date the surviving spouse elects to continue will be added to the
Contract Value. If the contract is continued in this way, the Death Benefit in
effect at the time the Beneficiary elected to continue the contract will remain
as the Death Benefit.
If the EEB Rider is in effect, the Enhancement Rate for future benefits will be
based on the age of the older of the surviving spouse or the annuitant at the
time the EEB is paid into the contract. The contract earnings and the covered
earnings limit will be reset, treating the current contract value (after
crediting any death benefit amount into the contract as described above) as the
initial deposit for purposes of future benefit calculations. If either the
surviving spouse or the surviving annuitant is 76 or older, the EEB death
benefit will be reduced to the EGMDB and your total annual charge will be
reduced to the EGMDB charge.
The value of the Death Benefit will be determined as of the Valuation Date we
approve the payment of the claim. Approval of payment will occur upon our
receipt of a claim submitted in Good Order. To be in Good Order, we require all
the following:
1. proof (e.g. an original certified death certificate), or any other proof of
death satisfactory to us, of the death; and
2. written authorization for payment; and
3. all required claim forms, fully completed (including selection of a
settlement option).
Notwithstanding any provision of this contract to the contrary, the payment of
Death Benefits provided under this contract must be made in compliance with
Code Section 72(s) or 401(a)(9) as applicable, as amended from time to time.
Death Benefits may be taxable. See Federal Tax Matters.
Unless otherwise provided in the Beneficiary designation, one of the following
procedures will take place on the death of a Beneficiary:
o If any Beneficiary dies before the Contractowner, that Beneficiary's
interest will go to any other Beneficiaries named, according to their
respective interests; and/or
o If no Beneficiary survives the Contractowner, the proceeds will be paid to
the Contractowner's estate.
If the Beneficiary is a minor, court documents appointing the
guardian/custodian may be required.
Unless the Contractowner has already selected a settlement option, the
Beneficiary may choose the method of payment of the Death Benefit. The Death
Benefit payable to the Beneficiary or joint owner must be distributed within
five years of the Contractowner's date of death unless the Beneficiary begins
receiving within one year of the Contractowner's death the distribution in the
form of a life annuity or an annuity for a designated period not extending
beyond the Beneficiary's life expectancy.
Upon the death of the Annuitant, Federal tax law requires that an annuity
election be made no later than 60 days after we have approved the death claim
for payment.
If the Death Benefit becomes payable, the recipient may elect to receive
payment either in the form of a lump sum settlement or an Annuity Payout. If a
lump sum settlement is elected, the proceeds will be mailed within seven days
of approval by us of the claim subject to the laws, regulations and tax code
governing payment of Death Benefits. This payment may be postponed as permitted
by the Investment Company Act of 1940.
In the case of a death of one of the parties to the annuity contract, if the
recipient of the death benefit has elected a lump sum settlement and the death
benefit is over $10,000, the proceeds will be placed into a SecureLine (Reg.
TM) account in the recipient's name as the owner of the account. SecureLine
(Reg. TM) is a service we offer to help the recipient manage the death benefit
proceeds. With SecureLine (Reg. TM), an interest bearing account is established
from the proceeds payable on a policy or contract administered by us. The
recipient is the owner of the account, and is the only one authorized to
transfer proceeds from the account. Instead of mailing the recipient a check,
we will send a checkbook so that the recipient will have access to the account
by writing a check. The recipient may choose to leave the proceeds in this
account, or may begin writing checks right away. If the recipient decides he or
she wants the entire proceeds
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immediately, the recipient may write one check for the entire account balance.
The recipient can write as many checks as he or she wishes. We may at our
discretion set minimum withdrawal amounts per check. The total of all checks
written cannot exceed the account balance. The SecureLine (Reg. TM) account is
part of our general account. It is not a bank account and it is not insured by
the FDIC or any other government agency. As part of our general account, it is
subject to the claims of our creditors. We receive a benefit from all amounts
left in the SecureLine (Reg. TM) account. The recipient may request that
surrender proceeds be paid directly to him or her instead of applied to a
SecureLine (Reg. TM) account.
Interest credited in the SecureLine (Reg. TM) account is taxable as ordinary
income in the year such interest is credited, and is not tax deferred. We
recommend that the recipient consult a tax advisor to determine the tax
consequences associated with the payment of interest on amounts in the
SecureLine (Reg. TM) account. The balance in the recipient's SecureLine (Reg.
TM) account starts earning interest the day the account is opened and will
continue to earn interest until all funds are withdrawn. Interest is compounded
daily and credited to the recipient's account on the last day of each month.
The interest rate will be updated monthly and we may increase or decrease the
rate at our discretion. The interest rate credited to the recipient's
SecureLine (Reg. TM) account may be more or less than the rate earned on funds
held in our general account. The interest rate offered with a SecureLine (Reg.
TM) account is not necessarily that credited to the fixed account.
There are no monthly fees. The recipient may be charged a fee for a stop
payment or if a check is returned for insufficient funds.
Investment Requirements
If you elect 4LATER (Reg. TM) Advantage Protected Funds or i4LIFE (Reg. TM)
Advantage Guaranteed Income Benefit Protected Funds, you must allocate 100% of
your Contract Value among one or more of the following Subaccounts only: LVIP
Protected American Balanced Allocation Fund, LVIP Protected American Growth
Allocation Fund, LVIP Protected Profile Conservative Fund, LVIP Protected
Profile Growth Fund, LVIP Protected Profile Moderate Fund and LVIP SSgA Bond
Index Fund.
If you purchase any other Living Benefit rider (Lincoln Lifetime IncomeSM
Advantage 2.0, Lincoln SmartSecurity (Reg. TM) Advantage, or the Guaranteed
Income Benefit under i4LIFE (Reg. TM) Advantage), you will be subject to
Investment Requirements, which means you will be limited in how much you can
invest in certain Subaccounts of your contract. Currently, if you purchase
i4LIFE (Reg. TM) without the Guaranteed Income Benefit, you will not be subject
to any Investment Requirements, although we reserve the right to impose
Investment Requirements for this rider in the future.
Investment Requirements apply whether you purchase a Living Benefit rider at
contract Issue or if you add a Living Benefit rider to an existing contract.
You must hold the rider for a minimum period of time after election (the
minimum time is specified under the Termination section of each rider). During
this time, you will be required to adhere to the Investment Requirements. After
this time, failure to adhere to the Investment Requirements will result in
termination of the rider.
We have divided the Subaccounts of your contract into groups and have specified
the minimum or maximum percentages of Contract Value that must be in each group
at the time you purchase the rider. Some investment options are not available
to you if you purchase certain riders. The Investment Requirements may not be
consistent with an aggressive investment strategy. You should consult with your
registered representative to determine if the Investment Requirements are
consistent with your investment objectives.
You can select the percentages of Contract Value (or Account Value if i4LIFE
(Reg. TM) Advantage with the Guaranteed Income Benefit is in effect) to
allocate to individual subaccounts within each group, but the total investment
for all Subaccounts within the group must comply with the specified minimum or
maximum percentages for that group.
In accordance with these Investment Requirements, you agree to be automatically
enrolled in the portfolio rebalancing option under your contract and thereby
authorize us to automatically rebalance your Contract Value on a periodic
basis. On each quarterly anniversary of the effective date of the rider, we
will rebalance your Contract Value, on a pro-rata basis, based on your
allocation instructions in effect at the time of the rebalancing. Any
reallocation of Contract Value among the Subaccounts made by you prior to a
rebalancing date will become your allocation instructions for rebalancing
purposes. Confirmation of the rebalancing will appear on your quarterly
statement and you will not receive an individual confirmation after each
reallocation. If we rebalance Contract Value from the Subaccounts and your
allocation instructions do not contain any Subaccounts that meet the Investment
Requirements then that portion of the rebalanced Contract Value that does not
meet the Investment Requirements will be allocated to the Delaware VIP (Reg.
TM) Limited-Term Diversified Income Series as the default investment option or
any other Subaccount that we may designate for that purpose. These investments
will become your allocation instructions until you tell us otherwise.
We may change the list of Subaccounts in a group, change the number of groups,
change the minimum or maximum percentages of Contract Value allowed in a group,
change the investment options that are or are not available to you, or change
the rebalancing frequency at any time in our sole discretion. You will be
notified at least 30 days prior to the date of any change. We may make such
modifications at any time when we believe the modifications are necessary to
protect our ability to provide the guarantees under these riders. Our decision
to make modifications will be based on several factors including the general
market conditions and the style and investment objectives of the Subaccount
investments.
At the time you receive notice of a change to the Investment Requirements, you
may:
1. drop the applicable rider immediately, without waiting for a termination
event if you do not wish to be subject to these Investment Requirements; or
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2. submit your own reallocation instructions for the Contract Value, before
the effective date specified in the notice, so that the Investment
Requirements are satisfied; or
3. take no action and be subject to the quarterly rebalancing as described
above. If this results in a change to your allocation instructions, then
these will be your new allocation instructions until you tell us otherwise.
At this time, the Subaccount groups are as follows:
Group 2
Investments cannot exceed 70% of Contract Value
Group 1 or Account Value (if
Investments must be at least 30% of Contract Value or Account Value (if i4LIFE (Reg. TM) Advantage with the Guaranteed
i4LIFE (Reg. TM) Advantage with the Guaranteed Income Benefit is in effect) Income Benefit is in effect) ------------------
----------------------------------------------------------------------------- -----------------------------
1. American Funds Bond Fund Any of the funds offered under the contract,
except for funds in Groups
1 and 3 and the fixed account.
2. American Funds Global Bond Fund
3. American Funds Mortgage FundSM
4. American Funds U.S. Government/AAA Rated Securities Fund
5. Delaware VIP (Reg. TM) Diversified Income Series
6. Delaware VIP (Reg. TM) Limited-Term Diversified Income Series
7. LVIP American Preservation Fund
8. LVIP BlackRock Inflation Protected Bond Fund
9. LVIP Delaware Diversified Floating Rate Fund
10. LVIP Dimensional/Vanguard Total Bond Fund
11. LVIP SSgA Bond Index Fund
Group 3
Investments cannot exceed 10% of Contract Value or Account Value (if
i4LIFE (Reg. TM) Advantage with the Guaranteed Income Benefit is in effect)
-----------------------------------------------------------------------------
1. DWS Alternative Asset Allocation VIP Portfolio
2. LVIP BlackRock Emerging Markets Index RPM Fund
3. LVIP SSgA Emerging Markets 100 Fund
As an alternative, to satisfy these Investment Requirements, you may allocate
100% of your Contract Value among the funds listed below. If you allocate less
than 100% of Contract Balue or i4LIFE (Reg. TM) Advantage Account Value among
these funds, then the funds listed below that are also listed in Group 1 will
be subject to Group 1 restrictions*. Any remaining funds listed below that are
not listed in Group 1 will fall into Group 2 and be subject to Group 2
restrictions. The fixed accounts are not available with these riders. The fixed
account is only available for dollar cost averaging.
o American Funds Asset Allocation Fund
o American Funds Bond Fund*
o American Funds Global Balanced FundSM
o American Funds Global Bond Fund*
o American Funds Mortgage FundSM*
o American Funds U.S. Government/AAA Rated Securities Fund*
o BlackRock Global Allocation V.I. Fund
o Delaware VIP (Reg. TM) Diversified Income Series*
o Delaware VIP (Reg. TM) Limited-Term Diversified Income Series*
o LVIP American Balanced Allocation Fund
o LVIP American Growth Allocation Fund
o LVIP American Income Allocation Fund
o LVIP American Preservation Fund
o LVIP BlackRock Inflation Protected Bond Fund*
o LVIP Delaware Diversified Floating Rate Fund*
o LVIP Dimensional/Vanguard Total Bond Fund*
o LVIP Protected American Growth Allocation Fund
o LVIP Protected American Balanced Allocation Fund
o LVIP Protected Profile Conservative Fund
o LVIP Protected Profile Moderate Fund
o LVIP Protected Profile Growth Fund
o LVIP SSgA Bond Index Fund*
o LVIP SSgA Global Tactical Allocation Fund
Investment Requirements for Protected Funds riders. If you elect 4LATER (Reg.
TM) Advantage Protected Funds you must allocate 100% of your Contract Value
among one or more of the following Subaccounts only.
Group 2
Investments cannot exceed 70% of Contract Value
Group 1 or Account Value (if
Investments must be at least 30% of Contract Value or Account Value (if i4LIFE (Reg. TM) Advantage with the Guaranteed
i4LIFE (Reg. TM) Advantage with the Guaranteed Income Benefit is in effect) Income Benefit is in effect) ------------------
----------------------------------------------------------------------------- -----------------------------
1. Delaware VIP (Reg. TM) Limited-Term Diversified Income Series 1. American Funds American Protected Asset
Allocation Fund
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Group 2
Investments cannot exceed 70% of Contract Value
Group 1 or Account Value (if
Investments must be at least 30% of Contract Value or Account Value (if i4LIFE (Reg. TM) Advantage with the Guaranteed
i4LIFE (Reg. TM) Advantage with the Guaranteed Income Benefit is in effect) Income Benefit is in effect) ------------------
----------------------------------------------------------------------------- -----------------------------
2. Delaware VIP (Reg. TM) Diversified Income Series 2. LVIP Protected American Balanced Allocation
Fund
3. LVIP American Preservation Fund 3. LVIP Protected American Growth Allocation Fund
4. LVIP BlackRock Inflation Protected Bond Fund 4. LVIP Protected Profile Conservative Fund
5. LVIP Delaware Diversified Floating Bond Rate 5. LVIP Protected Profile Growth Fund
6. LVIP Dimensional / Vanguard Total Bond Fund 6. LVIP Protected Profile Moderate Fund
7. LVIP SSgA Bond Index 7. LVIP SSgA Global Tactical Allocation RPM Fund
Group 3
Investments cannot exceed 10% of contract value or Account Value (if
i4LIFE (Reg. TM) Advantage with the Guaranteed Income Benefit is in effect)
-----------------------------------------------------------------------------
1. LVIP BlackRock Emerging Markets Index RPM Fund
In the alternative, you may satisfy these Investment Requirements by allocating
100% of your Contract Value among the funds listed below. If you allocate less
than 100% of Contract Value or Account Value under i4LIFE (Reg. TM) Advantage
to or among these funds, then the funds listed below that are also listed in
Group 1 will be subject to Group 1 restrictions.* Any remaining funds listed
below that are not listed in Group 1 will fall into Group 2 and will be subject
to Group 2 restrictions.
o American Funds American Protected Asset Allocation Fund
o Delaware VIP (Reg. TM) Limited-Term Diversified Income Series*
o Delaware VIP (Reg. TM) Diversified Income Series*
o LVIP American Preservation Fund*
o LVIP BlackRock Inflation Protected Bond Fund*
o LVIP Delaware Diversified Floating Rate Fund*
o LVIP Dimensional / Vanguard Total Bond Fund*
o LVIP Protected American Balanced Allocation Fund
o LVIP Protected Profile Conservative Fund
o LVIP Protected Profile Growth Fund
o LVIP Protected Profile Moderate Fund
o LVIP SSgA Bond Index Fund*
o LVIP SSgA Global Tactical Allocation RPM Fund
Living Benefit Riders
The optional Living Benefit riders offered under this variable annuity contract
are described in the following sections. The riders offer either a minimum
withdrawal benefit (Lincoln Lifetime IncomeSM Advantage 2.0 and Lincoln
SmartSecurity (Reg. TM) Advantage) or a minimum Annuity Payout (i4LIFE (Reg.
TM) Advantage with Guaranteed Income Benefit and 4LATER (Reg. TM) Advantage
Protected Funds). You may not elect more than one Living Benefit rider at any
one time. Upon election of a Living Benefit rider, you will be subject to
Investment Requirements (unless you elect i4LIFE (Reg. TM) Advantage without
the Guaranteed Income Benefit (version 4)).
The overview chart provided as an appendix to this prospectus provides a brief
description and comparison of each Living Benefit rider. Excess Withdrawals
under certain Living Benefit riders may result in a reduction or premature
termination of those benefits or of those riders. If you are not certain how an
Excess Withdrawal will reduce your future guaranteed amounts, you should
contact either your registered representative or us prior to requesting a
withdrawal to find out what, if any, impact the Excess Withdrawal will have on
any guarantees under the Living Benefit rider. Terms and conditions may change
after the contract is purchased.
The benefits and features of the optional Living Benefit riders are separate
and distinct from the downside protection strategies that may be employed by
the funds offered under this contract. The riders do not guarantee the
investment results of the funds.
Lincoln Lifetime IncomeSM Advantage 2.0
The Lincoln Lifetime IncomeSM Advantage 2.0 is a Living Benefit rider available
for purchase in your contract that provides:
o Guaranteed lifetime periodic withdrawals for you (and your spouse if the
joint life option is selected) up to the Guaranteed Annual Income amount
which is based upon a guaranteed Income Base (a value equal to either your
initial Purchase Payment or Contract Value, if elected after the contract's
effective date);
o A 5% Enhancement to the Income Base (less Purchase Payments received in that
year) if greater than an Automatic Annual Step-up so long as no withdrawals
are made in that year and the rider is within the Enhancement Period;
o Automatic Annual Step-ups of the Income Base to the Contract Value if the
Contract Value is equal to or greater than the Income Base after the 5%
Enhancement;
o Age-based increases to the Guaranteed Annual Income amount (after reaching a
higher age-band and after an Automatic Annual Step-up).
Please note any withdrawals made prior to age 55 or that exceed the Guaranteed
Annual Income amount or that are not payable to the original Contractowner or
original Contractowner's bank account (or to the original Annuitant or the
original Annuitant's bank account, if the owner is a non-natural person)
(Excess Withdrawals) may significantly reduce your Income Base as well as
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your Guaranteed Annual Income amount by an amount greater than the dollar
amount of the Excess Withdrawal and will terminate the rider if the Income Base
is reduced to zero.
In order to purchase Lincoln Lifetime IncomeSM Advantage 2.0 the Purchase
Payment or Contract Value (if purchased after the contract is issued) must be
at least $25,000. This rider provides guaranteed, periodic withdrawals for your
life as Contractowner/
Annuitant (single life option) or for the lives of you as
Contractowner/Annuitant and your spouse as joint owner (joint life option)
regardless of the investment performance of the contract, provided that certain
conditions are met. The Contractowner, Annuitant or Secondary Life may not be
changed while this rider is in effect (except if the Secondary Life assumes
ownership of the contract upon death of the Contractowner), including any sale
or assignment of the contract as collateral. An Income Base is used to
calculate the Guaranteed Annual Income payment from your contract, but is not
available as a separate benefit upon death or surrender. The Income Base is
equal to the initial Purchase Payment (or Contract Value if elected after
contract issue), increased by subsequent Purchase Payments, Automatic Annual
Step-ups and 5% Enhancements, and decreased by Excess Withdrawals in accordance
with the provisions set forth below. After the first anniversary of the rider
effective date, once cumulative additional Purchase Payments exceed $100,000,
additional Purchase Payments will be limited to $50,000 per Benefit Year
without Home Office approval. No additional Purchase Payments are allowed if
the Contract Value decreases to zero for any reason. No additional Purchase
Payments are allowed after the Nursing Home Enhancement is requested and
approved by us (described later in this prospectus).
This rider provides for guaranteed, periodic withdrawals up to the Guaranteed
Annual Income amount commencing after the younger of you or your spouse (joint
life option) reach age 55. The Guaranteed Annual Income payments are based upon
specified percentages of the Income Base. The specified withdrawal percentages
of the Income Base are age based and may increase over time. With the single
life option, you may receive Guaranteed Annual Income payments for your
lifetime. If you purchase the joint life option, Guaranteed Annual Income
amounts for the lifetimes of you and your spouse will be available.
Withdrawals in excess of the Guaranteed Annual Income amount or that are made
prior to age 55 or that are not payable to the original Contractowner or
original Contractowner's bank account (or to the original Annuitant or the
original Annuitant's bank account, if the owner is a non-natural person)
(Excess Withdrawals) may significantly reduce your Income Base and your
Guaranteed Annual Income payments by an amount greater than the dollar amount
of the Excess Withdrawal and may terminate the rider and the contract if the
Income Base is reduced to zero. Withdrawals will also negatively impact the
availability of the 5% Enhancement. These options are discussed below in
detail.
Lincoln Life offers other optional riders available for purchase with its
variable annuity contracts. These riders provide different methods to take
income from your Contract Value and may provide certain guarantees. There are
differences between the riders in the features provided as well as the charge
structure. In addition, the purchase of one rider may impact the availability
of another rider. Information about the relationship between Lincoln Lifetime
IncomeSM Advantage 2.0 and these other riders is included later in this
discussion. Not all riders will be available at all times. You may consider
purchasing the Lincoln Lifetime IncomeSM Advantage 2.0 if you want a guaranteed
lifetime income payment that may grow as you get older and may increase through
the Automatic Annual Step-up or 5% Enhancement. The cost of the Lincoln
Lifetime IncomeSM Advantage 2.0 may be higher than other Living Benefit riders
that you may purchase in your contract. The age at which you may start
receiving the Guaranteed Annual Income amount may be different than the ages
that you may receive guaranteed payments under other riders.
Availability. Lincoln Lifetime IncomeSM Advantage 2.0 is available for purchase
with new and existing nonqualified and qualified (IRAs and Roth IRAs) annuity
contracts. The Contractowner/Annuitant as well as the spouse under the joint
life option must be under age 86 at the time this rider is elected. You cannot
elect the rider and any other Living Benefit rider offered in your contract at
the same time. You may not elect the rider if you have also elected i4LIFE
(Reg. TM) Advantage, 4LATER (Reg. TM) Advantage Protected Funds or Lincoln
SmartIncomeSM Inflation, which are Annuity Payout options. You must wait at
least 12 months after terminating your Living Benefit rider or any other Living
Benefits we may offer in the future before electing Lincoln Lifetime IncomeSM
Advantage 2.0. See The Contracts - Lincoln SmartSecurity (Reg. TM) Advantage,
i4LIFE (Reg. TM) Advantage and Annuity Payouts - Lincoln SmartIncomeSM
Inflation for more information. There is no guarantee that Lincoln Lifetime
IncomeSM Advantage 2.0 will be available for new purchasers in the future as we
reserve the right to discontinue this benefit at any time.
If you purchase the Lincoln Lifetime IncomeSM Advantage 2.0, you will be
limited in your ability to invest within the Subaccounts offered within your
contract. You will be required to adhere to Investment Requirements. In
addition, the fixed account is not available except for use with dollar cost
averaging. See Investment Requirements .
If the rider is elected at contract issue, then the rider will be effective on
the contract's effective date. If the rider is elected after the contract is
issued (by sending a written request to our Home Office), the rider will be
effective on the next Valuation Date following approval by us.
Benefit Year. The Benefit Year is the 12-month period starting with the
effective date of the rider and starting with each anniversary of the rider
effective date after that.
Income Base. The Income Base is a value used to calculate your Guaranteed
Annual Income amount. The Income Base is not available to you as a lump sum
withdrawal or a Death Benefit. The initial Income Base varies based on when you
elect the rider. If you elect the rider at the time you purchase the contract,
the initial Income Base will equal your initial Purchase Payment. If you elect
the rider
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after we issue the contract, the initial Income Base will equal the Contract
Value on the effective date of the rider. The maximum Income Base is
$10,000,000. This maximum takes into consideration the total guaranteed amounts
under the Living Benefit riders of all Lincoln Life contracts (or contracts
issued by our affiliates) in which you (and/or spouse if joint life option) are
the covered lives. See The Contracts - 4LATER (Reg. TM) Advantage Protected
Funds and Lincoln SmartSecurity (Reg. TM) Advantage.
Additional Purchase Payments automatically increase the Income Base by the
amount of the Purchase Payment (not to exceed the maximum Income Base); for
example, a $10,000 additional Purchase Payment will increase the Income Base by
$10,000. After the first anniversary of the rider effective date, once
cumulative additional Purchase Payments exceed $100,000, additional Purchase
Payments will be limited to $50,000 per Benefit Year without Home Office
approval. If after the first Benefit year cumulative additional Purchase
Payments equal or exceed $100,000, the charge for Lincoln Lifetime IncomeSM
Advantage 2.0 will change to the then current charge in effect on the next
Benefit Year anniversary. Additional Purchase Payments will not be allowed if
the Contract Value decreases to zero for any reason including market loss.
Excess Withdrawals reduce the Income Base as discussed below. Withdrawals less
than or equal to the Guaranteed Annual Income amount will not reduce the Income
Base.
Since the charge for the rider is based on the Income Base, the cost of the
rider increases when additional Purchase Payments, Automatic Annual Step-ups
and 5% Enhancements are made, and the cost decreases as Excess Withdrawals are
made because these transactions all adjust the Income Base. In addition, the
percentage charge may change when Automatic Annual Step-ups or 5% Enhancements
occur as discussed below or additional Purchase Payments occur. See Charges and
Other Deductions - Rider Charges - Lincoln Lifetime IncomeSM Advantage 2.0
Charge.
5% Enhancement. On each Benefit Year anniversary, the Income Base, minus
Purchase Payments received in that year, will be increased by 5% if the
Contractowner/Annuitant (as well as the spouse if the joint life option is in
effect) are under age 86, if there were no withdrawals in that year and the
rider is within the Enhancement Period. The Enhancement Period is a 10-year
period that begins on the effective date of the rider. A new Enhancement Period
begins immediately following an Automatic Annual Step-up. If during any
Enhancement Period there are no Automatic Annual Step-ups, the 5% Enhancements
will stop at the end of the Enhancement Period and will not restart until the
next Benefit Year anniversary following the Benefit Year anniversary upon which
an Automatic Annual Step-up occurs. Any Purchase Payment made after the initial
Purchase Payment will be added immediately to the Income Base and will result
in an increased Guaranteed Annual Income amount but must be invested in the
contract at least one Benefit Year before it will be used in calculating the 5%
Enhancement. Any Purchase Payments made within the first 90 days after the
effective date of the rider will be included in the Income Base for purposes of
calculating the 5% Enhancement on the first Benefit Year anniversary.
If you decline an Automatic Annual Step-up during the first 10 Benefit Years,
you will continue to be eligible for the 5% Enhancements through the end of the
current Enhancement Period, but the Lincoln Lifetime IncomeSM Advantage 2.0
charge could increase to the then current charge at the time of any 5%
Enhancements after the 10th Benefit Year anniversary. You will have the option
to opt out of the Enhancements after the 10th Benefit Year. In order to be
eligible to receive further 5% Enhancements the Contractowner/Annuitant (single
life option), or the Contractowner and spouse (joint life option) must still be
living and be under age 86.
Note: The 5% Enhancement is not available in any year there is a withdrawal
from Contract Value including a Guaranteed Annual Income payment. A 5%
Enhancement will occur in subsequent years only under certain conditions. If
you are eligible (as defined below) for the 5% Enhancement in the next year,
the Enhancement will not occur until the Benefit Year anniversary of that year.
The following is an example of the impact of the 5% Enhancement on the Income
Base (assuming no withdrawals):
Initial Purchase Payment = $100,000; Income Base = $100,000
Additional Purchase Payment on day 30 = $15,000; Income Base = $115,000
Additional Purchase Payment on day 95 = $10,000; Income Base = $125,000
On the first Benefit Year anniversary, the Income Base will not be less than
$130,750 ($115,000 times 1.05%=$120,750 plus $10,000). The $10,000 Purchase
Payment on day 95 is not eligible for the 5% Enhancement until the 2nd Benefit
Year anniversary.
The 5% Enhancement will be in effect for 10 years (the Enhancement Period) from
the effective date of the rider. A new Enhancement Period will begin each time
an Automatic Annual Step-up to the Contract Value occurs as described below. As
explained below, the 5% Enhancement and Automatic Annual Step-up will not occur
in the same year. If the Automatic Annual Step-up provides a greater increase
to the Income Base, you will not receive the 5% Enhancement. If the Automatic
Annual Step-up and the 5% Enhancement increase the Income Base to the same
amount then you will receive the Automatic Annual Step-up. The 5% Enhancement
or the Automatic Annual Step-up cannot increase the Income Base above the
maximum Income Base of $10,000,000.
You will not receive the 5% Enhancement on any Benefit Year anniversary in
which there is a withdrawal, including a Guaranteed Annual Income payment from
the contract during that Benefit Year. The 5% Enhancement will occur on the
following Benefit Year anniversary if no further withdrawals are made from the
contract and the rider is within the Enhancement Period.
An example of the impact of a withdrawal on the 5% Enhancement is included in
the Withdrawal Amounts section below.
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If during the first 10 Benefit Years your Income Base is increased by the 5%
Enhancement on the Benefit Year anniversary, your percentage charge for the
rider will not change on the Benefit Year anniversary. However, the amount you
pay for the rider will increase since the charge for the rider is based on the
Income Base. After the 10th Benefit Year anniversary the annual rider
percentage charge may increase to the current charge each year if the Income
Base increases as a result of the 5% Enhancement, but the charge will never
exceed the guaranteed maximum annual percentage charge of 2.00%. See Charges
and Other Deductions - Rider Charges - Lincoln Lifetime IncomeSM Advantage 2.0
Charge.
If your percentage charge for this rider is increased due to a 5% Enhancement
that occurs after the 10th Benefit Year anniversary, you may opt-out of the 5%
Enhancement by giving us notice in writing within 30 days after the Benefit
Year anniversary if you do not want your percentage charge for the rider to
change. This opt-out will only apply for this particular 5% Enhancement. You
will need to notify us each time thereafter (if an Enhancement would cause your
percentage charge to increase) if you do not want the 5% Enhancement. You may
not opt-out of the 5% Enhancement if the current charge for the rider increases
due to additional Purchase Payment made during that Benefit Year that exceeds
the $100,000 Purchase Payment restriction after the first Benefit Year. See
Income Base section for more details.
Automatic Annual Step-ups of the Income Base. The Income Base will
automatically step-up to the Contract Value on each Benefit Year anniversary
if:
a. the Contractowner/Annuitant (single life option), or the Contractowner
and spouse (joint life option) are still living and under age 86; and
b. the Contract Value on that Benefit Year anniversary, after the deduction
of any withdrawals (including the rider charge), plus any Purchase
Payments made on that date is equal to or greater than the Income Base
after the 5% Enhancement (if any).
Each time the Income Base is stepped up to the current Contract Value as
described above, your percentage charge for the rider will be the current
charge for the rider, not to exceed the guaranteed maximum charge. Therefore,
your percentage charge for this rider could increase every Benefit Year
anniversary. See Charges and Other Deductions - Rider Charges - Lincoln
Lifetime IncomeSM Advantage 2.0 Charge.
Each time the Automatic Annual Step-up occurs a new Enhancement Period starts.
The Automatic Annual Step-up is available even in those years when a withdrawal
has occurred.
If your percentage charge for this rider is increased upon an Automatic Annual
Step-up, you may opt-out of the Automatic Annual Step-up by giving us notice in
writing within 30 days after the Benefit Year anniversary if you do not want
your percentage charge for the rider to change. This opt-out will only apply
for this particular Automatic Annual Step-up. You will need to notify us each
time the percentage charge increases if you do not want the Step-up. As stated
above, if you decline an Automatic Annual Step-up during the first 10 Benefit
Years, you will continue to be eligible for the 5% Enhancements through the end
of the current Enhancement Period, but the Lincoln Lifetime IncomeSM Advantage
2.0 charge could increase to the then current charge at the time of any 5%
Enhancements after the 10th Benefit Year anniversary. You will have the option
to opt out of the Enhancements after the 10th Benefit Year. See the earlier
Income Base section. You may not opt-out of the Automatic Annual Step-up if an
additional Purchase Payment made during that Benefit Year caused the charge for
the rider to increase to the current charge.
Following is an example of how the Automatic Annual Step-ups and the 5%
Enhancement will work (assuming no withdrawals or additional Purchase
Payments):
Potential
Contract Income Base with for Charge
Value 5% Enhancement Income Base to Change
---------- ------------------ ------------- -----------
Initial Purchase Payment $50,000 . $50,000 N/A $50,000 N/A
1st Benefit Year anniversary........ $54,000 $52,500 $54,000 Yes
2nd Benefit Year anniversary........ $53,900 $56,700 $56,700 No
3rd Benefit Year anniversary........ $56,000 $59,535 $59,535 No
4th Benefit Year anniversary........ $64,000 $62,512 $64,000 Yes
On the 1st Benefit Year anniversary, the Automatic Annual Step-up increased the
Income Base to the Contract Value of $54,000 since the increase in the Contract
Value is greater than the 5% Enhancement amount of $2,500 (5% of $50,000). On
the 2nd Benefit Year anniversary, the 5% Enhancement provided a larger increase
(5% of $54,000 = $2,700). On the 3rd Benefit Year anniversary, the 5%
Enhancement provided a larger increase (5% of $56,700=$2,835). On the 4th
Benefit Year anniversary, the Automatic Annual Step-up to the Contract Value
was greater than the 5% Enhancement amount of $2,977 (5% of $59,535). An
Automatic Annual Step-up cannot increase the Income Base beyond the maximum
Income Base of $10,000,000.
Withdrawal Amount. You may make periodic withdrawals up to the Guaranteed
Annual Income amount each Benefit Year for your (Contractowner) lifetime
(single life option) or the lifetimes of you and your spouse (joint life
option) as long as your Guaranteed Annual Income amount is greater than zero.
You may start taking Guaranteed Annual Income withdrawals when you (single life
option) or the younger of you and your spouse (joint life option) turn age 55.
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The initial Guaranteed Annual Income amount is calculated when you purchase the
rider. If you (or younger of you and your spouse if the joint life option is
elected) are under age 55 at the time the rider is elected the initial
Guaranteed Annual Income amount will be zero. If you (or the younger of you and
your spouse if the joint life option is elected) are age 55 or older at the
time the rider is elected the initial Guaranteed Annual Income amount will be
equal to a specified percentage of the Income Base. The specified percentage of
the Income Base will be based on your age (or younger of you and your spouse if
the joint life option is elected). Upon your first withdrawal the Guaranteed
Annual Income percentage is based on your age (single life option) or the
younger of you and your spouse's age (joint life option) at the time of the
withdrawal. For example, if you purchase the Lincoln Lifetime IncomeSM
Advantage 2.0 rider at age 58, your Guaranteed Annual Income percentage is 4%.
If you waited until you were age 60 (single life option) to make your first
withdrawal your Guaranteed Annual Income percentage would be 5%. During the
first Benefit Year the Guaranteed Annual Income amount is calculated using the
Income Base as of the effective date of the rider (including any Purchase
Payments made within the first 90 days after the effective date of the rider).
After the first Benefit Year anniversary we will use the Income Base calculated
on the most recent Benefit Year anniversary for calculating the Guaranteed
Annual Income amount. After your first withdrawal the Guaranteed Annual Income
amount percentage will only increase on a Benefit Year anniversary on or after
you have reached an applicable higher age band and after there has also been an
Automatic Annual Step-up. If you have reached an applicable age band and there
has not also been an Automatic Annual Step-up, then the Guaranteed Annual
Income amount percentage will not increase until the next Automatic Annual
Step-up occurs. If you do not withdraw the entire Guaranteed Annual Income
amount during a Benefit Year, there is no carryover of the remaining amount
into the next Benefit Year.
Guaranteed Annual Income Percentage by Age for Rider Elections On Or After May
20, 2013.
Single Life Option Single Life Option Joint Life Option Joint Life Option
---------------------- -------------------------- --------------------- -------------------------
Age
Guaranteed Annual Income (younger of you and Guaranteed Annual Income
Age amount percentage your spouse's age) amount percentage
---------------------- -------------------------- --------------------- -------------------------
55 and under 591/2 4.00% 55 and under 591/2 3.00%
591/2+ 5.00% 591/2 - 64 3.50%
65 - 69 4.00%
70+ 4.50%
Guaranteed Annual Income Percentage by Age for Rider Elections Prior to May 20,
2013.
Single Life Option Single Life Option Joint Life Option Joint Life Option
---------------------- -------------------------- --------------------- -------------------------
Age
Guaranteed Annual Income (younger of you and Guaranteed Annual Income
Age amount percentage your spouse's age) amount percentage
---------------------- -------------------------- --------------------- -------------------------
55 and under 591/2 4.00% 55 - 64 4.00%
591/2+ 5.00% 65+ 5.00%
If your Contract Value is reduced to zero because of market performance or
rider charges, withdrawals equal to the Guaranteed Annual Income amount will
continue automatically for your life (and your spouse's life if applicable)
under the Guaranteed Annual Income Amount Annuity Payout Option. You may not
withdraw the remaining Income Base in a lump sum. You will not be entitled to
the Guaranteed Annual Income amount if the Income Base is reduced to zero as a
result of an Excess Withdrawal. If the Income Base is reduced to zero due to an
Excess Withdrawal the rider and contract will terminate. If the Contract Value
is reduced to zero due to an Excess Withdrawal the rider and contract will
terminate.
Withdrawals equal to or less than the Guaranteed Annual Income amount will not
reduce the Income Base. All withdrawals you make will decrease the Contract
Value.
The following example shows the calculation of the Guaranteed Annual Income
amount for Lincoln Lifetime IncomeSM Advantage 2.0 and how withdrawals less
than or equal to the Guaranteed Annual Income amount affect the Income Base and
the Contract Value. The Contractowner is age 58 (4% Guaranteed Annual Income
percentage for single life option) on the rider's effective date, and makes an
initial Purchase Payment of $200,000 into the contract:
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Contract Value on the rider's effective date.................... $200,000
Income Base on the rider's effective date....................... $200,000
Initial Guaranteed Annual Income amount on the rider's effective
date ($200,000 x 4%) . $ 8,000
Contract Value six months after rider's effective date.......... $210,000
Income Base six months after rider's effective date............. $200,000
Withdrawal six months after rider's effective date when
Contractowner is still age 58................................... $ 8,000
Contract Value after withdrawal ($210,000 - $8,000) . $202,000
Income Base after withdrawal ($200,000 - $0) . $200,000
Contract Value on first Benefit Year anniversary................ $205,000
Income Base on first Benefit Year anniversary................... $205,000
Guaranteed Annual Income amount on first Benefit Year
anniversary ($205,000 x4%) . $ 8,200
Since there was a withdrawal during the first year the 5% Enhancement is not
available but the Automatic Annual Step-up was available and increased the
Income Base to the Contract Value of $205,000. On the first anniversary of the
rider's effective date the Guaranteed Annual Income amount is $8,200 (4% x
$205,000).
Purchase Payments added to the contract subsequent to the initial Purchase
Payment will increase the Guaranteed Annual Income amount by an amount equal to
the applicable Guaranteed Annual Income amount percentage multiplied by the
amount of the subsequent Purchase Payment. For example, assuming a
Contractowner is age 58 (single life option), if the Guaranteed Annual Income
amount of $2,000 (4% of $50,000 Income Base) is in effect and an additional
Purchase Payment of $10,000 is made, the new Guaranteed Annual Income amount
that Benefit Year is $2,400 ($2,000 + 4% of $10,000). The Guaranteed Annual
Income payment amount will be recalculated immediately after a Purchase Payment
is added to the contract.
After the first anniversary of the rider effective date, once cumulative
additional Purchase Payments exceed $100,000, additional Purchased Payments
will be limited to $50,000 per Benefit Year without Home Office approval.
Additional Purchase Payments will not be allowed if the Contract Value is zero.
No additional Purchase Payments are allowed after the Nursing Home Enhancement
is requested and approved by us (described below).
5% Enhancements and Automatic Annual Step-ups will increase the Income Base and
thus the Guaranteed Annual Income amount. The Guaranteed Annual Income amount
after the Income Base is adjusted either by a 5% Enhancement or an Automatic
Annual Step-up will be equal to the adjusted Income Base multiplied by the
applicable Guaranteed Annual Income percentage.
Nursing Home Enhancement. (The Nursing Home Enhancement is not available in
certain states. Please check with your registered representative.) The
Guaranteed Annual Income amount will be increased to 10%, called the Nursing
Home Enhancement, during a Benefit Year when the Contractowner/Annuitant is age
65 or older or the youngest of the Contractowner and spouse is age 65 or older
(joint life option), and one is admitted into an accredited nursing home or
equivalent health care facility. The Nursing Home Enhancement applies if the
admittance into such facility occurs 60 months or more after the effective date
of the rider, the individual was not in the nursing home in the year prior to
the effective date of the rider, and upon entering the nursing home, the person
has been then confined for at least 90 consecutive days. For the joint life
option if both spouses qualify, the Nursing Home Enhancement is available for
either spouse, but not both spouses. If no withdrawal has been taken since the
rider's effective date, the Nursing Home Enhancement will be available when the
Contractowner/Annuitant is age 65 or the youngest of the Contractowner and
spouse is age 65 (joint life option). If a withdrawal has been taken since the
rider's effective date, the Nursing Home Enhancement will be available on the
next Benefit Year anniversary after the Contractowner/Annuitant is age 65 or
the youngest of the Contractowner and spouse is age 65 (joint life option).
You may request the Nursing Home Enhancement by filling out a request form
provided by us. Proof of nursing home confinement will be required each year.
If you leave the nursing home, your Guaranteed Annual Income amount will be
reduced to the amount you would otherwise be eligible to receive starting after
the next Benefit Year anniversary. Any withdrawals made prior to the entrance
into a nursing home and during the Benefit Year that the Nursing Home
Enhancement commences, will reduce the amount available that year for the
Nursing Home Enhancement. Purchase Payments may not be made into the contract
after a request for the Nursing Home Enhancement is approved by us and any
Purchase Payments made either in the 12 months prior to entering the nursing
home or while you are residing in a nursing home will not be included in the
calculation of the Nursing Home Enhancement.
The requirements of an accredited nursing home or equivalent health care
facility are set forth in the Nursing Home Enhancement Claim Form. The criteria
for the facility include, but are not limited to: providing 24 hour a day
nursing services; an available physician; an employed nurse on duty or call at
all times; maintains daily clinical records; and able to dispense medications.
This does not include an assisted living or similar facility. The admittance to
a nursing home must be pursuant to a plan of care provided by a licensed health
care practitioner, and the nursing home must be located in the United States.
The remaining references to the Guaranteed Annual Income amount also include
the Nursing Home Enhancement amount.
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Excess Withdrawals. Excess Withdrawals are the cumulative amounts withdrawn
from the contract during the Benefit Year (including the current withdrawal)
that exceed the Guaranteed Annual Income amount at the time of the withdrawal
or are withdrawals made prior to age 55 (younger of you or your spouse for
joint life) or that are not payable to the original Contractowner or original
Contractowner's bank account (or to the original Annuitant or the original
Annuitant's bank account, if the owner is a non-natural person).
When an Excess Withdrawal occurs:
1. The Income Base is reduced by the same proportion that the Excess
Withdrawal reduces the Contract Value. This means that the reduction in
the Income Base could be more than the dollar amount of the withdrawal;
and
2. The Guaranteed Annual Income amount will be recalculated to equal the
applicable Guaranteed Annual Income amount percentage multiplied by the
new (reduced) Income Base (after the pro rata reduction for the Excess
Withdrawal).
We will provide you with quarterly statements that will include the Guaranteed
Annual Income amount (as adjusted for Guaranteed Annual Income amount payments,
Excess Withdrawals and additional Purchase Payments) available to you for the
Benefit Year, if applicable, in order for you to determine whether a withdrawal
may be an Excess Withdrawal. We encourage you to either consult with your
registered representative or call us at the number provided on the front page
of this prospectus if you have questions about Excess Withdrawals.
The following example demonstrates the impact of an Excess Withdrawal on the
Income Base, the Guaranteed Annual Income amount and the Contract Value. The
Contractowner who is age 58 (single life option) makes a $12,000 withdrawal
which causes a $12,915.19 reduction in the Income Base.
Prior to Excess Withdrawal:
Contract Value = $60,000
Income Base = $85,000
Guaranteed Annual Income amount = $3,400 (4% of the Income Base of $85,000)
After a $12,000 Withdrawal ($3,400 is within the Guaranteed Annual Income
amount, $8,600 is the Excess Withdrawal):
The Contract Value is reduced by the amount of the Guaranteed Annual Income
amount of $3,400 and the Income Base is not reduced:
Contract Value = $56,600 ($60,000 - $3,400)
Income Base = $85,000
The Contract Value is also reduced by the $8,600 Excess Withdrawal and the
Income Base is reduced by 15.19435%, the same proportion that the Excess
Withdrawal reduced the $56,600 Contract Value ($8,600 - $56,600)
Contract Value = $48,000 ($56,600 - $8,600)
Income Base = $72,084.81 ($85,000 x 15.19435% = $12,915.19; $85,000 -
$12,915.19 = $72,084.81)
Guaranteed Annual Income amount = $2,883.39 (4% of $72,084.81 Income Base)
On the following Benefit Year anniversary:
Contract Value = $43,000
Income Base = $72,084.81
Guaranteed Annual Income amount = $2,883.39 (4% x $72,084.81)
In a declining market, Excess Withdrawals may significantly reduce your Income
Base as well as your Guaranteed Annual Income amount. If the Income Base is
reduced to zero due to an Excess Withdrawal the rider will terminate. If the
Contract Value is reduced to zero due to an Excess Withdrawal the rider and
contract will terminate.
Withdrawals from IRA contracts will be treated as within the Guaranteed Annual
Income amount (even if they exceed the Guaranteed Annual Income amount) only if
the withdrawals are taken as systematic installments of the amount needed to
satisfy the required minimum distribution (RMD) rules under Internal Revenue
Code Section 401(a)(9). In addition, in order for this exception for RMDs to
apply, the following must occur:
1. Lincoln's automatic withdrawal service is used to calculate and pay the
RMD;
2. The RMD calculation must be based only on the value in this contract;
and
3. No withdrawals other than RMDs are made within the Benefit Year (except
as described in the next paragraph).
If your RMD withdrawals during a Benefit Year are less than the Guaranteed
Annual Income amount, an additional amount up to the Guaranteed Annual Income
amount may be withdrawn. If a withdrawal, other than an RMD is made during the
Benefit Year, then all amounts withdrawn in excess of the Guaranteed Annual
Income amount, including amounts attributable to RMDs, will be treated as
Excess Withdrawals.
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Distributions from qualified contracts are generally taxed as ordinary income.
In nonqualified contracts, withdrawals of Contract Value that exceed Purchase
Payments are taxed as ordinary income. See Federal Tax Matters for a discussion
of the tax consequences of withdrawals.
Guaranteed Annual Income Amount Annuity Payout Option. If you are required to
take annuity payments because you have reached the maturity date of the
contract, you have the option of electing the Guaranteed Annual Income Amount
Annuity Payout Option. If the Contract Value is reduced to zero and you have a
remaining Income Base, you will receive the Guaranteed Annual Income Amount
Annuity Payout Option. If you are receiving the Guaranteed Annual Income Amount
Annuity Payout Option, the Beneficiary may be eligible to receive final payment
upon death of the single life or surviving joint life. To be eligible the Death
Benefit option in effect immediately prior to the effective date of the
Guaranteed Annual Income Amount Annuity Payout Option must be one of the
following Death Benefits: the Guarantee of Principal Death Benefit, the EGMDB
or the EEB rider. If the Account Value Death Benefit option is in effect, the
Beneficiary will not be eligible to receive the final payment(s).
The Guaranteed Annual Income Amount Annuity Payout Option is an Annuity Payout
option which the Contractowner (and spouse if applicable) will receive annual
annuity payments equal to the Guaranteed Annual Income amount for life (this
option is different from other Annuity Payout options, including i4LIFE (Reg.
TM) Advantage, which are based on your Contract Value). Contractowners may
decide to choose the Guaranteed Annual Income Amount Annuity Payout Option over
i4LIFE (Reg. TM) Advantage if they feel this may provide a higher final payment
option over time and they may place more importance on this over access to the
Account Value. Payment frequencies other than annual may be available. You will
have no other contract features other than the right to receive annuity
payments equal to the Guaranteed Annual Income amount for your life or the life
of you and your spouse for the joint life option.
The final payment is a one-time lump-sum payment. If the effective date of the
rider is the same as the effective date of the contract the final payment will
be equal to the sum of all Purchase Payments, decreased by withdrawals. If the
effective date of the rider is after the effective date of the contract the
final payment will be equal to the Contract Value on the effective date of the
rider, increased for Purchase Payments received after the rider effective date
and decreased by withdrawals. Excess Withdrawals reduce the final payment in
the same proportion as the withdrawals reduce the Contract Value; withdrawals
less than or equal to the Guaranteed Annual Income amount and payments under
the Guaranteed Annual Income Amount Annuity Payout Option will reduce the final
payment dollar for dollar.
Death Prior to the Annuity Commencement Date. The Lincoln Lifetime IncomeSM
Advantage 2.0 has no provision for a payout of the Income Base or any other
Death Benefit upon death of the Contractowners or Annuitant. At the time of
death, if the Contract Value equals zero, no Death Benefit options (as
described earlier in this prospectus) will be in effect. Election of the
Lincoln Lifetime IncomeSM Advantage 2.0 does not impact the Death Benefit
options available for purchase with your annuity contract except as described
below in Impact to Withdrawal Calculations of Death Benefits before the Annuity
Commencement Date. All Death Benefit payments must be made in compliance with
Internal Revenue Code Sections 72(s) or 401(a)(9) as applicable as amended from
time to time. See The Contracts - Death Benefit.
Upon the death of the single life, the Lincoln Lifetime IncomeSM Advantage 2.0
will end and no further Guaranteed Annual Income amounts are available (even if
there was an Income Base in effect at the time of the death). If the
Beneficiary elects to continue the contract after the death of the single life
(through a separate provision of the contract), the Beneficiary may purchase a
new Lincoln Lifetime IncomeSM Advantage 2.0 if available under the terms and
charge in effect at the time of the new purchase. There is no carryover of the
Income Base.
Upon the first death under the joint life option, the lifetime payout of the
Guaranteed Annual Income amount will continue for the life of the surviving
spouse. The 5% Enhancement and Automatic Annual Step-up will continue if
applicable as discussed above. Upon the death of the surviving spouse, the
Lincoln Lifetime IncomeSM Advantage 2.0 will end and no further Guaranteed
Annual Income amounts are available (even if there was an Income Base in effect
at the time of the death).
As an alternative, after the first death, the surviving spouse if under age 86
may choose to terminate the joint life option and purchase a new single life
option, if available, under the terms and charge in effect at the time for a
new purchase. In deciding whether to make this change, the surviving spouse
should consider whether the change will cause the Income Base and the
Guaranteed Annual Income amount to decrease.
Termination. After the fifth anniversary of the effective date of the rider,
the Contractowner may terminate the rider by notifying us in writing of the
request to terminate or by failing to adhere to Investment Requirements.
Lincoln Lifetime IncomeSM Advantage 2.0 will automatically terminate:
o on the Annuity Commencement Date (except payments under the Guaranteed
Annual Income Amount Annuity Payout Option will continue if applicable); or
o upon the death under the single life option or the death of the surviving
spouse under the joint life option;
o when the Guaranteed Annual Income amount or Contract Value is reduced to
zero due to an Excess Withdrawal;
o upon surrender of the contract; or
o upon termination of the underlying annuity contract.
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The termination will not result in any increase in Contract Value equal to the
Income Base. Upon effective termination of this rider, the benefits and charges
within this rider will terminate. If you terminate the rider, you must wait one
year before you can re-elect any Living Benefit rider, or any other living
benefits we may offer in the future.
Compare to Lincoln SmartSecurity (Reg. TM) Advantage. If a Contractowner is
interested in purchasing a rider that provides guaranteed minimum withdrawals,
the following factors should be considered when comparing Lincoln Lifetime
IncomeSM Advantage 2.0 and Lincoln SmartSecurity (Reg. TM) Advantage (only one
of these riders can be added to a contract at any one time): the Lincoln
Lifetime IncomeSM Advantage 2.0 has the opportunity to provide a higher Income
Base than the Guaranteed Amount under Lincoln SmartSecurity (Reg. TM) Advantage
because of the 5% Enhancement or Automatic Annual Step-up. You should compare
the annual income percentage available under each rider. The Income Base for
Lincoln Lifetime IncomeSM Advantage 2.0 may also be higher than the Guaranteed
Amount under Lincoln SmartSecurity (Reg. TM) Advantage because withdrawals
equal to or less than the Guaranteed Annual Income amount do not reduce the
Income Base whereas withdrawals under Lincoln SmartSecurity (Reg. TM) Advantage
reduce the Guaranteed Amount. Lincoln Lifetime IncomeSM Advantage 2.0 also
provides the potential for lifetime withdrawals from an earlier age (rather
than age 65 with Lincoln SmartSecurity (Reg. TM) Advantage). However, the
percentage charge for the Lincoln Lifetime IncomeSM Advantage 2.0 is higher and
has the potential to increase on every Benefit Year anniversary if the increase
in Contract Value exceeds the 5% Enhancement and after the 10th Benefit Year
anniversary upon a 5% Enhancement. In addition, the guaranteed maximum charge
is higher for Lincoln Lifetime IncomeSM Advantage 2.0. Since the Lincoln
Lifetime IncomeSM Advantage 2.0 Income Base is not reduced by withdrawals that
are less than or equal to the Guaranteed Annual Income amount, the charge,
which is applied against the Income Base will not be reduced. Whereas with
Lincoln SmartSecurity (Reg. TM) Advantage, withdrawals reduce the Guaranteed
Amount against which the Lincoln SmartSecurity (Reg. TM) Advantage charge is
applied. In addition, Lincoln SmartSecurity (Reg. TM) Advantage provides that
guaranteed Maximum Annual Withdrawal amounts can continue to a Beneficiary to
the extent of any remaining Guaranteed Amount while the Lincoln Lifetime
IncomeSM Advantage 2.0 does not offer this feature.
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit (version 4) for
purchasers who previously purchased Lincoln Lifetime IncomeSM Advantage 2.0.
i4LIFE (Reg. TM) Advantage is an optional Annuity Payout rider that provides
periodic variable income payments for life, the ability to make withdrawals
during a defined period of time (the Access Period) and a Death Benefit during
the Access Period. A minimum payout floor, called the Guaranteed Income
Benefit, is also available for election at the time you elect i4LIFE (Reg. TM)
Advantage. You cannot have both i4LIFE (Reg. TM) Advantage and Lincoln Lifetime
IncomeSM Advantage 2.0 in effect on your contract at the same time.
Contractowners with an active Lincoln Lifetime IncomeSM Advantage 2.0 may
decide to drop Lincoln Lifetime IncomeSM Advantage 2.0 and purchase i4LIFE
(Reg. TM) Advantage with Guaranteed Income Benefit (version 4) even if it is no
longer available for sale as long as the election occurs prior to the Annuity
Commencement Date. They are also guaranteed that the Guaranteed Income Benefit
percentage and Access Period requirements will be at least as favorable as
those in effect at the time they purchase Lincoln Lifetime IncomeSM Advantage
2.0. If the decision to drop Lincoln Lifetime IncomeSM Advantage 2.0 is made,
the Contractowner can use the greater of the Lincoln Lifetime IncomeSM
Advantage 2.0 Income Base reduced by all Guaranteed Annual Income payments
since the last Automatic Annual Step-up (or inception date) or the Account
Value immediately prior to electing i4LIFE (Reg. TM) Advantage to establish the
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit (version 4). This
decision must be made by the maximum age to elect i4LIFE (Reg. TM) Advantage,
which is 95 for nonqualified contracts and 80 for qualified contracts.
Purchasers of Lincoln Lifetime IncomeSM Advantage 2.0 who have waited until
after the 5th Benefit Year anniversary may elect i4LIFE (Reg. TM) Advantage
with Guaranteed Income Benefit until age 99 for nonqualified contracts and age
85 for qualified contracts.
If you choose to drop Lincoln Lifetime IncomeSM Advantage 2.0 and have the
single life option, you must purchase i4LIFE (Reg. TM) Advantage with
Guaranteed Income Benefit (version 4) single life option. If you drop Lincoln
Lifetime IncomeSM Advantage 2.0 and have the joint life option, you must
purchase i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit (version 4) joint
life option. The minimum length of the i4LIFE (Reg. TM) Advantage Access Period
will vary based upon when you purchased your Lincoln Lifetime IncomeSM
Advantage 2.0 rider and how long before you decided to purchase i4LIFE (Reg.
TM) Advantage. These requirements are specifically listed in the i4LIFE (Reg.
TM) Advantage Guaranteed Income Benefit section of this prospectus under
Impacts to i4LIFE (Reg. TM) Advantage Regular Income Payments.
For nonqualified contracts, the Contractowner must elect the levelized option
for Regular Income Payments. While i4LIFE (Reg. TM) Advantage with Guaranteed
Income Benefit (version 4) is in effect, the Contractowner cannot change the
payment mode elected or decrease the length of the Access Period.
When deciding whether to drop Lincoln Lifetime IncomeSM Advantage 2.0 and
purchase i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit (version 4)
you should consider that depending on a person's age and the selected length of
the Access Period, i4LIFE (Reg. TM) Advantage may provide a higher payout than
the Guaranteed Annual Income amounts under Lincoln Lifetime IncomeSM Advantage
2.0. You should consider electing i4LIFE (Reg. TM) Advantage when you are ready
to immediately start receiving i4LIFE (Reg. TM) Advantage payments whereas with
Lincoln Lifetime IncomeSM Advantage 2.0 you may defer taking withdrawals until
a later date. Payments from a nonqualified contract that a person receives
under the i4LIFE (Reg. TM) Advantage rider are treated as "amounts received as
an annuity" under section 72 of the Internal Revenue Code because the payments
occur after the annuity starting date. These payments are subject to an
"exclusion ratio" as provided in section 72(b) of the Code, which means a
portion of each annuity payout is treated as income (taxable at ordinary income
tax rates), and the remainder is treated as a nontaxable return of purchase
payments. In contrast, withdrawals under Lincoln Lifetime IncomeSM Advantage
2.0 are not treated as amounts received as an annuity because they occur prior
to the
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annuity starting date. As a result, such withdrawals are treated first as a
return of any existing gain in the contract (which is the measure of the extent
to which the contract value exceeds purchase payments), and then as a
nontaxable return of purchase payments.
The initial charge for i4LIFE (Reg. TM) Advantage with Guaranteed Income
Benefit (version 4) will be equal to the current annual rate in effect for your
Lincoln Lifetime IncomeSM Advantage 2.0 rider. This charge is in addition to
the mortality and expense risk and administrative charge for your base contract
Death Benefit option. The charge is calculated based upon the greater of the
value of the Income Base or Contract Value as of the last Valuation Date under
Lincoln Lifetime IncomeSM Advantage 2.0 prior to election of i4LIFE (Reg. TM)
Advantage with Guaranteed Income Benefit (version 4). During the Access Period,
this charge is deducted from the i4LIFE (Reg. TM) Advantage Account Value on a
quarterly basis with the first deduction occurring on the Valuation Date on or
next following the three-month anniversary of the effective date of i4LIFE
(Reg. TM) Advantage with Guaranteed Income Benefit (version 4). During the
Lifetime Income Period, this charge is deducted annually. The initial charge
may increase annually upon a step-up of the Guaranteed Income Benefit by an
amount equal to the prior charge rate (or initial charge rate if the first
anniversary of the rider's effective date) multiplied by the percentage
increase, if any, to the Guaranteed Income Benefit and the percentage increase
if any to the Lincoln Lifetime IncomeSM Advantage 2.0 current charge. If an
Excess Withdrawal occurs, the charge will decrease by the same percentage as
the percentage change to the Account Value.
Impact to Withdrawal Calculations of Death Benefits before the Annuity
Commencement Date. The death benefit calculation for certain death benefit
options in effect prior to the Annuity Commencement Date may change for
contractowners with an active Lincoln Lifetime IncomeSM Advantage 2.0. Certain
death benefit options provide that all withdrawals reduce the death benefit in
the same proportion that the withdrawals reduce the contract value. If you
elect Lincoln Lifetime IncomeSM Advantage 2.0, withdrawals less than or equal
to the Guaranteed Annual Income will reduce the sum of all purchase payment
amounts on a dollar for dollar basis for purposes of calculating the death
benefit under the Guarantee of Principal Death Benefit. The same also applies
to the EGMDB or the EEB rider if the death benefit is based on the sum of all
purchase payments, decreased by withdrawals. See The Contracts - Death
Benefits. Any Excess Withdrawals will reduce the sum of all purchase payments
in the same proportion that the withdrawals reduced the contract value under
any death benefit option in which proportionate withdrawals are in effect. This
change has no impact on death benefit options in which all withdrawals reduce
the death benefit calculation on a dollar for dollar basis. The terms of your
contract will describe which method is in effect for your contract while this
rider is in effect.
The following example demonstrates how a withdrawal will reduce the death
benefit if both the EGMDB and Lincoln Lifetime IncomeSM Advantage 2.0 are in
effect when the contractowner dies. Note that this calculation applies only to
the sum of all purchase payments calculation and not for purposes of reducing
the highest anniversary contract value under the EGMDB:
Contract value before withdrawal $80,000
Guaranteed Annual Income amount $5,000
Enhanced Guaranteed Minimum Death Benefit (EGMDB) values before withdrawal is
the greatest of a), b), or c) described in detail in the EGMDB section of this
prospectus:
a) Contract value $80,000
b) Sum of purchase payments $100,000
c) Highest anniversary contract value $150,000
Withdrawal of $9,000 will impact the death benefit calculation as follows:
a) $80,000 - $9,000 = $71,000 (Reduction $9,000)
b) $100,000 - $5,000 = $95,000 (reduction by the amount of the Guaranteed
Annual Income amount)
($95,000 - $5,067 = $89,932 [$95,000 times ($4,000/$75,000) = $5,067]
Proportional reduction of Excess Withdrawal. Total reduction = $10,067.
c) $150,000 - $16,875 = $133,125 [$150,000 times $9,000/$80,000 = $16,875].
The entire $9,000 withdrawal reduced the death benefit option
proportionally. Total reduction = $16,875.
Item c) provides the largest death benefit of $133,125.
Lincoln SmartSecurity (Reg. TM) Advantage
Lincoln SmartSecurity (Reg. TM) Advantage is a rider that is available for
purchase with your variable annuity contract. This benefit provides a minimum
guaranteed amount (Guaranteed Amount) that you will be able to withdraw, in
installments, from your contract. The Guaranteed Amount is equal to the initial
Purchase Payment (or Contract Value if elected after contract issue) adjusted
for subsequent Purchase Payments, step-ups and withdrawals in accordance with
the provisions set forth below.
The Lincoln SmartSecurity (Reg. TM) Advantage rider will no longer be available
for purchase after May 20, 2013.
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With Lincoln SmartSecurity (Reg. TM) Advantage, the Guaranteed Amount will
automatically step-up to the Contract Value, if higher, on each Benefit Year
anniversary through the 10th anniversary. With Lincoln SmartSecurity (Reg. TM)
Advantage, the Contractowner can also initiate additional 10-year periods of
automatic step-ups.
You may access this Guaranteed Amount through periodic withdrawals which are
based on a percentage of the Guaranteed Amount. With Lincoln SmartSecurity
(Reg. TM) Advantage single life or joint life options, you also have the option
to receive periodic withdrawals for your lifetime or for the lifetimes of you
and your spouse (when available in your state). These options are discussed
below in detail.
By purchasing this rider, you will be limited in how much you can invest in
certain Subaccounts. See The Contracts - Investment Requirements. We offer
other optional riders available for purchase with variable annuity contracts.
These riders, which are fully discussed in this prospectus, provide different
methods to take income from your Contract Value and may provide certain
guarantees. There are differences between the riders in the features provided
as well as the charge structure. In addition, the purchase of one rider may
impact the availability of another rider. In particular, before you elect
Lincoln SmartSecurity (Reg. TM) Advantage, you may want to compare it to
Lincoln Lifetime IncomeSM Advantage 2.0, which provides minimum guaranteed,
periodic withdrawals for life. See The Contracts - Lincoln Lifetime IncomeSM
Advantage 2.0 - Compare to Lincoln SmartSecurity (Reg. TM) Advantage.
If the benefit is elected at contract issue, then the rider will be effective
on the contract's effective date. If the benefit is elected after the contract
is issued (by sending a written request to our Home Office), the rider will be
effective on the next Valuation Date following approval by us.
Benefit Year. The Benefit Year is the 12-month period starting with the
effective date of the rider and starting with each anniversary of the rider
effective date after that. If the Contractowner elects to step-up the
Guaranteed Amount (this does not include automatic annual step-ups within a
10-year period), the Benefit Year will begin on the effective date of the
step-up and each anniversary of the effective date of the step-up after that.
The step-up will be effective on the next Valuation Date after notice of the
step-up is approved by us.
Guaranteed Amount. The Guaranteed Amount is a value used to calculate your
withdrawal benefit under this rider. The Guaranteed Amount is not available to
you as a lump sum withdrawal or a Death Benefit. The initial Guaranteed Amount
varies based on when and how you elect the benefit. If you elect the benefit at
the time you purchase the contract, the Guaranteed Amount will equal your
initial Purchase Payment. If you elect the benefit after we issue the contract,
the Guaranteed Amount will equal the Contract Value on the effective date of
the rider. The maximum Guaranteed Amount is $10,000,000 for Lincoln
SmartSecurity (Reg. TM) Advantage. This maximum takes into consideration the
combined guaranteed amounts under the Living Benefit riders of all Lincoln Life
contracts (or contracts issued by our affiliates) owned by you (or on which you
or your spouse, if joint owner, are the Annuitant).
Additional Purchase Payments automatically increase the Guaranteed Amount by
the amount of the Purchase Payment (not to exceed the maximum); for example, a
$10,000 additional Purchase Payment will increase the Guaranteed Amount by
$10,000. After the first anniversary of the rider effective date, once
cumulative additional Purchase Payments exceed $100,000, additional Purchase
Payments will be limited to $50,000 per Benefit Year without Home Office
approval. Additional Purchase Payments will not be allowed if the Contract
Value is zero.
Each withdrawal reduces the Guaranteed Amount as discussed below.
Since the charge for the rider is based on the Guaranteed Amount, the cost of
the rider increases when additional Purchase Payments and step-ups are made,
and the cost decreases as withdrawals are made because these transactions all
adjust the Guaranteed Amount.
Step-ups of the Guaranteed Amount. Under Lincoln SmartSecurity (Reg. TM)
Advantage, the Guaranteed Amount will automatically step-up to the Contract
Value on each Benefit Year anniversary up to and including the 10th Benefit
Year if:
a. the Contractowner or joint owner is still living; and
b. the Contract Value as of the Valuation Date, after the deduction of any
withdrawals (including Interest Adjustments) and the Rider charge plus any
Purchase Payments made on that date is greater than the Guaranteed Amount
immediately preceding the Valuation Date.
After the 10th Benefit Year anniversary, you may initiate another 10-year
period of automatic step-ups by electing (in writing) to step-up the Guaranteed
Amount to the greater of the Contract Value or the current Guaranteed Amount
if:
a. each Contractowner and Annuitant is under age 81; and
b. the Contractowner or joint owner is still living.
If you choose, we will administer this election for you automatically, so that
a new 10-year period of step-ups will begin at the end of each prior 10-year
step-up period.
Following is an example of how the step-ups work in Lincoln SmartSecurity (Reg.
TM) Advantage, (assuming no withdrawals or additional Purchase Payments):
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Contract Guaranteed
Value Amount
---------- -----------
Initial Purchase Payment $50,000...... $50,000 $50,000
1st Benefit Year anniversary.......... $54,000 $54,000
2nd Benefit Year anniversary.......... $53,900 $54,000
3rd Benefit Year anniversary.......... $57,000 $57,000
Annual step-ups, if the conditions are met, will continue until (and including)
the 10th Benefit Year anniversary. If you had elected to have the next 10-year
period of step-ups begin automatically after the prior 10-year period, annual
step-ups, if conditions are met, will continue beginning on the 11th Benefit
Year anniversary.
Contractowner elected step-ups (other than automatic step-ups) will be
effective on the next Valuation Date after we receive your request and a new
Benefit Year will begin. Purchase Payments and withdrawals made after a step-up
adjust the Guaranteed Amount. In the future, we may limit your right to step-up
the Guaranteed Amount to your Benefit Year anniversary dates. All step-ups are
subject to the maximum Guaranteed Amount.
A Contractowner elected step-up (including Contractowner step-ups that we
administer for you to begin a new 10-year step-up period) may cause a change in
the percentage charge for this benefit. There is no change in the percentage
charge when automatic, annual step-ups occur during a 10-year period. See
Charges and Other Deductions - Rider Charges - Lincoln SmartSecurity (Reg. TM)
Advantage Charge.
Withdrawals. You will have access to your Guaranteed Amount through periodic
withdrawals up to the Maximum Annual Withdrawal amount each Benefit Year until
the Guaranteed Amount equals zero.
On the effective date of the rider, the Maximum Annual Withdrawal amount is 5%
of the Guaranteed Amount.
If you do not withdraw the entire Maximum Annual Withdrawal amount during a
Benefit Year, there is no carryover of the extra amount into the next Benefit
Year. The Maximum Annual Withdrawal amount is increased by 5% of any additional
Purchase Payments. For example, if the Maximum Annual Withdrawal amount is
$2,500 (5% of $50,000 Guaranteed Amount) is in effect and an additional
Purchase Payment of $10,000 is made, the new Maximum Annual Withdrawal amount
is $3,000 ($2,500 + 5% of $10,000). Step-ups of the Guaranteed Amount (both
automatic step-ups and step-ups elected by you) will step-up the Maximum Annual
Withdrawal amount to the greater of:
a. the Maximum Annual Withdrawal amount immediately prior to the step-up;
or
b. 5% of the new (stepped-up) Guaranteed Amount.
If the cumulative amounts withdrawn from the contract during the Benefit Year
(including the current withdrawal) are within the Maximum Annual Withdrawal
amount, then:
1. the withdrawal will reduce the Guaranteed Amount by the amount of the
withdrawal on a dollar-for-dollar basis, and
2. the Maximum Annual Withdrawal amount will remain the same.
Withdrawals within the Maximum Annual Withdrawal Amount are not subject to the
Interest Adjustment on the amount withdrawn from the fixed account if
applicable. See The Contracts - Fixed Side of the Contract. Withdrawals from
IRA contracts will be treated as within the Maximum Annual Withdrawal amount
(even if they exceed the 5% Maximum Annual Withdrawal amount) only if the
withdrawals are taken in the form of systematic monthly or quarterly
installments, as calculated by Lincoln, of the amount needed to satisfy the
required minimum distribution rules under Internal Revenue Code Section
401(a)(9) for this Contract Value. Distributions from qualified contracts are
generally taxed as ordinary income. In nonqualified contracts, withdrawals of
Contract Value that exceed Purchase Payments are taxed as ordinary income. See
Federal Tax Matters.
When cumulative amounts withdrawn from the contract during the Benefit Year
(including the current withdrawal) exceed the Maximum Annual Withdrawal amount:
1. The Guaranteed Amount is reduced to the lesser of:
o the Contract Value immediately following the withdrawal, or
o the Guaranteed Amount immediately prior to the withdrawal, less the amount
of the withdrawal.
2. The Maximum Annual Withdrawal amount will be the least of:
o the Maximum Annual Withdrawal amount immediately prior to the withdrawal;
or
o the greater of:
o 5% of the reduced Guaranteed Amount immediately following the withdrawal
(as specified above when withdrawals exceed the Maximum Annual
Withdrawal amount); or
o 5% of the Contract Value immediately following the withdrawal; or
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o the new Guaranteed Amount.
The following example demonstrates the impact of a withdrawal in excess of the
Maximum Annual Withdrawal amount on the Guaranteed Amount and the Maximum
Annual Withdrawal amount. A $7,000 withdrawal caused a $32,000 reduction in the
Guaranteed Amount.
Prior to Excess Withdrawal:
Contract Value = $60,000
Guaranteed Amount = $85,000
Maximum Annual Withdrawal = $5,000 (5% of the initial Guaranteed Amount of
$100,000)
After a $7,000 Withdrawal:
Contract Value = $53,000
Guaranteed Amount = $53,000
Maximum Annual Withdrawal = $2,650
The Guaranteed Amount was reduced to the lesser of the Contract Value
immediately following the withdrawal ($53,000) or the Guaranteed Amount
immediately prior to the withdrawal, less the amount of the withdrawal ($85,000
- $7,000 = $78,000).
The Maximum Annual Withdrawal amount was reduced to the least of:
1) Maximum Annual Withdrawal amount prior to the withdrawal ($5,000); or
2) The greater of 5% of the new Guaranteed Amount ($2,650) or 5% of the
Contract Value following the withdrawal ($2,650); or
3) The new Guaranteed Amount ($53,000).
The least of these three items is $2,650.
In a declining market, withdrawals that exceed the Maximum Annual Withdrawal
amount may substantially deplete or eliminate your Guaranteed Amount and reduce
your Maximum Annual Withdrawal amount.
Withdrawals in excess of the Maximum Annual Withdrawal amount will be subject
to an Interest Adjustment on the amount withdrawn from the fixed account. Refer
to the Statement of Additional Information for an example of the Interest
Adjustment calculation.
Lifetime Withdrawals. Payment of the Maximum Annual Withdrawal amount will be
guaranteed for your (Contractowner) lifetime (if you purchase the single life
option) or for the lifetimes of you (Contractowner) and your spouse (if the
joint life option is purchased), as long as:
1) No withdrawals are made before you (and your spouse if a joint life)
are age 65; and
2) An Excess Withdrawal (described above) has not reduced the Maximum
Annual Withdrawal amount to zero.
If the lifetime withdrawal is not in effect, the Maximum Annual Withdrawal
amount will last only until the Guaranteed Amount equals zero.
If any withdrawal is made prior to the time you (or both spouses) are age 65,
the Maximum Annual Withdrawal amount will not last for the lifetime(s), except
in the two situations described below:
1) If a step-up of the Guaranteed Amount after age 65 causes the Maximum Annual
Withdrawal amount to equal or increase from the immediately prior Maximum
Annual Withdrawal amount. This typically occurs if the Contract Value equals or
exceeds the highest, prior Guaranteed Amount. If this happens, the new Maximum
Annual Withdrawal amount will automatically be available for the specified
lifetime(s); or
2) The Contractowner makes a one-time election to reset the Maximum Annual
Withdrawal amount to 5% of the current Guaranteed Amount. This reset will occur
on the first valuation date following the Benefit Year anniversary and will be
based on the Guaranteed Amount as of that Valuation Date. This will reduce your
Maximum Annual Withdrawal amount. A Contractowner would only choose this if the
above situation did not occur. To reset the Maximum Annual Withdrawal amount,
the following must occur:
a. the Contractowner (and spouse if applicable) is age 65;
b. the contract is currently within a 10-year automatic step-up period
described above (or else a Contractowner submits a step-up request to start a
new 10-year automatic step-up period) (the Contractowner must be eligible to
elect a step-up; i.e., all Contractowners and the Annuitant must be alive and
under age 81); and
c. you have submitted this request to us in writing at least 30 days prior to
the end of the Benefit Year.
As an example of these two situations, if you purchased Lincoln SmartSecurity
(Reg. TM) Advantage single life with $100,000, your initial Guaranteed Amount
is $100,000 and your initial Maximum Annual Withdrawal amount is $5,000. If you
make a $5,000 withdrawal at age 62, your Guaranteed Amount will decrease to
$95,000. Since you did not satisfy the age 65 requirement, you do not have a
lifetime Maximum Annual Withdrawal amount. If a step-up of the Guaranteed
Amount after age 65 (either automatic or owner-elected) causes the Guaranteed
Amount to equal or exceed $100,000, then the Maximum Annual Withdrawal amount
of $5,000 (or greater) will
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become a lifetime payout. This is the first situation described above. However,
if the Guaranteed Amount has not been reset to equal or exceed the highest
prior Guaranteed Amount, then you can choose the second situation described
above if you are age 65 and the contract is within a 10-year automatic step-up
period. This will reset the Maximum Annual Withdrawal amount to 5% of the
current Guaranteed Amount; 5% of $95,000 is $4,750. This is your new Maximum
Annual Withdrawal amount which can be paid for your lifetime unless Excess
Withdrawals are made.
The tax consequences of withdrawals and annuity payments are discussed in
Federal Tax Matters.
All withdrawals you make, whether or not within the Maximum Annual Withdrawal
amount, will decrease your Contract Value. If the contract is surrendered, the
Contractowner will receive the Contract Value (less any applicable charges,
fees, and taxes) and not the Guaranteed Amount.
If your Contract Value is reduced to zero because of market performance,
withdrawals equal to the Maximum Annual Withdrawal amount will continue for the
life of you (and your spouse if applicable) if the lifetime withdrawals are in
effect. If not, the Maximum Annual Withdrawal amount will continue until the
Guaranteed Amount equals zero. You may not withdraw the remaining Guaranteed
Amount in a lump sum.
Guaranteed Amount Annuity Payout Option. If you desire to annuitize your
Guaranteed Amount, the Guaranteed Amount Annuity Payout Option is available.
The Guaranteed Amount Annuity Payment Option is a fixed annuitization in which
the Contractowner (and spouse if applicable) will receive the Guaranteed Amount
in annual annuity payments equal to the current 5% Maximum Annual Withdrawal
amount, including the lifetime Maximum Annual Withdrawals if in effect (this
option is different from other annuity payment options discussed in this
prospectus, including i4LIFE (Reg. TM) Advantage, which are based on your
Contract Value). Payment frequencies other than annual may be available.
Payments will continue until the Guaranteed Amount equals zero and may continue
until death if the lifetime Maximum Annual Withdrawal is in effect. This may
result in a partial, final payment. You would consider this option only if your
Contract Value is less than the Guaranteed Amount (and you don't believe the
Contract Value will ever exceed the Guaranteed Amount) and you do not wish to
keep your annuity contract in force other than to pay out the Guaranteed
Amount. You will have no other contract features other than the right to
receive annuity payments equal to the Maximum Annual Withdrawal amount until
the Guaranteed Amount equals zero.
If the Contract Value is zero and you have a remaining Guaranteed Amount, you
may not withdraw the remaining Guaranteed Amount in a lump sum, but must elect
the Guaranteed Amount Annuity Payment Option.
Death Prior to the Annuity Commencement Date. There is no provision for a lump
sum payout of the Guaranteed Amount upon death of the Contractowners or
Annuitant. At the time of death, if the Contract Value equals zero, no Death
Benefit will be paid other than any applicable Maximum Annual Withdrawal
amounts. All Death Benefit payments must be made in compliance with Internal
Revenue Code Sections 72(s) or 401(a)(9) as applicable as amended from time to
time. See The Contracts - Death Benefit.
Upon the death of the single life under Lincoln SmartSecurity (Reg. TM)
Advantage single life option, the lifetime payout of the Maximum Annual
Withdrawal amount, if in effect, will end. If the contract is continued as
discussed below, the Maximum Annual Withdrawal amount will continue until the
Guaranteed Amount, if any, is zero. In the alternative, the surviving spouse
can choose to become the new single life, if the surviving spouse is under age
81. This will cause a reset of the Guaranteed Amount and the Maximum Annual
Withdrawal amount. The new Guaranteed Amount will equal the Contract Value on
the date of the reset and the new Maximum Annual Withdrawal amount will be 5%
of the new Guaranteed Amount. This also starts a new 10-year period of
automatic step-ups. At this time, the charge for the rider will become the
current charge in effect for the single life option. The surviving spouse will
need to be 65 before taking withdrawals to qualify for a lifetime payout. In
deciding whether to make this change, the surviving spouse should consider: 1)
the change a reset would cause to the Guaranteed Amount and the Maximum Annual
Withdrawal amount; 2) whether it is important to have Maximum Annual Withdrawal
amounts for life versus the remainder of the prior Guaranteed Amount; and 3)
the cost of the single life option.
Upon the first death under Lincoln SmartSecurity (Reg. TM) Advantage joint life
option, the lifetime payout of the Maximum Annual Withdrawal amount, if in
effect, will continue for the life of the surviving spouse. Upon the death of
the surviving spouse, the lifetime payout of the Maximum Annual Withdrawal
amount will end. However, if the spouse's Beneficiary elects to take the
annuity Death Benefit in installments over life expectancy, the Maximum Annual
Withdrawal amount will continue until the Guaranteed Amount, if any, is zero
(see below for a non-spouse Beneficiary). As an alternative, after the first
death, the surviving spouse may choose to change from the joint life option to
the single life option, if the surviving spouse is under age 81. This will
cause a reset of the Guaranteed Amount and the Maximum Annual Withdrawal
amount. The new Guaranteed Amount will equal the Contract Value on the date of
the reset and the new Maximum Annual Withdrawal amount will be 5% of the new
Guaranteed Amount. This also starts a new 10-year period of automatic step-ups.
At this time, the charge for the rider will become the current charge in effect
for the single life option. In deciding whether to make this change, the
surviving spouse should consider:
1) if the reset will cause the Guaranteed Amount and the Maximum Annual
Withdrawal amount to decrease and
2) if the cost of the single life option is less than the cost of the
joint life option.
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If the surviving spouse of the deceased Contractowner continues the contract,
the remaining automatic step-ups will apply to the spouse as the new
Contractowner.
If a non-spouse Beneficiary elects to receive the Death Benefit in installments
over life expectancy (thereby keeping the contract in force), the Beneficiary
may continue Lincoln SmartSecurity (Reg. TM) Advantage if desired. Automatic
step-ups under Lincoln SmartSecurity (Reg. TM) Advantage will not continue and
elective step-ups of the Guaranteed Amount under both options will not be
permitted. In the event the Contract Value declines below the Guaranteed Amount
(as adjusted for withdrawals of Death Benefit payments), the Beneficiary is
assured of receiving payments equal to the Guaranteed Amount (as adjusted).
Deductions for the rider charge will continue on a quarterly basis and will be
charged against the remaining Guaranteed Amount. Note: there are instances
where the required installments of the Death Benefit, in order to be in
compliance with the Internal Revenue Code as noted above, may exceed the
Maximum Annual Withdrawal amount, thereby reducing the benefit of this rider.
If there are multiple Beneficiaries, each Beneficiary will be entitled to
continue a share of Lincoln SmartSecurity (Reg. TM) Advantage equal to his or
her share of the Death Benefit.
Impact of Divorce on Joint Life Option. In the event of a divorce, the
Contractowner may change from a joint life option to a single life option (if
the Contractowner is under age 81) at the current rider charge for new sales of
the single life option. At the time of the change, the Guaranteed Amount will
be reset to the current Contract Value and the Maximum Annual Withdrawal amount
will equal 5% of this new Guaranteed Amount.
After a divorce, the Contractowner may keep the joint life option to have the
opportunity to receive lifetime payouts for the lives of the Contractowner and
a new spouse. This is only available if no withdrawals were made from the
contract after the effective date of the rider up to and including the date the
new spouse is added to the rider.
Termination. After the later of the fifth anniversary of the effective date of
the rider or the fifth anniversary of the most recent Contractowner-elected
step-up, including any step-up we administered for you, of the Guaranteed
Amount, the Contractowner may terminate the rider by notifying us in writing.
After this time, the rider will also terminate if the Contractowner fails to
adhere to the Investment Requirements. Lincoln SmartSecurity (Reg. TM)
Advantage will automatically terminate:
o on the Annuity Commencement Date (except payments under the Guaranteed
Amount Annuity Payment Option will continue if applicable);
o upon the election of i4LIFE (Reg. TM) Advantage;
o if the Contractowner or Annuitant is changed (except if the surviving spouse
assumes ownership of the contract upon death of the Contractowner)
including any sale or assignment of the contract or any pledge of the
contract as collateral;
o upon the last payment of the Guaranteed Amount unless the lifetime Maximum
Annual Withdrawal is in effect;
o when a withdrawal in excess of the Maximum Annual Withdrawal amount reduces
the Guaranteed Amount to zero; or
o upon termination of the underlying annuity contract.
The termination will not result in any increase in Contract Value equal to the
Guaranteed Amount. Upon effective termination of this rider, the benefits and
charges within this rider will terminate.
If you terminate the rider, you must wait one year before you can re-elect
Lincoln SmartSecurity (Reg. TM) Advantage, or purchase Lincoln Liftime IncomeSM
Advantage 2.0 or any other Living Benefit we are offering in the future.
i4LIFE (Reg. TM) Advantage Option. Contractowners with an active Lincoln
SmartSecurity (Reg. TM) Advantage who decide to terminate the Lincoln
SmartSecurity (Reg. TM) Advantage rider and purchase i4LIFE (Reg. TM) Advantage
can use any remaining Guaranteed Amount to establish the Guaranteed Income
Benefit under the i4LIFE (Reg. TM) Advantage terms and charge in effect at the
time of the i4LIFE (Reg. TM) Advantage election. Contractowners may consider
this if i4LIFE (Reg. TM) Advantage will provide a higher payout amount, among
other reasons. There are many factors to consider when making this decision,
including the cost of the riders, the payout amounts and applicable guarantees.
You should discuss this decision with your registered representative. See
i4LIFE (Reg. TM) Advantage.
Availability. Lincoln SmartSecurity (Reg. TM) Advantage is available for
purchase with nonqualified and qualified (IRAs and Roth IRAs) annuity
contracts. All Contractowners and the Annuitant of the contracts with Lincoln
SmartSecurity (Reg. TM) Advantage must be under age 81 at the time this rider
is elected. You cannot elect the rider on or after the purchase of i4LIFE (Reg.
TM) Advantage, 4LATER (Reg. TM) Advantage Protected Funds, or on or after the
Annuity Commencement Date.
As of May 20, 2013, this rider will no longer be available for purchase.
There is no guarantee that Lincoln SmartSecurity (Reg. TM) Advantage will be
available for new purchasers in the future as we reserve the right to
discontinue this benefit at any time. Check with your investment representative
regarding availability.
4LATER (Reg. TM) Advantage Protected Funds
4LATER (Reg. TM) Advantage Protected Funds is a rider that provides an Income
Base which will be used to establish the amount of the Guaranteed Income
Benefit payment upon the election of the i4LIFE (Reg. TM) Advantage rider. If
you elect 4LATER (Reg. TM) Advantage Protected Funds, you must later elect the
i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected Funds feature
under i4LIFE (Reg. TM) Advantage Guaranteed
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Income Benefit (version 4) to receive a benefit from 4LATER (Reg. TM) Advantage
Protected Funds. You will be subject to certain Investment Requirements in
which 100% of your Contract Value must be allocated among specified
Subaccounts. See The Contracts - Investment Requirements.
Income Base. The Income Base is an amount used to calculate the Guaranteed
Income Benefit under i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit
Protected Funds at a later date. The Income Base is not available to you as a
lump sum withdrawal or as a Death Benefit. The initial Income Base varies based
on when you elect the rider. If you elect the 4LATER (Reg. TM) Advantage
Protected Funds at the time you purchase the contract, the Income Base will be
equal to the initial Purchase Payment . If you elect the rider after you have
purchased the contract, the initial Income Base will equal the Contract Value
on the effective date of 4LATER (Reg. TM) Advantage Protected Funds. The
maximum Income Base is $10,000,000. The maximum takes into consideration the
total guaranteed amounts from all Lincoln Life contracts (or contracts issued
by our affiliates) in which you (and/or Secondary Life, if joint life option)
are the covered lives.
Additional Purchase Payments automatically increase the Income Base by the
amount of the Purchase Payments (not to exceed the maximum Income Base). For
example, an additional Purchase Payment of $10,000 will increase the Income
Base by $10,000. After the first anniversary of the rider effective date, once
cumulative additional Purchase Payments exceed $100,000, additional Purchase
Payments will be limited to $50,000 per Benefit Year without Home Office
approval. If after the first Benefit Year cumulative additional Purchase
Payments equal or exceed $100,000, the charge for 4LATER (Reg. TM) Advantage
Protected Funds will change to the then current charge in effect on the next
Benefit Year anniversary. Additional Purchase Payments will not be allowed if
the Contract Value decreases to zero for any reason, including market loss.
Each withdrawal reduces the Income Base in the same proportion as the amount
withdrawn reduces the Contract Value on the Valuation Date of the withdrawal.
This means that the reduction in the Income Base could be more than the dollar
amount of the withdrawal.
The following example demonstrates the impact of a withdrawal on the Income
Base and the Contract Value. The Contractowner makes a withdrawal of $11,200
which causes a $12,550 reduction in the Income Base.
Prior to the withdrawal:
Contract Value = $112,000
Income Base = $125,500
After a withdrawal of $11,200, the Contract Value is reduced by 10% ($11,200)
and the Income Base is also reduced by 10%, the same proportion that the
withdrawal reduced the Contract Value ($11,200 - $112,000)
Contract Value = $100,800 ($112,000 - $11,200)
Income Base = $112,950 ($125,500 x 10% = $12,550; $125,500 - $12,550 =
$112,950)
In a declining market, withdrawals may significantly reduce your Income Base.
If the Income Base is reduced to zero due to withdrawals, this rider will
terminate. If the Contract Value is reduced to zero due to a withdrawal, both
the rider and the contract will terminate.
Automatic Annual Step-up. The Income Base will automatically step-up to the
Contract Value on each Benefit Year anniversary if:
a. the Contractowner/Annuitant (single life option), or the Contractowner
and Secondary Life (joint life option) are still living and under age 86;
and
b. the Contract Value on that Benefit Year anniversary, after the deduction
of any withdrawals (including the rider charge), plus any Purchase
Payments made on that date is equal to or greater than the Income Base
after the 5% Enhancement (if any).
The Automatic Annual Step-up is available even in years in which a withdrawal
has occurred.
5% Enhancement. On each Benefit Year anniversary, the Income Base, minus
Purchase Payments received in that year, will be increased by 5% if:
a. the Contractowner/Annuitant (as well as the Secondary Life if the joint
life option is in effect) are under age 86; and
b. if there were no withdrawals in that year; and
c. the rider is within the Enhancement Period described below.
The Enhancement Period is a 10-year period that begins on the effective date of
the rider. A new Enhancement Period begins immediately following an Automatic
Annual Step-up. If during any Enhancement Period there are no Automatic Annual
Step-ups, the 5% Enhancements will terminate at the end of the Enhancement
Period and will not restart until the next Benefit Year anniversary following
the Benefit Year anniversary upon which an Automatic Annual Step-up occurs. Any
new Purchase Payment made after the initial Purchase Payment will be added
immediately to the Income Base. However, any new Purchase Payment must be
invested in the contract for at least one Benefit Year before it will be used
in calculating the 5% Enhancement. Any new Purchase Payments made within
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the first 90 days after the effective date of 4LATER (Reg. TM) Advantage
Protected Funds will be included in the Income Base for purposes of calculating
the 5% Enhancement on the first Benefit Year anniversary.
If you decline the Automatic Annual Step-up during the first 10 Benefit Years,
you will continue to be eligible for the 5% Enhancements through the end of the
current Enhancement Period, but the 4LATER (Reg. TM) Advantage Protected Funds
charge could increase to the then current charge at the time of any 5%
Enhancements after the 10th Benefit Year anniversary. You will have the option
to opt out of the Enhancements after the 10th Benefit Year. In order to be
eligible to receive further 5% Enhancements the Contractowner/Annuitant (single
life option), or the Contractowner and Secondary Life (joint life option) must
still be living and be under age 86.
Note: The 5% Enhancement is not available in any year there is a withdrawal
from Contract Value. A 5% Enhancement will occur in subsequent years only under
certain conditions. If you are eligible (as defined below) for the 5%
Enhancement in the next year, the Enhancement will not occur until the Benefit
Year anniversary of that year.
The following is an example of the impact of the 5% Enhancement on the Income
Base (assuming no withdrawals):
Initial Purchase Payment = $100,000; Income Base = $100,000
Additional Purchase Payment on day 30 = $15,000; Income Base = $115,000
Additional Purchase Payment on day 95 = $10,000; Income Base = $125,000
On the first Benefit Year anniversary, the Income Base will not be less than
$130,750 ($115,000 times 1.05%=$120,750 plus $10,000). The $10,000 Purchase
Payment on day 95 is not eligible for the 5% Enhancement until the 2nd Benefit
Year anniversary.
As explained below, the 5% Enhancement and Automatic Annual Step-up will not
occur in the same year. If the Automatic Annual Step-up provides a greater
increase to the Income Base, you will not receive the 5% Enhancement. If the
Automatic Annual Step-up and the 5% Enhancement increase the Income Base to the
same amount then you will receive the Automatic Annual Step-up. The 5%
Enhancement or the Automatic Annual Step-up cannot increase the Income Base
above the maximum Income Base of $10,000,000.
You will not receive the 5% Enhancement on any Benefit Year anniversary in
which there is a withdrawal. The 5% Enhancement will occur on the following
Benefit Year anniversary if no further withdrawals are made from the contract
and the rider is within the Enhancement Period.
The following is an example of how the Automatic Annual Step-ups and the 5%
Enhancement affect the Income Base and the potential for the charge to increase
or decrease (assuming there have been no withdrawals or new Purchase Payments
):
Potential for
Contract Income Base with Charge
Value 5% Enhancement Income Base to Change
---------- ------------------ ------------- --------------
Initial Purchase Payment $50,000 . $50,000 N/A $50,000 N/A
1st Benefit Year anniversary...... $54,000 $52,500 $54,000 Yes
2nd Benefit Year anniversary...... $53,900 $56,700 $56,700 No
3rd Benefit Year anniversary...... $56,000 $59,535 $59,535 No
4th Benefit Year anniversary...... $64,000 $62,512 $64,000 Yes
On the 1st Benefit Year anniversary, the Automatic Annual Step-up increased the
Income Base to the Contract Value of $54,000 since the increase in the Contract
Value is greater than the 5% Enhancement amount of $2,500 (5% of $50,000). On
the 2nd Benefit Year anniversary, the 5% Enhancement provided a larger increase
(5% of $54,000 = $2,700). On the 3rd Benefit Year anniversary, the 5%
Enhancement provided a larger increase (5% of $56,700=$2,835). On the 4th
Benefit Year anniversary, the Automatic Annual Step-up to the Contract Value
was greater than the 5% Enhancement amount of $2,977 (5% of $59,535). An
Automatic Annual Step-up cannot increase the Income Base beyond the maximum
Income Base of $10,000,000.
Death Prior to the Annuity Commencement Date. 4LATER (Reg. TM) Advantage
Protected Funds has no provision for a payout of the Income Base or any other
Death Benefit upon death of the Contractowners or Annuitant. At the time of
death, if the Contract Value equals zero, no Death Benefit options (as
described earlier in this prospectus) will be in effect. Election of the 4LATER
(Reg. TM) Advantage Protected Funds does not impact the Death Benefit options
available for purchase with your annuity contract. Generally all Death Benefit
payments must be made in compliance with Internal Revenue Code Sections 72(s)
or 401(a)(9), as amended. See The Contracts - Death Benefit.
If the Contractowner is not also named as the Annuitant or the Secondary Life,
upon the first death of the Annuitant or Secondary Life, the 4LATER (Reg. TM)
Advantage Protected Funds rider will continue. Upon the second death of either
the Annuitant or Secondary Life, 4LATER (Reg. TM) Advantage Protected Funds
will terminate.
Upon the death of the Contractowner, the 4LATER (Reg. TM) Advantage Protected
Funds rider will continue only if either the Annuitant or the Secondary Life
becomes the new Contractowner (because he or she was the Beneficiary or joint
owner), and payments under i4LIFE (Reg. TM) Advantage begin within one year
after the death of the Contractowner. The new Contractowner will also become
the Annuitant and the rider charge will neither increase nor decrease as a
result of this change in ownership.
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Eligibility. To purchase 4LATER (Reg. TM) Advantage Protected Funds, the
Annuitant and Secondary Life must be age 85 or younger.
4LATER (Reg. TM) Advantage Protected Funds is not available for purchase with
qualified contracts. 4LATER (Reg. TM) Advantage Protected Funds is designed
primarily for purchasers of non-qualified contracts with joint life benefits
where the Secondary Life is not a spouse. If you are eligible to elect Lincoln
Lifetime IncomeSM Advantage 2.0 and you purchase joint life benefits where
Secondary Life is a spouse, Lincoln Lifetime IncomeSM Advantage 2.0 generally
offers better benefits for the same charge. Please see Living Benefits Riders -
Lincoln Lifetime IncomeSM Advantage 2.0, for more information about Lincoln
Lifetime IncomeSM Advantage 2.0 .
Termination. After the 5th anniversary of the effective date of the 4LATER
(Reg. TM) Advantage Protected Funds rider, the Contractowner may terminate the
rider by notifying us in writing. After this time, the rider will also
terminate if the Contractowner fails to adhere to the Investment Requirements.
4LATER (Reg. TM) Advantage Protected Funds will automatically terminate:
o on the Annuity Commencement Date; or
o if the Contractowner or Annuitant is changed (except if the Secondary Life
assumes ownership of the contract upon death of the Contractowner)
including any sale or assignment of the contract or any pledge of the
contract as collateral; or
o upon the second death of either the Annuitant or Secondary Life; or
o when the Income Base is reduced to zero due to withdrawals; or
o the last day that you can elect i4LIFE (Reg. TM) Advantage (age 85 for
qualified contracts and age 99 for non-qualified contracts); or
o upon termination of the underlying contract.
If you terminate this rider, you must wait at least one year before you can
re-elect it or any other Living Benefit we offer in the future.
i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected Funds for
purchasers who previously purchased 4LATER (Reg. TM) Advantage Protected Funds.
Contractowners with an active 4LATER (Reg. TM) Advantage Protected Funds will
purchase i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected Funds
at the terms in effect for other purchasers of this rider. i4LIFE (Reg. TM)
Advantage Guaranteed Income Benefit Protected Funds is a feature under i4LIFE
(Reg. TM) Advantage with Guaranteed Income Benefit (version 4). i4LIFE (Reg.
TM) Advantage Guaranteed Income Benefit Protected Funds provides for periodic
variable income payments for life, the ability to make withdrawals during a
defined period of time (the Access Period) and a Death Benefit during the
Access Period, and a minimum payout floor, called the Guaranteed Income
Benefit. You will be required to adhere to certain Investment Requirements
during the time you own i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit
Protected Funds. See Living Benefit Riders - i4LIFE (Reg. TM) Advantage with
Guaranteed Income Benefit (version 4) for more information.
Once you elect i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected
Funds, you can use the greater of the Income Base under 4LATER (Reg. TM)
Advantage Protected Funds or Account Value to establish the Guaranteed Income
Benefit under i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected
Funds. This decision must be made by the maximum age to elect i4LIFE (Reg. TM)
Advantage, which is age 95. Purchasers of 4LATER (Reg. TM) Advantage Protected
Funds who have waited until after the 5th Benefit Year anniversary may elect
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit until age 99.
If you elected the 4LATER (Reg. TM) Advantage Protected Funds joint life
option, you must purchase i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit
Protected Funds joint life option.
Contractowners who elect 4LATER (Reg. TM) Advantage Protected Funds are
guaranteed the ability in the future to elect i4LIFE (Reg. TM) Advantage
Guaranteed Income Benefit Protected Funds even if it is no longer available for
sale. They are also guaranteed that the Guaranteed Income Benefit percentage
and Access Period requirements will be at least as favorable as those at the
time they elected 4LATER (Reg. TM) Advantage Protected Funds. The minimum
length of the i4LIFE (Reg. TM) Advantage Access Period will vary based upon
when you purchased your 4LATER (Reg. TM) Advantage Protected Funds rider and
how long the rider was in effect before you decided to purchase i4LIFE (Reg.
TM) Advantage. These requirements are specifically listed in the i4LIFE (Reg.
TM) Advantage Guaranteed Income Benefit section of this prospectus under
Impacts to i4LIFE (Reg. TM) Advantage Regular Income Payments.
The Contractowner must elect the levelized option for Regular Income Payments.
While i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Protected Funds is
in effect, the Contractowner cannot change the payment mode elected or decrease
the length of the Access Period.
You should consider electing i4LIFE (Reg. TM) Advantage Guaranteed Income
Benefit Protected Funds when you are ready to immediately start receiving
i4LIFE (Reg. TM) Advantage payments. Payments from a nonqualified contract that
a person receives under i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit
Protected Funds are treated as "amounts received as an annuity" under section
72 of the Internal Revenue Code because the payments occur after the annuity
starting date. These payments are subject to an "exclusion ratio" as provided
in section 72(b) of the Code, which means a portion of each Annuity Payout is
treated as income (taxable at ordinary income tax rates), and the remainder is
treated as a nontaxable return of Purchase Payments.
i4LIFE (Reg. TM) Advantage
i4LIFE (Reg. TM) Advantage is an optional Annuity Payout rider you may purchase
at an additional cost and is separate and distinct from other Annuity Payout
options offered under your contract and described later in this prospectus. You
may also purchase the i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit
(version 4) for an additional charge. See Charges and Other Deductions - Rider
Charges - i4LIFE (Reg. TM) Advantage Charges.
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i4LIFE (Reg. TM) Advantage is an Annuity Payout option that provides you with
variable, periodic Regular Income Payments for life subject to certain
conditions. These payouts are made during two time periods: an Access Period
and a Lifetime Income Period. During the Access Period, you have access to your
Account Value, which means you may surrender the contract, make withdrawals,
and have a Death Benefit. During the Lifetime Income Period, you no longer have
access to your Account Value. You choose the length of the Access Period when
you select i4LIFE (Reg. TM) Advantage; the Lifetime Income Period begins
immediately after the Access Period ends and continues until your death (or the
death of a Secondary Life, if later). i4LIFE (Reg. TM) Advantage is different
from other Annuity Payout options provided by Lincoln because with i4LIFE (Reg.
TM) Advantage, you have the ability to make additional withdrawals or surrender
the contract during the Access Period. You may also purchase the Guaranteed
Income Benefit which provides a minimum payout floor for your Regular Income
Payments. You choose when you want to receive your first Regular Income Payment
and the frequency with which you will receive Regular Income Payments. The
initial Regular Income Payment is calculated from the Account Value on a date
no more than 14 days prior to the date you select to begin receiving the
Regular Income Payments. This calculation date is called the Periodic Income
Commencement Date, and is the same date the Access Period begins. Regular
Income Payments must begin within one year of the date you elect i4LIFE (Reg.
TM) Advantage. Once they begin, Regular Income Payments will continue until the
death of the Annuitant or Secondary Life, if applicable. This option is
available on non-qualified annuities, IRAs and Roth IRAs (check with your
registered representative regarding availability with SEP market). This option
is subject to a charge while the i4LIFE (Reg. TM) Advantage is in effect
computed daily on the Account Value. See Charges and Other Deductions - i4LIFE
(Reg. TM) Advantage Charges.
i4LIFE (Reg. TM) Advantage is available for contracts with a Contract Value of
at least $50,000, and may be elected at the time of annuity application or at
any time before any other Annuity Payout option under this contract is elected,
by sending a written request to our Home Office. When you elect i4LIFE (Reg.
TM) Advantage, you must choose the Annuitant, Secondary Life, if applicable,
and make several choices about your Regular Income Payments. The Annuitant and
Secondary Life may not be changed after i4LIFE (Reg. TM) Advantage is elected.
For qualified contracts, the Secondary Life must be the spouse. See i4LIFE
(Reg. TM) Advantage Death Benefits regarding the impact of a change to the
Annuitant prior to the i4LIFE (Reg. TM) Advantage election.
i4LIFE (Reg. TM) Advantage for IRA annuity contracts is only available if the
Annuitant and Secondary Life, if applicable, are age 591/2 or older at the time
the option is elected. i4LIFE (Reg. TM) Advantage with Guaranteed Income
Benefit must be elected by age 80 on qualified contracts. Additional
limitations on issue ages and features may be necessary to comply with the IRC
provisions for required minimum distributions. Additional Purchase Payments may
be made during the Access Period for an IRA annuity contract, unless a
Guaranteed Income Benefit has been elected. If the Guaranteed Income Benefit
option has been elected on an IRA contract, additional Purchase Payments may be
made until the initial Guaranteed Income Benefit is calculated. Additional
Purchase Payments will not be accepted after the Periodic Income Commencement
Date for a non-qualified annuity contract.
If i4LIFE (Reg. TM) Advantage is selected, the applicable transfer provisions
among Subaccounts and the fixed account will continue to be those specified in
your annuity contract for transfers on or before the Annuity Commencement Date.
However, once i4LIFE (Reg. TM) Advantage begins, any automatic withdrawal
service will terminate. See The Contracts - Transfers on or Before the Annuity
Commencement Date.
When you elect i4LIFE (Reg. TM) Advantage, the Death Benefit option that you
had previously elected will become the Death Benefit election under i4LIFE
(Reg. TM) Advantage, unless you elect a less expensive Death Benefit option. If
you had previously elected EEB Death Benefit, you must elect a new Death
Benefit. Existing Contractowners with the Account Value Death Benefit who elect
i4LIFE (Reg. TM) Advantage must choose the i4LIFE (Reg. TM) Advantage Account
Value Death Benefit. The amount paid under the new Death Benefit may be less
than the amount that would have been paid under the Death Benefit provided
before i4LIFE (Reg. TM) Advantage began. See The Contracts - i4LIFE (Reg. TM)
Advantage Death Benefits.
Access Period. At the time you elect i4LIFE (Reg. TM) Advantage, you also
select the Access Period, which begins on the Periodic Income Commencement
Date. The Access Period is a defined period of time during which we pay
variable, periodic Regular Income Payments and provide a Death Benefit, and
during which you may surrender the contract and make withdrawals from your
Account Value (defined below). At the end of the Access Period, the remaining
Account Value is used to make Regular Income Payments for the rest of your life
(or the Secondary Life if applicable). This is called the Lifetime Income
Period. During the Lifetime Income Period, you will no longer be able to make
withdrawals or surrenders or receive a Death Benefit. If your Account Value is
reduced to zero because of withdrawals or market loss, your Access Period ends.
We will establish the minimum (currently 5 years) and maximum (currently the
length of time between your current age and age 115 for non-qualified contracts
or to age 100 for qualified contracts) Access Periods at the time you elect
i4LIFE (Reg. TM) Advantage. Generally, shorter Access Periods will produce a
higher initial Regular Income Payment than longer Access Periods. At any time
during the Access Period, and subject to the rules in effect at that time, you
may extend or shorten the Access Period by sending us notice. Additional
restrictions may apply if you are under age 591/2 when you request a change to
the Access Period. Currently, if you extend the Access Period, it must be
extended at least 5 years. If you change the Access Period, subsequent Regular
Income Payments will be adjusted accordingly, and the Account Value remaining
at the end of the new Access Period will be applied to continue Regular Income
Payments for your life. Additional limitations on issue ages and features may
be necessary to comply with the IRC provisions for required minimum
distributions. We may reduce or terminate the Access Period for IRA i4LIFE
(Reg. TM) Advantage contracts in order to keep the Regular Income Payments in
compliance with IRC provisions for required minimum distributions. The minimum
Access Period requirements for Guaranteed Income Benefits are longer than the
requirements for i4LIFE (Reg. TM) Advantage without a Guaranteed
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Income Benefit. Shortening the Access Period will terminate the Guaranteed
Income Benefit. See The Contracts - Guaranteed Income Benefit with i4LIFE (Reg.
TM) Advantage.
Account Value. The initial Account Value is the Contract Value on the Valuation
Date i4LIFE (Reg. TM) Advantage is effective (or your initial Purchase Payment
if i4LIFE (Reg. TM) Advantage is purchased at contract issue), less any
applicable premium taxes. During the Access Period, the Account Value on a
Valuation Date will equal the total value of all of the Contractowner's
Accumulation Units plus the Contractowner's value in the fixed account, and
will be reduced by Regular Income Payments and Guaranteed Income Benefit
payments made as well as any withdrawals taken. After the Access Period ends,
the remaining Account Value will be applied to continue Regular Income Payments
for your life and the Account Value will be reduced to zero.
Regular Income Payments during the Access Period. i4LIFE (Reg. TM) Advantage
provides for variable, periodic Regular Income Payments for as long as an
Annuitant (or Secondary Life, if applicable) is living and access to your
Account Value during the Access Period. When you elect i4LIFE (Reg. TM)
Advantage, you will have to choose the date you will receive the initial
Regular Income Payment. Once they begin, Regular Income Payments will continue
until the death of the Annuitant or Secondary Life, if applicable. Regular
Income Payments must begin within one year of the date you elect i4LIFE (Reg.
TM) Advantage. You also select when the Access Period ends and when the
Lifetime Income Period begins. You must also select the frequency of the
payments (monthly, quarterly, semi-annually or annually), how often the payment
is recalculated, the length of the Access Period and the assumed investment
return. These choices will influence the amount of your Regular Income
Payments.
If you do not choose a payment frequency, the default is a monthly frequency.
In most states, you may also elect to have Regular Income Payments from
non-qualified contracts recalculated only once each year rather than
recalculated at the time of each payment. This results in level Regular Income
Payments between recalculation dates. Qualified contracts are only recalculated
once per year, at the beginning of each calendar year. You also choose the
assumed investment return. Return rates of 3%, 4%, 5%, or 6% may be available.
The higher the assumed investment return you choose, the higher your initial
Regular Income Payment will be and the higher the return must be to increase
subsequent Regular Income Payments. You also choose the length of the Access
Period. At this time, changes can only be made on Periodic Income Commencement
Date anniversaries.
Regular Income Payments are not subject to any applicable Interest Adjustments.
See Charges and Other Deductions. For information regarding income tax
consequences of Regular Income Payments, see Federal Tax Matters.
The amount of the initial Regular Income Payment is determined on the Periodic
Income Commencement Date by dividing the Contract Value (or Purchase Payment if
elected at contract issue), less applicable premium taxes by 1000 and
multiplying the result by an annuity factor. The annuity factor is based upon:
o the age and sex of the Annuitant and Secondary Life, if applicable;
o the length of the Access Period selected;
o the frequency of the Regular Income Payments;
o the assumed investment return you selected; and
o the Individual Annuity Mortality table specified in your contract.
The annuity factor used to determine the Regular Income Payments reflects the
fact that, during the Access Period, you have the ability to withdraw the
entire Account Value and that a Death Benefit of the entire Account Value will
be paid to your Beneficiary upon your death. These benefits during the Access
Period result in a slightly lower Regular Income Payment, during both the
Access Period and the Lifetime Income Period, than would be payable if this
access was not permitted and no lump-sum Death Benefit of the full Account
Value was payable. (The Contractowner must elect an Access Period of no less
than the minimum Access Period which is currently set at 5 years.) The annuity
factor also reflects the requirement that there be sufficient Account Value at
the end of the Access Period to continue your Regular Income Payments for the
remainder of your life (and/or the Secondary Life if applicable), during the
Lifetime Income Period, with no further access or Death Benefit.
The Account Value will vary with the actual net investment return of the
Subaccounts selected and the interest credited on the fixed account, which then
determines the subsequent Regular Income Payments during the Access Period.
Each subsequent Regular Income Payment (unless the levelized option is
selected) is determined by dividing the Account Value on the applicable
Valuation Date by 1000 and multiplying this result by an annuity factor revised
to reflect the declining length of the Access Period. As a result of this
calculation, the actual net returns in the Account Value are measured against
the assumed investment return to determine subsequent Regular Income Payments.
If the actual net investment return (annualized) for the contract exceeds the
assumed investment return, the Regular Income Payment will increase at a rate
approximately equal to the amount of such excess. Conversely, if the actual net
investment return for the contract is less than the assumed investment return,
the Regular Income Payment will decrease. For example, if net investment return
is 3% higher (annualized) than the assumed investment return, the Regular
Income Payment for the next year will increase by approximately 3%. Conversely,
if actual net investment return is 3% lower than the assumed investment return,
the Regular Income Payment will decrease by approximately 3%.
Withdrawals made during the Access Period will also reduce the Account Value
that is available for Regular Income Payments, and subsequent Regular Income
Payments will be reduced in the same proportion that withdrawals reduce the
Account Value.
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For a joint life option, if either the Annuitant or Secondary Life dies during
the Access Period, Regular Income Payments will be recalculated using a revised
annuity factor based on the single surviving life, if doing so provides a
higher Regular Income Payment.
For nonqualified contracts, if the Annuitant and Secondary Life, if applicable,
both die during the Access Period, the Guaranteed Income Benefit (if any) will
terminate and the annuity factor will be revised for a non-life contingent
Regular Income Payment and Regular Income Payments will continue until the
Account Value is fully paid out and the Access Period ends. For qualified
contracts, if the Annuitant and Secondary Life, if applicable, both die during
the Access Period, i4LIFE (Reg. TM) Advantage (and any Guaranteed Income
Benefit if applicable) will terminate.
Regular Income Payments during the Lifetime Income Period. The Lifetime Income
Period begins at the end of the Access Period if either the Annuitant or
Secondary Life is living. Your earlier elections regarding the frequency of
Regular Income Payments, assumed investment return and the frequency of the
recalculation do not change. The initial Regular Income Payment during the
Lifetime Income Period is determined by dividing the Account Value on the last
Valuation Date of the Access Period by 1000 and multiplying the result by an
annuity factor revised to reflect that the Access Period has ended. The annuity
factor is based upon:
o the age and sex of the Annuitant and Secondary Life (if living);
o the frequency of the Regular Income Payments;
o the assumed investment return you selected; and
o the Individual Annuity Mortality table specified in your contract.
The impact of the length of the Access Period and any withdrawals made during
the Access Period will continue to be reflected in the Regular Income Payments
during the Lifetime Income Period. To determine subsequent Regular Income
Payments, the contract is credited with a fixed number of Annuity Units equal
to the initial Regular Income Payment (during the Lifetime Income Period)
divided by the Annuity Unit value (by Subaccount). Subsequent Regular Income
Payments are determined by multiplying the number of Annuity Units per
Subaccount by the Annuity Unit value. Your Regular Income Payments will vary
based on the value of your Annuity Units. If your Regular Income Payments are
adjusted on an annual basis, the total of the annual payment is transferred to
Lincoln Life's general account to be paid out based on the payment mode you
selected. Your payment(s) will not be affected by market performance during
that year. Your Regular Income Payment(s) for the following year will be
recalculated at the beginning of the following year based on the current value
of the Annuity Units.
Regular Income Payments will continue for as long as the Annuitant or Secondary
Life, if applicable, is living, and will continue to be adjusted for investment
performance of the Subaccounts your Annuity Units are invested in (and the
fixed account if applicable). Regular Income Payments vary with investment
performance.
During the Lifetime Income Period, there is no longer an Account Value;
therefore, no withdrawals are available and no Death Benefit is payable. In
addition, transfers are not allowed from a fixed annuity payment to a variable
annuity payment.
i4LIFE (Reg. TM) Advantage Death Benefits
i4LIFE (Reg. TM) Advantage Account Value Death Benefit. The i4LIFE (Reg. TM)
Advantage Account Value death benefit is available during the Access Period.
This death benefit is equal to the Account Value as of the valuation date on
which we approve the payment of the death claim. You may not change this death
benefit once it is elected.
i4LIFE (Reg. TM) Advantage Guarantee of Principal Death Benefit.
The i4LIFE (Reg. TM) Advantage Guarantee of Principal Death Benefit is
available during the Access Period and will be equal to the greater of:
o the Account Value as of the Valuation Date we approve the payment of the
claim; or
o the sum of all Purchase Payments, less the sum of Regular Income Payments
and other withdrawals where:
o Regular Income Payments, including withdrawals to provide the Guaranteed
Income Benefit, reduce the Death Benefit by the dollar amount of the
payment; and
o all other withdrawals, if any, reduce the Death Benefit in the same
proportion that withdrawals reduce the Contract Value or Account Value.
References to Purchase Payments and withdrawals include Purchase Payments and
withdrawals made prior to the election of i4LIFE (Reg. TM) Advantage if your
contract was in force with the Guarantee of Principal or greater Death Benefit
option prior to that election.
In a declining market, withdrawals which are deducted in the same proportion
that withdrawals reduce the Contract Value or Account Value, may have a
magnified effect on the reduction of the death benefit payable. All references
to withdrawals include deductions for any applicable charges associated with
that withdrawal and premium taxes, if any.
The following example demonstrates the impact of a proportionate withdrawal on
your Death Benefit:
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i4LIFE (Reg. TM) Advantage Guarantee of Principal Death Benefit... $200,000
Total i4LIFE (Reg. TM) Regular Income Payment..................... $ 25,000
Additional Withdrawal............................................. $ 15,000 ($15,000/$150,000=10% withdrawal)
Account Value at the time of Additional Withdrawal................ $150,000
Death Benefit Value after i4LIFE (Reg. TM) Regular Income Payment =
$200,000 - $25,000 = $175,000
Death Benefit Value after additional withdrawal = $175,000 - $17,500 =
$157,500
Reduction in Death Benefit Value for Withdrawal = $175,000 X 10% = $17,500
The Regular Income Payments reduce the Death Benefit by $25,000 and the
additional withdrawal causes a 10% reduction in the Death Benefit, the same
percentage that the withdrawal reduced the Account Value.
During the Access Period, contracts with the i4LIFE (Reg. TM) Advantage
Guarantee of Principal Death Benefit may elect to change to the i4LIFE (Reg.
TM) Advantage Account Value Death Benefit. We will effect the change in Death
Benefit on the Valuation Date we receive a completed election form at our Home
Office, and we will begin deducting the lower i4LIFE (Reg. TM) Advantage charge
at that time. Once the change is effective, you may not elect to return to the
i4LIFE (Reg. TM) Advantage Guarantee of Principal Death benefit.
i4LIFE (Reg. TM) Advantage EGMDB. The i4LIFE (Reg. TM) Advantage EGMDB is only
available during the Access Period. This benefit is the greatest of:
o the Account Value as of the Valuation Date on which we approve the payment
of the claim; or
o the sum of all Purchase Payments, less the sum of Regular Income Payments
and other withdrawals where:
o Regular Income Payments, including withdrawals to provide the Guaranteed
Income Benefit, reduce the Death Benefit by the dollar amount of the
payment; and
o all other withdrawals, if any, reduce the Death Benefit in the same
proportion that withdrawals reduce the Contract Value or Account Value.
References to Purchase Payments and withdrawals include Purchase Payments and
withdrawals made prior to the election of i4LIFE (Reg. TM) Advantage if your
contract was in force with the Guarantee of Principal or greater Death Benefit
option prior to that election; or
o the highest Account Value or Contract Value on any contract anniversary date
(including the inception date of the contract) after the EGMDB is effective
(determined before the allocation of any Purchase Payments on that contract
anniversary) prior to the 81st birthday of the deceased and prior to the
date of death. The highest Account Value or Contract Value is increased by
Purchase Payments and is decreased by Regular Income Payments, including
withdrawals to provide the Guaranteed Income Benefits and all other
withdrawals subsequent to the anniversary date on which the highest Account
Value or Contract Value is obtained. Regular Income Payments and
withdrawals are deducted in the same proportion that Regular Income
Payments and withdrawals reduce the Contract Value or Account Value.
When determining the highest anniversary value, if you elected the EGMDB (or
more expensive death benefit option) in the base contract and this Death
Benefit was in effect when you purchased i4LIFE (Reg. TM) Advantage, we will
look at the Contract Value before i4LIFE (Reg. TM) Advantage and the Account
Value after the i4LIFE (Reg. TM) Advantage election to determine the highest
anniversary value.
In a declining market, withdrawals which are deducted in the same proportion
that withdrawals reduce the Account Value, may have a magnified effect on the
reduction of the Death Benefit payable. All references to withdrawals include
deductions for any applicable charges associated with that withdrawal and
premium taxes, if any.
Contracts with the i4LIFE (Reg. TM) Advantage EGMDB may elect to change to the
i4LIFE (Reg. TM) Advantage Guarantee of Principal or i4LIFE (Reg. TM) Advantage
Account Value Death Benefit. We will effect the change in Death Benefit on the
Valuation Date we receive a completed election form at our Home Office, and we
will begin deducting the lower i4LIFE (Reg. TM) Advantage charge at that time.
Once the change is effective, you may not elect to return to the i4LIFE (Reg.
TM) Advantage EGMDB.
General Death Benefit Provisions. For all Death Benefit options, following the
Access Period, there is no Death Benefit. The Death Benefits also terminate
when the Account Value equals zero, because the Access Period terminates.
If there is a change in the Contractowner, joint owner or Annuitant during the
life of the contract, for any reason other than death, the only Death Benefit
payable for the new person will be the Account Value.
For non-qualified contracts, upon the death of the Contractowner, joint owner
or Annuitant, the Contractowner (or Beneficiary) may elect to terminate the
contract and receive full payment of the Death Benefit or may elect to continue
the contract and receive Regular Income Payments. Upon the death of the
Secondary Life, who is not also an owner, only the surrender value is paid.
If you are the owner of an IRA annuity contract, and there is no Secondary
Life, and you die during the Access Period, the i4LIFE (Reg. TM) Advantage will
terminate. A spouse Beneficiary may start a new i4LIFE (Reg. TM) Advantage
program.
If a death occurs during the Access Period, the value of the Death Benefit will
be determined as of the Valuation Date we approve the payment of the claim.
Approval of payment will occur upon our receipt of all the following:
1. proof (e.g. an original certified death certificate), or any other
proof of death satisfactory to us; and
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2. written authorization for payment; and
3. all required claim forms, fully completed (including selection of a
settlement option).
Notwithstanding any provision of this contract to the contrary, the payment of
Death Benefits provided under this contract must be made in compliance with
Code Section 72(s) or 401(a)(9) as applicable, as amended from time to time.
Death Benefits may be taxable. See Federal Tax Matters.
Upon notification to us of the death, Regular Income Payments may be suspended
until the death claim is approved. Upon approval, a lump sum payment for the
value of any suspended payments will be made as of the date the death claim is
approved, and Regular Income Payments will continue, if applicable. The excess,
if any, of the Death Benefit over the Account Value will be credited into the
contract at that time.
If a lump sum settlement is elected, the proceeds will be mailed within seven
days of approval by us of the claim subject to the laws, regulations and tax
code governing payment of Death Benefits. This payment may be postponed as
permitted by the Investment Company Act of 1940.
Guaranteed Income Benefit with i4LIFE (Reg. TM) Advantage
A Guaranteed Income Benefit is available for purchase when you elect i4LIFE
(Reg. TM) Advantage which ensures that your Regular Income Payments will never
be less than a minimum payout floor, regardless of the actual investment
performance of your contract. See Charges and Other Deductions for a discussion
of the Guaranteed Income Benefit charges.
Beginning July 2, 2012, or when available in your state, i4LIFE (Reg. TM)
Advantage Guaranteed Income Benefit (version 4) Protected Funds is an optional
feature available only to purchasers of 4LATER (Reg. TM) Advantage Protected
Funds. See Investment Requirements in this prospectus for more information
about the Investment Requirements applicable to i4LIFE (Reg. TM) Advantage
Guaranteed Income Benefit Protected Funds. You will be subject to Investment
Requirements applicable to i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit
Protected Funds the entire time you own this rider. Failure to comply with the
Investment Requirements will result in the termination of i4LIFE (Reg. TM)
Advantage with Guaranteed Income Benefit (version 4). See i4LIFE (Reg. TM)
Advantage with Guaranteed Income Benefit - Termination for more information.
All of the other terms and conditions of i4LIFE (Reg. TM) Advantage Guaranteed
Income Benefit (version 4) continue to apply to i4LIFE (Reg. TM) Advantage
Guaranteed Income Benefit Protected Funds.
As discussed below, certain features of the Guaranteed Income Benefit may be
impacted if you purchased Lincoln SmartSecurity (Reg. TM) Advantage, Lincoln
Lifetime IncomeSM Advantage 2.0 (withdrawal benefit riders) or 4LATER (Reg. TM)
Advantage Protected Funds prior to electing i4LIFE (Reg. TM) Advantage with the
Guaranteed Income Benefit (annuity payout rider).
Additional purchase payments cannot be made to a contract with the Guaranteed
Income Benefit. You are also limited in how much you can invest in certain
subaccounts. See the Contracts - Investment Requirements.
There is no guarantee that the i4LIFE (Reg. TM) Guaranteed Income Benefit
option will be available to elect in the future, as we reserve the right to
discontinue this option at any time. In addition, we may make different
versions of the Guaranteed Income Benefit available to new purchasers or may
create different versions for use with various Living Benefit riders. However,
a contractowner with Lincoln Lifetime IncomeSM Advantage 2.0 who decides to
drop Lincoln Lifetime IncomeSM Advantage 2.0 to purchase i4LIFE (Reg. TM)
Advantage will be guaranteed the right to purchase the Guaranteed Income
Benefit under the terms set forth in the Lincoln Lifetime IncomeSM Advantage
2.0 rider.
i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit, if available, is elected
when you elect i4LIFE (Reg. TM) Advantage or during the Access Period, if still
available for election, subject to terms and conditions at that time. You may
choose not to purchase the i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit
at the time you purchase i4LIFE (Reg. TM) Advantage by indicating that you do
not want the i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit on the
election form at the time that you purchase i4LIFE (Reg. TM) Advantage. If you
intend to use the Guaranteed Amount from the Lincoln SmartSecurity (Reg. TM)
Advantage rider, the Income Base from Lincoln Lifetime IncomeSM Advantage 2.0
or 4LATER (Reg. TM) Advantage Protected Funds to establish the Guaranteed
Income Benefit, you must elect the Guaranteed Income Benefit at the time you
elect i4LIFE (Reg. TM) Advantage.
The i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit is reduced by
withdrawals (other than Regular Income Payments) in the same proportion that
the withdrawals reduce the Account Value. See i4LIFE (Reg. TM) Advantage -
General i4LIFE (Reg. TM) Provisions for an example.
Guaranteed Income Benefit (version 4). For Guaranteed Income Benefit (version
4) the initial Guaranteed Income Benefit will be an amount equal to a specified
percentage of your Account Value (or Income Base or Guaranteed Amount as
applicable), based on your age (or the age of the youngest life under a joint
life option) at the time the Guaranteed Income Benefit is elected. The
specified percentages and the corresponding age-bands for calculating the
initial Guaranteed Income Benefit are outlined in the table below.
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Age-Banded Percentages for Calculating Initial Guaranteed Income
Benefit on or after May 20, 2013:
Single Life Option Single Life Option Joint Life Option Joint Life Option
-------------------- ----------------------- --------------------- ----------------------
Percentage of Account Age Percentage of Account
Value, Income Base or (younger of you and Value, Income Base or
Age Guaranteed Amount* your spouse's age) Guaranteed Amount*
-------------------- ----------------------- --------------------- ----------------------
Under age 40 2.50% Under age 40 2.00%
40 - 54 3.00% 40 - 54 2.50%
55 - under 591/2 3.50% 55 - under 59 1/2 3.00%
591/2 - 64 4.00% 591/2 - 69 3.50%
65 - 69 4.50% 70 - 74 4.00%
70 - 79 5.00% 75+ 4.50%
80 and above 5.50%
* Purchasers of Lincoln SmartSecurity (Reg. TM) Advantage may use any remaining
Guaranteed Amount (if greater than the Account Value) to calculate the
initial Guaranteed Income Benefit. Purchasers of Lincoln Lifetime IncomeSM
Advantage 2.0 may use any remaining Income Base reduced by all Guaranteed
Annual Income payments since the last Automatic Annual Step-up, if any, or
the rider effective date (if there has not been any Automatic Annual
Step-up) if greater than the contract value to establish the initial
Guaranteed Income Benefit. Purchasers of 4LATER (Reg. TM) Advantage
Protected Funds may use any remaining Income Base to establish the initial
Guaranteed Income Benefit (if greater than the contract value).
Age-Banded Percentages for Calculating Initial Guaranteed Income Benefit prior
to May 20, 2013:
Single & Joint Life Option* Single & Joint Life Option*
----------------------------- ----------------------------
Percentage of Account
Value, Income Base or
Age Guaranteed Amount**
----------------------------- ----------------------------
Under age 40 2.50%
40 - 54 3.00%
55 - under 591/2 3.50%
591/2 - 64 4.00%
65 - 69 4.50%
70 - 79 5.00%
80 and above 5.50%
* If joint life option is in effect, the younger of you and your spouse's age
applies
** Contractowners who elect Lincoln SmartSecurity (Reg. TM) Advantage will
receive the currently available version of the Guaranteed Income benefit.
Purchasers of Lincoln Lifetime IncomeSM Advantage 2.0 may use any remaining
Income Base reduced by all Guaranteed Annual Income payments since the last
Automatic Annual Step-up, if any, or the rider effective date (if there has
not been any Automatic Annual Step-up) if greater than the contract value
to establish the initial Guaranteed Income Benefit. Purchasers of 4LATER
(Reg. TM) Advantage Protected Funds may use any remaining Income Base to
establish the initial Guaranteed Income Benefit (if greater than the
contract value).
If the amount of your i4LIFE (Reg. TM) Advantage Regular Income Payment has
fallen below the Guaranteed Income Benefit, because of poor investment results,
a payment equal to the i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit is
the minimum payment you will receive. If the market performance in your
contract is sufficient to provide Regular Income Payments at a level that
exceeds the Guaranteed Income Benefit, the Guaranteed Income Benefit will never
come into effect. If the Guaranteed Income Benefit is paid, it will be paid
with the same frequency as your Regular Income Payment. If your Regular Income
Payment is less than the Guaranteed Income Benefit, we will reduce the Account
Value by the Regular Income Payment plus an additional amount equal to the
difference between your Regular Income Payment and the Guaranteed Income
Benefit (in other words, Guaranteed Income Benefit payments reduce the Account
Value by the entire amount of the Guaranteed Income Benefit payment). (Regular
Income Payments also reduce the Account Value). This payment will be made from
the variable subaccounts and the fixed account on a pro-rata basis according to
your investment allocations.
If your Account Value reaches zero as a result of payments to provide the
Guaranteed Income Benefit, we will continue to pay you an amount equal to the
Guaranteed Income Benefit. If your Account Value reaches zero, your Access
Period will end and your Lifetime Income Period will begin. Additional amounts
withdrawn from the Account Value to provide the Guaranteed Income Benefit may
terminate your Access Period earlier than originally scheduled, and will reduce
your death benefit. If your Account Value equals zero, no death benefit will be
paid. See i4LIFE (Reg. TM) Advantage Death Benefits. After the Access Period
ends, we will continue to pay the Guaranteed Income Benefit for as long as the
annuitant (or the Secondary Life, if applicable) is living.
The following example illustrates how poor investment performance, which
results in a Guaranteed Income Benefit payment, affects the i4LIFE (Reg. TM)
Account Value:
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i4LIFE (Reg. TM) Account Value before market decline............ $135,000
i4LIFE (Reg. TM) Account Value after market decline............. $100,000
Guaranteed Income Benefit....................................... $ 810
Regular Income Payment after market decline..................... $ 769
Account Value after market decline and Guaranteed Income Benefit
payment......................................................... $ 99,190
The contractowner receives an amount equal to the Guaranteed Income Benefit.
The entire amount of the Guaranteed Income Benefit is deducted from the Account
Value.
The Guaranteed Income Benefit (version 4) will automatically step up every year
to 75% of the current Regular Income Payment, if that result is greater than
the immediately prior Guaranteed Income Benefit. For non-qualified contracts,
the step-up will occur annually on the first valuation date on or after each
Periodic Income Commencement Date anniversary starting on the first Periodic
Income Commencement Date anniversary. For qualified contracts, the step-up will
occur annually on the valuation date of the first periodic income payment of
each calendar year. The first step-up is the valuation date of the first
periodic income payment in the next calendar year following the Periodic Income
Commencement Date.
The following example illustrates how the initial Guaranteed Income Benefit
(version 4) is calculated for a 60-year old contractowner with a nonqualified
contract, and how a step-up would increase the Guaranteed Income Benefit in a
subsequent year. The percentage of the Account Value used to calculate the
initial Guaranteed Income Benefit is 4% for a 60-year old per the Age-Banded
Percentages for Calculating Initial Guaranteed Income Benefit table above. The
example also assumes that the Account Value has increased due to positive
investment returns resulting in a higher recalculated Regular Income Payment.
See The Contracts - i4LIFE (Reg. TM) Advantage-Regular Income Payments during
the Access Period for a discussion of recalculation of the Regular Income
Payment.
8/1/2013 Amount of initial Regular Income Payment............................. $ 5,051
8/1/2013 Account Value at election of Guaranteed Income Benefit (version 4)... $100,000
8/1/2013 Initial Guaranteed Income Benefit (4% times $100,000 Account Value) . $ 4,000
8/1/2014 Recalculated Regular Income Payment.................................. $ 6,000
8/1/2014 Guaranteed Income Benefit after step-up (75% of $6,000) . $ 4,500
The contractowner's Guaranteed Income Benefit was increased to 75% of the
recalculated Regular Income Payment.
At the time of a step-up of the Guaranteed Income Benefit the i4LIFE (Reg. TM)
Guaranteed Income Benefit percentage charge may increase subject to the maximum
guaranteed charge of 2.00%. This means that your charge may change every year.
If we automatically administer a new step-up for you and if your percentage
charge is increased, you may ask us to reverse the step-up by giving us notice
within 30 days after the date of the step-up. If we receive notice of your
request to reverse the step-up, on a going forward basis, we will decrease the
percentage charge to the percentage charge in effect before the step-up
occurred. Any increased charges paid between the time of the step-up and the
date we receive your notice to reverse the step-up will not be reimbursed.
Step-ups will continue after a request to reverse a step-up. i4LIFE (Reg. TM)
Advantage charges are in addition to the Guaranteed Income Benefit charges. We
will provide you with written notice when a step-up will result in an increase
to the current charge so that you may give us timely notice if you wish to
reverse a step-up.
The next section describes certain guarantees in living benefit riders relating
to the election of the Guaranteed Income Benefit.
Lincoln Lifetime IncomeSM Advantage 2.0. Contractowners who purchase Lincoln
Lifetime IncomeSM Advantage 2.0 are guaranteed the ability in the future to
purchase i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit (version 4)
even if it is no longer available for sale. They are also guaranteed that the
Guaranteed Income Benefit percentages and Access Period requirements will be at
least as favorable as those available at the time they purchased Lincoln
Lifetime IncomeSM Advantage 2.0. See The Contracts- Lincoln Lifetime IncomeSM
Advantage 2.0.
Contractowners with an active Lincoln Lifetime IncomeSM Advantage 2.0 may
decide to drop Lincoln Lifetime IncomeSM Advantage 2.0 and purchase i4LIFE
(Reg. TM) Advantage with Guaranteed Income Benefit (version 4). If this
decision is made, the Contractowner can use the Lincoln Lifetime IncomeSM
Advantage 2.0 Income Base reduced by all Guaranteed Annual Income payments
since the last Automatic Annual Step-up or since the rider's effective date (if
there has not been an Automatic Annual Step-up) if greater than the Account
Value to establish the i4LIFE (Reg. TM) Advantage with Guaranteed Income
Benefit (version 4) at the terms in effect for purchasers of this rider.
Lincoln SmartSecurity (Reg. TM) Advantage. Contractowners who purchased Lincoln
SmartSecurity (Reg. TM) Advantage are guaranteed that they may use the
remaining Guaranteed Amount (if greater than the contract value) at the time
the initial Guaranteed Income Benefit is determined, to calculate the
Guaranteed Income Benefit. The initial Guaranteed Income Benefit will be equal
to the applicable percentage based on either the contractowner's age (single
life) or the youngest age of either the contractowner or Secondary Life (if
applicable) , at the time the Guaranteed Income Benefit is elected, multiplied
by the remaining Guaranteed Amount. The applicable percentage is
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found in the Age-Banded Percentages for Calculating Initial Guaranteed Income
Benefit table above. In other words, the initial Guaranteed Income Benefit will
equal the applicable percentage based on the contractowner's age multiplied by
the remaining Guaranteed Amount (if greater than the contract value).
The following is an example of how the Guaranteed Amount from Lincoln
SmartSecurity (Reg. TM) Advantage or the Income Base from Lincoln Lifetime
IncomeSM Advantage 2.0 may be used to calculate the i4LIFE (Reg. TM) Advantage
with Guaranteed Income Benefit (version 4). The example assumes that on the
date that i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit (version 4)
is elected the contractowner is 70 years of age and has made no withdrawals
from the contract. The percentage of the Account Value used to calculate the
initial Guaranteed Income Benefit is 5% for a 70-year old per the Age-Banded
Percentages for Calculating Initial Guaranteed Income Benefit table above. The
example assumes an annual payment mode has been elected.
Account Value (equals contract value on date i4LIFE (Reg. TM) Advantage
with Guaranteed Income Benefit (version 4) is elected)........................ $100,000
Guaranteed Amount/Income Base on date i4LIFE (Reg. TM) Advantage with
Guaranteed Income Benefit (version 4) is elected.............................. $120,000
Amount of initial Regular Income Payment............................... $ 5,992 per year
Initial Guaranteed Income Benefit (5% x $120,000 Guaranteed
Amount/Income Base which is greater than $100,000 Account
Value)........................................................................ $ 6,000
4LATER (Reg. TM) Advantage Protected Funds. Contractowners who elect the 4LATER
(Reg. TM) Advantage Protected Funds rider must elect i4LIFE (Reg. TM) Advantage
Guaranteed Income Benefit Protected Funds in accordance with the same terms set
out above for i4LIFE (Reg. TM) Advantage Guaranteed Income. When this decision
is made, the Contractowner can use the greater of the Income Base under 4LATER
(Reg. TM) Advantage Protected Funds or the Account Value under i4LIFE (Reg. TM)
Advantage Guaranteed Income Benefit Protected Funds to calculate the amount of
the initial Guaranteed Income Benefit. All other provisions of i4LIFE (Reg. TM)
Advantage Guaranteed Income Benefit apply.
Impacts to i4LIFE (Reg. TM) Advantage Regular Income Payments. When you select
the i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit, certain restrictions
will apply to your contract:
o A 4% assumed investment return (AIR) will be used to calculate the Regular
Income Payments.
o The minimum Access Period required for Guaranteed Income Benefit (version
4) is the longer of 20 years or the difference between your age (nearest
birthday) and age 90. We may change this Access Period requirement prior
to election of the Guaranteed Income Benefit. If you use the greater of
the Account Value or Income Base under Lincoln Lifetime IncomeSM Advantage
2.0 or 4LATER (Reg. TM) Advantage Protected Funds to calculate the
Guaranteed Income Benefit after the fifth anniversary of the rider's
effective date, the minimum Access Period will be the longer of 15 years
or the difference between your age (nearest birthday) and age 85.
o The maximum Access Period available for this benefit is to age 115 for
non-qualified contracts; to age 100 for qualified contracts.
If you choose to lengthen your Access Period (which must be increased by a
minimum of 5 years), your Regular Income Payment will be reduced, but the
i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit will not be affected. If
you choose to shorten your Access Period, the i4LIFE (Reg. TM) Advantage with
Guaranteed Income Benefit will terminate.
The i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit will terminate due to
any of the following events:
o the death of the annuitant (or the later of the death of the annuitant or
Secondary Life if a joint payout was elected); or
o a contractowner requested decrease in the Access Period or a change to the
Regular Income Payment frequency; or
o upon written notice to us; or
o assignment of the contract; or
o failure to comply with Investment Requirements.
A termination due to a decrease in the Access Period, a change in the Regular
Income Payment frequency, or upon written notice from the contractowner will be
effective as of the valuation date on the next Periodic Income Commencement
Date anniversary. Termination will be only for the i4LIFE (Reg. TM) Advantage
Guaranteed Income Benefit and not the i4LIFE (Reg. TM) Advantage election,
unless otherwise specified. However if you used the greater of the Account
Value or Income Base under Lincoln Lifetime IncomeSM Advantage 2.0 or 4LATER
(Reg. TM) Advantage Protected Funds to establish the Guaranteed Income Benefit
any termination of the Guaranteed Income Benefit will also result in a
termination of the i4LIFE (Reg. TM) Advantage election. If you terminate the
i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit you may be able to
re-elect it, if available, after one year. The election will be treated as a
new purchase, subject to the terms and charges in effect at the time of
election and the i4LIFE (Reg. TM) Advantage Regular Income Payments will be
recalculated. The i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit will be
based on the Account Value at the time of the election.
Availability. The Guaranteed Income Benefit (version 4) is available with
qualified and nonqualified (IRAs and Roth IRAs) annuity contracts. The
Contractowner must be under age 96 for nonqualified contracts and under age 81
for qualified contracts at the time this rider is elected.
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Withdrawals. You may request a withdrawal at any time prior to or during the
Access Period. We reduce the Account Value by the amount of the withdrawal, and
all subsequent Regular Income Payments and Guaranteed Income Benefit payments,
if applicable, will be reduced proportionately. Withdrawals may have tax
consequences. See Federal Tax Matters. The Interest Adjustment may apply.
The following example demonstrates the impact of a withdrawal on the Regular
Income Payments and the Guaranteed Income Benefit payments:
i4LIFE (Reg. TM) Regular Income Payment before Withdrawal..... $ 1,200
Guaranteed Income Benefit before Withdrawal................... $ 900
Account Value at time of Additional Withdrawal................ $150,000
Additional Withdrawal......................................... $ 15,000 (a 10% withdrawal)
Reduction in i4LIFE (Reg. TM) Regular Income Payment for Withdrawal =
$1,200 X 10 % = $120
i4LIFE (Reg. TM) Regular Income Payment after Withdrawal = $1,200 - $120 =
$1,080
Reduction in Guaranteed Income Benefit for Withdrawal = $900 X 10% = $90
Guaranteed Income Benefit after Withdrawal = $900 - $90 = $810
Surrender. At any time prior to or during the Access Period, you may surrender
the contract by withdrawing the surrender value. If the contract is
surrendered, the contract terminates and no further Regular Income Payments
will be made. The Interest Adjustment may apply.
Termination. For IRA annuity contracts, you may terminate i4LIFE (Reg. TM)
Advantage prior to the end of the Access Period by notifying us in writing. The
termination will be effective on the next Valuation Date after we receive the
notice and your contract will return to the accumulation phase. Your i4LIFE
(Reg. TM) Advantage Death Benefit will terminate and you may choose the
Guarantee of Principal (if you had the i4LIFE (Reg. TM) Advantage Guarantee of
Principal Death Benefit) or Account Value Death Benefit options. Upon
termination, we will stop assessing the charge for i4LIFE (Reg. TM) Advantage
and begin assessing the mortality and expense risk charge and administrative
charge associated with the new Death Benefit option. Your Contract Value upon
termination will be equal to the Account Value on the Valuation Date we
terminate i4LIFE (Reg. TM) Advantage.
For non-qualified contracts, you may not terminate i4LIFE (Reg. TM) Advantage
once you have elected it.
Annuity Payouts
When you apply for a contract, you may select any Annuity Commencement Date
permitted by law, which is usually on or before the Annuitant's 90th birthday.
However, you must elect to receive Annuity Payouts by the Annuitant's 99th
birthday. Your broker-dealer may recommend that you annuitize at an earlier
age. As an alternative, contractowners with Lincoln SmartSecurity (Reg. TM)
Advantage may elect to annuitize their Guaranteed Amount under the Guaranteed
Amount Annuity Payout Option. Contractowners with Lincoln Lifetime IncomeSM
Advantage 2.0 may elect the Guaranteed Annual Income Amount Annuity Payout
option.
The contract provides optional forms of payouts of annuities (annuity options),
each of which is payable on a variable basis, a fixed basis or a combination of
both as you specify. The contract provides that all or part of the Contract
Value may be used to purchase an Annuity Payout option.
You may elect Annuity Payouts in monthly, quarterly, semiannual or annual
installments. If the payouts from any Subaccount would be or become less than
$50, we have the right to reduce their frequency until the payouts are at least
$50 each. Following are explanations of the annuity options available.
Annuity Options
The annuity options outlined below do not apply to Contractowners who have
elected i4LIFE (Reg. TM) Advantage, the Guaranteed Amount Annuity Payout option
or the Guaranteed Annual Income Amount Annuity Payout option.
Life Annuity. This option offers a periodic payout during the lifetime of the
Annuitant and ends with the last payout before the death of the Annuitant. This
option offers the highest periodic payout since there is no guarantee of a
minimum number of payouts or provision for a Death Benefit for Beneficiaries.
However, there is the risk under this option that the recipient would receive
no payouts if the Annuitant dies before the date set for the first payout; only
one payout if death occurs before the second scheduled payout, and so on.
Life Annuity with Payouts Guaranteed for Designated Period. This option
guarantees periodic payouts during a designated period, usually 10 or 20 years,
and then continues throughout the lifetime of the Annuitant. The designated
period is selected by the Contractowner.
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Joint Life Annuity. This option offers a periodic payout during the joint
lifetime of the Annuitant and a designated joint Annuitant. The payouts
continue during the lifetime of the survivor. However, under a joint life
annuity, if both Annuitants die before the date set for the first payout, no
payouts will be made. Only one payment would be made if both deaths occur
before the second scheduled payout, and so on.
Joint Life Annuity with Guaranteed Period. This option guarantees periodic
payouts during a designated period, usually 10 or 20 years, and continues
during the joint lifetime of the Annuitant and a designated joint Annuitant.
The payouts continue during the lifetime of the survivor. The designated period
is selected by the Contractowner.
Joint Life and Two Thirds to Survivor Annuity. This option provides a periodic
payout during the joint lifetime of the Annuitant and a designated joint
Annuitant. When one of the joint Annuitants dies, the survivor receives two
thirds of the periodic payout made when both were alive.
Joint Life and Two-Thirds Survivor Annuity with Guaranteed Period. This option
provides a periodic payout during the joint lifetime of the Annuitant and a
joint Annuitant. When one of the joint Annuitants dies, the survivor receives
two-thirds of the periodic payout made when both were alive. This option
further provides that should one or both of the Annuitants die during the
elected guaranteed period, usually 10 or 20 years, full benefit payment will
continue for the rest of the guaranteed period.
Unit Refund Life Annuity. This option offers a periodic payout during the
lifetime of the Annuitant with the guarantee that upon death a payout will be
made of the value of the number of Annuity Units (see Variable Annuity Payouts)
equal to the excess, if any, of:
o the total amount applied under this option divided by the Annuity Unit value
for the date payouts begin, minus
o the Annuity Units represented by each payout to the Annuitant multiplied by
the number of payouts paid before death.
The value of the number of Annuity Units is computed on the date the death
claim is approved for payment by the Home Office.
Life Annuity with Cash Refund. Fixed annuity benefit payments that will be made
for the lifetime of the Annuitant with the guarantee that upon death, should
(a) the total dollar amount applied to purchase this option be greater than (b)
the fixed annuity benefit payment multiplied by the number of annuity benefit
payments paid prior to death, then a refund payment equal to the dollar amount
of (a) minus (b) will be made.
Under the annuity options listed above, you may not make withdrawals. Other
options, with or without withdrawal features, may be made available by us. You
may pre-select an Annuity Payout option as a method of paying the Death Benefit
to a Beneficiary. If you do, the Beneficiary cannot change this payout option.
You may change or revoke in writing to our Home Office, any such selection,
unless such selection was made irrevocable. If you have not already chosen an
Annuity Payout option, the Beneficiary may choose any Annuity Payout option. At
death, options are only available to the extent they are consistent with the
requirements of the contract as well as Sections 72(s) and 401(a)(9) of the tax
code, if applicable.
Lincoln SmartIncomeSM Inflation. The Lincoln SmartIncomeSM Inflation Fixed
Annuity Payout Option ("Lincoln SmartIncomeSM Inflation") is an Annuity Payout
option that provides:
o Scheduled Payments (the periodic Annuity Payouts under this rider) for the
life of the Annuitant and Secondary Life (Secondary Life may also be
referred to as joint life), if applicable, that may change each January
based on changes in the Consumer Price Index-Urban (CPI). The CPI is the
non-seasonally adjusted U.S. City Average All Items Consumer Price Index
for all Urban Consumers published by the U.S. Bureau of Labor Statistics
and is widely used to measure inflation.
o A Guaranteed Minimum Scheduled Payment.
o A Death Benefit based on the Reserve Value.
o A Reserve Value from which additional withdrawals, called Unscheduled
Payments, may be taken at any time as long as the Reserve Value is greater
than zero and up to the amount of the Reserve Value less any related
charges and taxes.
You must wait at least one year from the effective date of the contract to
elect Lincoln SmartIncomeSM Inflation. For non-qualified annuities the
Annuitant and joint Annuitant must be at least 50 years of age and not older
than 85 years of age (50 years and not more than 75 years of age for qualified
annuities). The minimum Contract Value that may be credited to this Annuity
Payout option is $50,000 and the maximum is $2,000,000.
You may consider electing this Annuity Payout option if you would like an
Annuity Payout that may increase or decrease as inflation, as measured by the
CPI, increases or decreases. Lincoln SmartIncomeSM Inflation also provides a
guaranteed minimum payout, Death Benefits and access to the Reserve Value from
which you can take Unscheduled Payments. We offer other fixed Annuity Payout
options that have a higher income factor and would result in a higher payment
than Lincoln SmartIncomeSM Inflation but do not offer Unscheduled Payments or a
Death Benefit. You should carefully consider whether or not Lincoln
SmartIncomeSM Inflation is the appropriate choice for you.
All or a portion of your Contract Value may be used to fund the Lincoln
SmartIncomeSM Inflation. You may select both Lincoln SmartIncomeSM Inflation
and another Annuity Payout option at the same time by allocating less than 100%
of your Contract Value to
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Lincoln SmartIncomeSM Inflation and the remainder to the other Annuity Payout
option. If only a portion of your Contract Value is used to fund Lincoln
SmartIncomeSM Inflation, the remainder of the Contract Value must be used to
fund another Annuity Payout option.
The Lincoln SmartIncomeSM Inflation may not be available for purchase in the
future as we reserve the right not to offer it for sale. The availability of
Lincoln SmartIncomeSM Inflation will depend upon your state's approval of the
contract rider. We also reserve the right to substitute an appropriate index
for the CPI, if:
1. The CPI is discontinued, delayed, or otherwise not available for this
use; or
2. The composition, base or method of calculating the CPI changes so that
we deem it inappropriate for use.
If the CPI is discontinued, delayed or otherwise not available, or if the
composition, base or method of, calculating the CPI changes so that we deem it
inappropriate for use in Lincoln SmartIncomeSM Inflation, we will substitute an
appropriate index for the CPI. In the case of a substitution, we will give you
written notification at least 30 days in advance of this change, as well as
provide you with an amendment to the prospectus. We will attempt to utilize a
substitute index generated by the government that is a measure of inflation. We
will not substitute an index created by us or one of our affiliates. Upon
substitution of the CPI, annuity payment values will be calculated consistent
with the formulas currently used but with different index values for
calculating the Scheduled Payment and Reserve Value adjustments. If we
substitute a different index of the CPI you may cancel the rider per the terms
of the termination provisions of rider and may be subject to an Unscheduled
Payment charge. See Termination and Unscheduled Payments.
Rider Year and Rider Date. The Rider Date is the effective date of the rider.
The Rider Date anniversary is the same calendar day as the Rider Date each
calendar year. A Rider Year is each 12-month period starting with the Rider
Date and starting each Rider Date anniversary after that.
Scheduled Payment and Guaranteed Minimum Scheduled Payment. Scheduled Payments
are Annuity Payouts for the life of the Annuitant (and Secondary Life if
applicable).You choose when payments will begin and whether the Scheduled
Payment is paid monthly, quarterly, semi-annually or annually. Once the
Scheduled Payment frequency is established it cannot be changed. The frequency
of the Scheduled Payments will affect the dollar amount of each Scheduled
Payment. For example, a more frequent payment schedule will reduce the dollar
amount of each Scheduled Payment. The first payment must be at least 30 days
after the Rider Date and before the first Rider Date anniversary. The Scheduled
Payment will be adjusted either up or down on an annual basis depending on the
percentage change of the CPI. Scheduled Payments are also adjusted for
Unscheduled Payments, any related Unscheduled Payment charge and any deduction
for premium taxes. If adjustments to the Scheduled Payment cause it to be less
than the Guaranteed Minimum Scheduled Payment, as adjusted, you will receive
the Guaranteed Minimum Scheduled Payment, as adjusted, unless Unscheduled
Payments have reduced the Reserved Value to zero, in which case the rider will
terminate.
Lincoln SmartIncomeSM Inflation also provides a Guaranteed Minimum Scheduled
Payment which is initially equal to the first Scheduled Payment. The Guaranteed
Minimum Scheduled Payment may be adjusted for Unscheduled Payments, any related
Unscheduled Payment charge and any deductions for premium taxes, but is not
adjusted for changes in the CPI. (See further discussion and example of
reductions to the Scheduled Payment and Guaranteed Minimum Scheduled Payment
for Unscheduled Payment in the Unscheduled Payment section below.)
The initial Scheduled Payment is calculated by multiplying the Contract Value
allocated to Lincoln SmartIncomeSM Inflation, reduced for any premium tax, by
an income factor. The income factor is based upon:
o the age and sex of the Annuitant and Secondary Life;
o the frequency of the Scheduled Payments;
o the Scheduled Payments start date.
For a given Contractowner with the same characteristics (sex, age, frequency of
Annuity Payouts and Annuity Payout start date) the income factor for a fixed
lifetime Annuity Payout option would be higher than the income factor for
Lincoln SmartIncomeSM Inflation. You may request an illustration of annuity
values prior to purchasing Lincoln SmartIncomeSM Inflation which will
illustrate the Scheduled Payment and Guaranteed Minimum Scheduled Payment you
may expect.
Reserve Value. The Reserve Value is a value we establish to determine the
amount available for Unscheduled Payments and the Death Benefit, if any. The
initial Reserve Value on the Rider Date is equal to the amount of the Contract
Value used to purchase Lincoln SmartIncomeSM Inflation, less any outstanding
premium taxes that have not previously been deducted. Each January 1, the
Reserve Value will be adjusted either up or down by the percentage change in
the CPI during the preceding calendar year, as described below. The Reserve
Value is decreased dollar for dollar by any Scheduled or Unscheduled Payments
and related Unscheduled Payment charges or any premium taxes. There is no
minimum floor to the Reserve Value. If the Reserve Value falls to zero because
of Scheduled Payments and/or negative CPI Adjustments (and not due to the
deduction of Unscheduled Payments and related Unscheduled Payment charges and
taxes) there will be no more annual adjustments to the Reserve Value and there
will be no more Unscheduled Payments or Death Benefit. However, the Scheduled
Payments will continue for the life of the Annuitant and Secondary Life, if
applicable.
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If the deduction of an Unscheduled Payment and related Unscheduled Payment
charge reduces the Reserve Value to zero the Lincoln SmartIncomeSM Inflation
will terminate.
Adjustment of the Scheduled Payment and Reserve Value. Each January 1st
(Adjustment Date) the Scheduled Payment and Reserve Value may be adjusted up or
down by the same percentage, which will be the percentage change in the CPI
during the preceding calendar year. The CPI is the non-seasonally adjusted U.S.
City Average All Items Consumer Price Index for all Urban Consumers and is
published monthly by the United States Department of Labor, Bureau of Labor
Statistics (BLS). The CPI measures over time the average price change paid by
urban consumers for consumer goods and services. The CPI is published as a
number (CPI Value).You may obtain information regarding the CPI from BLS
electronically (www.bls.gov/cpi), through subscriptions to publications, and
via telephone and fax, through automated recordings.
The adjustment to the Scheduled Payment and to the Reserve Value each
Adjustment Date may be positive or negative, depending upon whether the CPI
Value has risen or fallen in the preceding calendar year. A rise in the CPI
Value will result in a positive adjustment. A fall in the CPI Value will result
in a negative adjustment. The percentage change in the CPI is measured by the
change in the CPI Value published each December immediately preceding the
Adjustment Date compared to either the initial CPI Value (first adjustment) or
the CPI Value published in December two calendar years preceding the Adjustment
Date (all subsequent adjustments after the first). The CPI Value published in
December is the CPI Value for the month of November. The first adjustment to
the Scheduled Payment and Reserve Value will be made on the next Adjustment
Date following the Rider Date. For the first adjustment the initial CPI Value
will be the CPI Value published in the month preceding the Rider Date. The
calculation of the first adjustment percentage will be equal to [(i)/(ii)]
where:
(i) is the CPI Value published in December of the calendar year
immediately preceding the Adjustment Date
(ii) is the initial CPI Value
Following is an example of the calculation of the first adjustment percentage
and the first adjustment to the Reserve Value using hypothetical CPI values:
Initial Reserve Value on Rider Date 4/15/2012...................... $ 150,000
Initial Scheduled Payment on 4/15/2012............................. $ 8,000
Initial CPI Value published in March 2012.......................... 150
CPI Value published in December 2012............................... 155
Adjustment percentage (155/150).................................... 1.033333
Reserve Value After 1/1/2013 Adjustment ($150,000 x 1.033333) . $ 155,000
Scheduled Payment After 1/1/2013 Adjustment ($8,000 x 1.033333) . $8,266.67
Subsequent adjustments will be calculated on each subsequent Adjustment Date.
Subsequent adjustments will be based upon the percentage change in the CPI
Value published in December immediately preceding the Adjustment Date compared
with the CPI Value published two calendar years prior to the Adjustment Date.
Calculations of the adjustment percentage after calculation of the first
adjustment percentage will be equal to [(i)/ (ii)] where:
(i) is the CPI Value published in December of the calendar year
immediately preceding the Adjustment Date
(ii) is the CPI Value published in December two calendar years preceding
the Adjustment Date.
If adjustments to the Scheduled Payment cause it to be less than the Guaranteed
Minimum Scheduled Payment you will receive the Guaranteed Minimum Scheduled
Payment. While you are receiving the Guaranteed Minimum Scheduled Payment we
will continue to adjust the Scheduled Payment by the percentage change of the
CPI Value published each December immediately preceding the Adjustment Date
compared to the CPI Value published two calendar years prior to the Adjustment
Date. You will start to receive the Scheduled Payment again in the year that it
is adjusted so that it is greater than the Guaranteed Minimum Scheduled
Payment.
The following example demonstrates the impact of a positive change in a
hypothetical CPI Value resulting in a positive adjustment to the Scheduled
Payment and Reserve Value:
Annual Scheduled Payment for calendar year 2012.......................... $ 5,000
Guaranteed Minimum Scheduled Payment for calendar year 2012.............. $ 4,800
Reserve Value 12/31/2012................................................. $ 100,000
CPI Value published in December 2012..................................... 120
CPI Value published in December 2011..................................... 115
Adjustment percentage (120/115).......................................... 1.043782
Reserve Value after 1/1/2013 adjustment ($100,000 x 1.043782) . $ 104,378
Annual Scheduled Payment for calendar year 2013 after 1/1/2013 adjustment
($5,000 x 1.043782) . $5,217.39
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Since the Scheduled Payment (after the adjustment) for 2013 of $5,217.39 is
greater than the Guaranteed Scheduled Payment of $4,800, the payment you will
receive in 2013 will equal the Scheduled Payment of $5,217.39.
The following example demonstrates the impact of a negative change in a
hypothetical CPI Value resulting in a negative adjustment to the Scheduled
Payment and Reserve Value:
Annual Scheduled Payment for calendar year 2012.......................... $ 5,000
Guaranteed Minimum Scheduled Payment for calendar year 2012.............. $ 4,800
Reserve Value 12/31/2012................................................. $ 100,000
CPI Value published in December 2012..................................... 120
CPI Value published in December 2011..................................... 130
Adjustment percentage (120/130).......................................... 0.9230769
Reserve Value after 1/1/2013 adjustment ($100,000 x 0.9230769) . $ 92,308
Annual Scheduled Payment for calendar year 2013 after 1/1/2013 adjustment
($5,000 x 0.9230769) . $ 4,615.38
Since the Scheduled Payment (after adjustment) for 2013 of $4,615.38 is less
than the Guaranteed Minimum Scheduled Payment of $4,800, the payment you will
receive in 2013 will equal the Guaranteed Minimum Scheduled Payment of $4,800.
Continuing this example for the next year's adjustment:
Annual Scheduled Payment for calendar year 2013.......................... $ 4,800
Guaranteed Minimum Scheduled Payment for calendar year 2013.............. $ 4,800
Reserve Value 12/31/2013 ($92,308 - $4,800) . $ 87,508
CPI Value published in December 2013..................................... 140
CPI Value published in December 2012..................................... 120
Adjustment percentage (140/120).......................................... 1.16666
Reserve Value after 1/1/2014 adjustment ($87,508 x 1.166666) . $ 102,093
Annual Scheduled Payment for calendar year 2014 after 1/1/2014 adjustment
($4,615.38 x 1.166666) . $5,384.61
The adjustment is applied to the previously calculated Scheduled Payment
($4,615.38) and not the Guaranteed Minimum Scheduled Payment $4,800. Since the
adjusted Scheduled Payment is greater than the Guaranteed Minimum Guaranteed
Payment, the Scheduled Payment will be paid out in calendar year 2014.
Unscheduled Payments. You may take withdrawals in addition to your Scheduled
Payments (Unscheduled Payments) up to the amount of the Reserve Value less any
related Unscheduled Payment charges and any deduction for any premium taxes.
Unscheduled Payments and any related Unscheduled Payment charges or premium
taxes will reduce the Reserve Value on a dollar for dollar basis. Unscheduled
Payments will reduce the Scheduled Payments and Guaranteed Minimum Scheduled
Payment in the same proportion the Unscheduled Payment reduces the Reserve
Value (including Unscheduled Payment charges and taxes). Because the Reserve
Value is reduced over time (due to Scheduled Payments, Unscheduled Payments and
related Unscheduled Payment charges and any premium taxes) an Unscheduled
Payment taken in the later years of the rider when the Reserve Value is smaller
may result in a larger proportional reduction to the Scheduled Payment and
Guaranteed Minimum Scheduled Payment than if the same Unscheduled Payment was
taken in the early years of the rider when the Reserve Value was larger and may
also result in a proportional reduction of the Scheduled Payment and Guaranteed
Minimum Scheduled Payment that is more than the Unscheduled Payment amount
taken.
If the Reserve Value falls to zero because of Scheduled Payments and/or
negative CPI Adjustments (other than due to the deduction of Unscheduled
Payments and related Unscheduled Payment charges and taxes) there will be no
more annual adjustments to the Reserve Value and there will be no more
Unscheduled Payments or Death Benefit. However, the Scheduled Payments will
continue for the life of the Annuitant and Secondary Life, if applicable. If
the deduction of an Unscheduled Payment and related Unscheduled Payment charge
reduces the Reserve Value to zero the Lincoln SmartIncomeSM Inflation will
terminate.
The following example shows how an Unscheduled Payment of $2,000 taken in the
early years of the rider results in a $300 proportional reduction of the
Guaranteed Minimum Scheduled Payment. The example assumes that no other
Unscheduled Payments have been taken.
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Reserve Value 1/1/2013..................................................... $100,000
Guaranteed Minimum Scheduled Payment 1/1/2013.............................. $ 15,000
Unscheduled Payment 1/2/2013............................................... $ 2,000
Proportional reduction percentage ($2,000/$100,000) . .02
Proportional reduction to the Guaranteed Minimum Scheduled Payment (.02 x
$15,000) . $ 300
New Guaranteed Minimum Scheduled Payment................................... $ 14,700
The example next shows how the same $2,000 Unscheduled Payment taken in the
later years of the rider results in a $3,000 proportional reduction of the
Guaranteed Minimum Scheduled Payment which is more than the actual Unscheduled
Payment amount.
Reserve Value 1/1/2013................................................... $10,000
Guaranteed Minimum Scheduled Payment..................................... $15,000
Unscheduled Payment 1/2/2013............................................. $ 2,000
Proportional reduction percentage ($2,000/$10,000) . .20
Proportional reduction to the Guaranteed Minimum Scheduled Payment (.20 x
$15,000) . $ 3,000
New Guaranteed Minimum Scheduled Payment ($15,000 - $3,000) . $12,000
Please note that any Unscheduled Payments may significantly reduce your future
Scheduled Payments, Guaranteed Minimum Scheduled Payment, as well as your
Reserve Value, so carefully consider this before deciding to take an
Unscheduled Payment.
If the Unscheduled Payment is taken during the first seven Rider Years an
Unscheduled Payment charge is assessed on the amount of the Unscheduled Payment
that exceeds the 10% free amount per Rider Year. Unscheduled Payments of up to
10% of the then current Reserve Value may be taken each Rider Year without
charge, as long as the then current Reserve Value is greater than zero. The
Unscheduled Payment charge is assessed against Unscheduled Payments in excess
of 10% of the then current Reserve Value in a Rider Year. Unscheduled Payments
that do not exceed on a cumulative basis more than 10% of the then current
Reserve Value each year are not subject to an Unscheduled Payment charge. If an
Unscheduled Payment is subject to an Unscheduled Payment charge the charge will
be deducted from the Unscheduled Payment so that you will receive less than the
amount requested. If the Annuitant or Secondary Life is diagnosed with a
terminal illness or confined to an extended care facility after the first Rider
Year, then no Unscheduled Payment charges are assessed on any Unscheduled
Payment. The Unscheduled Payment charge is also waived upon payment of a Death
Benefit as described below. See Charges and Other Deductions - Charges for
Lincoln SmartIncomeSM Inflation for a schedule of Unscheduled Payment charges.
The following example demonstrates the Unscheduled Payment charge for an
Unscheduled Payment taken in the third Rider Year and the impact to Scheduled
Payments and the Guaranteed Minimum Scheduled Payment:
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Guaranteed Minimum Scheduled Payment for calendar year 2013............................... $ 4,800
Annual Scheduled Payment for calendar year 2013 paid 1/1/2013............................. $ 5,000
Reserve Value 1/1/2013 before Scheduled Payment........................................... $ 515,000
Reserve Value 1/2/2013 after Scheduled Payment ($515,000 - $5,000) . $ 510,000
Unscheduled Payment charge percent........................................................ 7%
Then current Reserve Value before Unscheduled Payment on 1/15/2013........................ $ 510,000
Free amount on 1/15/2013 (10% x $510,000) . $ 51,000
Unscheduled Payment 1/15/2013............................................................. $ 10,000
[since Unscheduled Payment is within the 10% free amount ($10,000 < = $51,000) there is
no Unscheduled Payment
charge]..................................................................................
Reserve Value 1/15/2013 after Unscheduled Payment ($510,000 - $10,000) . $ 500,000
Proportional reduction percentage due to Unscheduled Payment ($10,000/$510,000) . 1.96078%
Scheduled Payment after proportional reduction for Unscheduled Payment [$5,000 - ($5,000 $ 4,902
x .0196078)] .
Guaranteed Scheduled Payment after proportional reduction [$4,800 - ($4,800 x .0196078)] . $ 4,706
Then current Reserve Value 2/1/2013 before second Unscheduled Payment..................... $ 500,000
2nd Unscheduled Payment 2/1/2013.......................................................... $ 75,000
Free amount on 2/1/2013 (10% x $500,000) . $ 50,000
Remaining free amount ($50,000 - $10,000 prior Unscheduled Payment) . $ 40,000
Unscheduled Payment charge [($75,000 - $40,000) x .07] . $ 2,450
Unscheduled Payment paid (minus Unscheduled Payment charge ($75,000 - $2,450) . $ 72,550
Proportional reduction percentage due to Unscheduled Payment ($75,000/$500,000) . 15%
Scheduled Payment after proportional reduction for Unscheduled Payment [$5,000 - ($5,000 $ 4,250
x .15)] .
Guaranteed Minimum Scheduled Payment after proportional reduction for Unscheduled Payment
[$4,800 - ($4,800 x
.15)].................................................................................... $ 4,000
Reserve Value after 2/2/2013 Unscheduled Payment and Unscheduled Payment charge ($500,000 $ 425,000
- $75,000) .
If the deduction for an Unscheduled Payment, including any related Unscheduled
Payment charge and premium taxes, reduces the Reserve Value to zero, Lincoln
SmartIncomeSM Inflation will terminate.
Death of Contractowner, Annuitant or Secondary Life. On or after the Annuity
Commencement Date, upon the death of the Contractowner, Annuitant or the
Secondary Life a Death Benefit will be paid if there is a Reserve Value. The
Death Benefit will be determined as of the date due proof of death is received
by us. See Annuity Options-General Information.
The Death Benefit paid under Lincoln SmartIncomeSM Inflation will be the
greater of:
a. the current Reserve Value as of the date due proof of death is received
by us; or
b. the initial Reserve Value, less all Scheduled and Unscheduled Payments,
less any Unscheduled Payment charges.
Following is an example of the calculation of a Death Benefit upon the death of
the Contractowner demonstrating the impact of a negative hypothetical CPI
factor:
7/15/2012 Initial Reserve Value...................................... $100,000
1/10/2013 Reserve Value is adjusted due to negative CPI Value of -.10
($100,000 x .10 = $10,000 Adjustment)
($100,000 - $10,000 = $90,000 Reserve Value) . $ 90,000
2/1/2013 Scheduled Payment of $45,000 reduces the Reserve Value
Reserve Value is reduced by the amount of the Scheduled Payment
($90,000 - $45,000 = $45,000) . $ 45,000
8/6/2013 Death of a Contractowner
Death Benefit is greater of
a) current Reserve Value ($45,000); or
b) initial Reserve Value minus Scheduled Payment
($100,000 - $45,000 = $55,000) .
8/5/2013 Death Benefit paid.......................................... $ 55,000
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If any Contractowner (who is not the Annuitant) dies while Lincoln
SmartIncomeSM Inflation is in force, the holder of the rights of ownership
(i.e. the Beneficiary or successor owner) pursuant to the terms of the
underlying contract may:
1. Terminate the contract and receive the Death Benefit, if any, in a
lump-sum; or
2. Continue the contract in force and receive Scheduled Payments and
Unscheduled Payments less any Unscheduled Payment charge until the later
of (i) the Reserve Value being reduced to zero, or (ii) the death(s) of
the Annuitant and any Secondary Life.
If the Annuitant dies (whether or not the Annuitant is an owner) while Lincoln
SmartIncomeSM Inflation is in force, the holder of the rights of ownership
pursuant to the terms of the underlying contract may:
1. Terminate the contract and receive the Death Benefit, if any, in a
lump-sum; or
2. Continue the contract in force and receive Scheduled Payments and
Unscheduled Payments less any Unscheduled Payment charge until the later
of (i) the Reserve Value being reduced to zero (this may result in a
reduced final Scheduled Payment where the Reserve Value is less than the
Scheduled Payment to reduce the Reserve Value to zero), or (ii) the death
of any Secondary Life.
If the Secondary Life (who is not an owner) dies while Lincoln SmartIncomeSM
Inflation is in force the holder of the rights of ownership pursuant to the
terms of the underlying contract, may:
1. Terminate the contract and receive the Death Benefit, if any in a
lump-sum; or
2. Continue the contract in force and receive Scheduled Payments and
Unscheduled Payments, less Unscheduled Payment charge until the later of
(i) the Reserve Value being reduced to zero (this may result in a reduced
final Scheduled Payment where the Reserve Value is less than the Scheduled
Payment to reduce the Reserve Value to zero), or (ii) the death of the
Annuitant.
Once you elect Lincoln SmartIncomeSM Inflation, any prior Death Benefit
elections will terminate (other than any Death Benefit in effect under i4LIFE
(Reg. TM) Advantage) and the Lincoln SmartIncomeSM Inflation Death Benefit will
be in effect. If you have elected i4LIFE (Reg. TM) Advantage, the i4LIFE (Reg.
TM) Advantage Death Benefit will be in effect only on the portion of the
Contract Value invested in i4LIFE (Reg. TM) Advantage.
If we were not notified of a death and we continue to make Scheduled or
Unscheduled Payments after the date that Lincoln SmartIncomeSM Inflation should
have been terminated, any such payments made are recoverable by us. The
Contractowner(s) or the holder of the rights of ownership will be liable to the
Company for the amount of such payments made.
Termination. You may terminate the Lincoln SmartIncomeSM Inflation by taking an
Unscheduled Payment that results in the Reserve Value being reduced to zero due
to the deduction of the Unscheduled Payment and any related Unscheduled Payment
charge and any premium taxes. Upon termination of the rider due to the
deduction of an Unscheduled Payment, and any related Unscheduled Payment charge
and any premium taxes, there will be no further Scheduled Payments made or
received under the rider.
If the Reserve Value is reduced to zero and the sum of the Scheduled and
Unscheduled Payments made, plus all Unscheduled Payment charges incurred, is
less than the initial Reserve Value, we will pay the holder of the rights of
ownership, the difference. The payment of the difference between the initial
Reserve Value and the sum of all Scheduled and Unscheduled Payments made, plus
charges incurred may occur under circumstances where changes in the CPI have
been negative, thus resulting in a lowered Reserve Value.
The following example shows how negative changes to the CPI result in a payment
of the difference between the initial Reserve Value and the sum of all
Scheduled and Unscheduled Payments made plus incurred charges:
7/15/2012 Initial Reserve Value........................................................... $100,000
1/10/2013 Reserve Value is adjusted due to negative CPI Value of -.10
($100,000 x .10 = $10,000 Adjustment)
($100,000 - $10,000 = $90,000 Reserve Value) . $ 90,000
2/1/2013 Scheduled Payment of $45,000 reduces the Reserve Value
Reserve Value is reduced by the amount of the Scheduled Payment ($90,000 - $45,000 = $ 45,000
$45,000) .
8/6/2013 Unscheduled Payment.............................................................. $ 45,000
Reserve Value............................................................................. $ 0
Reserve Value is reduced to zero which results in termination of the rider
Initial Reserve Value is greater than payments received
[$100,000 > ($45,000 + $45,000) = $90,000] .
Final payment made to holder of rights of ownership....................................... $ 10,000
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General Information
Any previously selected Death Benefit in effect before the Annuity Commencement
Date will no longer be available on and after the Annuity Commencement Date.
You may change the Annuity Commencement Date, change the annuity option or
change the allocation of the investment among Subaccounts up to 30 days before
the scheduled Annuity Commencement Date, upon written notice to the Home
Office. You must give us at least 30 days notice before the date on which you
want payouts to begin. We may require proof of age, sex, or survival of any
payee upon whose age, sex, or survival payments depend.
Unless you select another option, the contract automatically provides for a
life annuity with Annuity Payouts guaranteed for 10 years (on a fixed, variable
or combination fixed and variable basis, in proportion to the account
allocations at the time of annuitization) except when a joint life payout is
required by law. Under any option providing for guaranteed period payouts, the
number of payouts which remain unpaid at the date of the Annuitant's death (or
surviving Annuitant's death in case of joint life Annuity) will be paid to you
or your Beneficiary as payouts become due after we are in receipt of:
o proof, satisfactory to us, of the death;
o written authorization for payment; and
o all claim forms, fully completed.
Variable Annuity Payouts
Variable Annuity Payouts will be determined using:
o The Contract Value on the Annuity Commencement Date, less applicable premium
taxes;
o The annuity tables contained in the contract;
o The annuity option selected; and
o The investment performance of the fund(s) selected.
To determine the amount of payouts, we make this calculation:
1. Determine the dollar amount of the first periodic payout; then
2. Credit the contract with a fixed number of Annuity Units equal to the first
periodic payout divided by the Annuity Unit value; and
3. Calculate the value of the Annuity Units each period thereafter.
Annuity Payouts assume an investment return of 3%, 4%, 5% or 6% per year, as
applied to the applicable mortality table. Some of these assumed interest rates
may not be available in your state; therefore; please check with your
investment representative. You may choose your assumed interest rate at the
time you elect a variable Annuity Payout on the administrative form provided by
us. The higher the assumed interest rate you choose, the higher your initial
annuity payment will be. The amount of each payout after the initial payout
will depend upon how the underlying fund(s) perform, relative to the assumed
rate. If the actual net investment rate (annualized) exceeds the assumed rate,
the payment will increase at a rate proportional to the amount of such excess.
Conversely, if the actual rate is less than the assumed rate, annuity payments
will decrease. The higher the assumed interest rate, the less likely future
annuity payments are to increase, or the payments will increase more slowly
than if a lower assumed rate was used. There is a more complete explanation of
this calculation in the SAI.
Fixed Side of the Contract
Purchase Payments and Contract Value allocated to the fixed side of the
contract become part of our general account, and do not participate in the
investment experience of the VAA. The general account is subject to regulation
and supervision by the Indiana Department of Insurance as well as the insurance
laws and regulations of the jurisdictions in which the contracts are
distributed.
In reliance on certain exemptions, exclusions and rules, we have not registered
interests in the general account as a security under the Securities Act of 1933
and have not registered the general account as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests in it are
regulated under the 1933 Act or the 1940 Act. We have been advised that the
staff of the SEC has not made a review of the disclosures which are included in
this prospectus which relate to our general account and to the fixed account
under the contract. These disclosures, however, may be subject to certain
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses. This prospectus is generally
intended to serve as a disclosure document only for aspects of the contract
involving the VAA, and therefore contains only selected information regarding
the fixed side of the contract. Complete details regarding the fixed side of
the contract are in the contract.
We guarantee an annual effective interest rate of not less than 1.50% per year
on amounts held in a fixed account. Any amount surrendered, withdrawn from or
transferred out of a fixed account prior to the expiration of the Guaranteed
Period is subject to the Interest Adjustment (see Interest Adjustment and
Charges and Other Deductions). This may reduce your value upon surrender,
withdrawal or transfer, but will not reduce the amount below the value it would
have had if 1.50% (or the guaranteed minimum interest rate for your contract)
interest had been credited to the fixed account. Refer to Transfers before the
Annuity Commencement Date and Transfers after the Annuity Commencement Date for
additional transfer restrictions from the fixed account.
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ANY INTEREST IN EXCESS OF 1.50% (OR THE GUARANTEED MINIMUM INTEREST RATE STATED
IN YOUR CONTRACT) WILL BE DECLARED IN ADVANCE AT OUR SOLE DISCRETION.
CONTRACTOWNERS BEAR THE RISK THAT NO INTEREST IN EXCESS OF THE MINIMUM INTEREST
RATE WILL BE DECLARED.
Your contract may not offer a fixed account or if permitted by your contract,
we may discontinue accepting purchase payments or transfers into the fixed side
of the contract at any time. Please contact your registered representative for
further information.
Guaranteed Periods
The fixed account is divided into separate Guaranteed Periods, which credit
guaranteed interest.
You may allocate Purchase Payments to one or more Guaranteed Periods of 1 to 10
years. We may add Guaranteed Periods or discontinue accepting Purchase Payments
into one or more Guaranteed Periods at any time. The minimum amount of any
Purchase Payment that can be allocated to a Guaranteed Period is $2,000. Each
Purchase Payment allocated to the fixed account will start its own Guaranteed
Period and will earn a guaranteed interest rate. The duration of the Guaranteed
Period affects the guaranteed interest rate of the fixed account. A Guaranteed
Period ends on the date after the number of calendar years in the Guaranteed
Period. Interest will be credited daily at a guaranteed rate that is equal to
the effective annual rate determined on the first day of the Guaranteed Period.
Amounts surrendered, transferred or withdrawn prior to the end of the
Guaranteed Period will be subject to the Interest Adjustment. Each Guaranteed
Period Purchase Payment will be treated separately for purposes of determining
any applicable Interest Adjustment. You may transfer amounts from the fixed
account to the variable Subaccount(s) subject to the following restrictions:
o fixed account transfers are limited to 25% of the value of that fixed
account in any 12-month period; and
o the minimum amount that can be transferred is $300 or, if less, the amount
in the fixed account.
Because of these restrictions, it may take several years to transfer amounts
from the fixed account to the variable Subaccounts. You should carefully
consider whether the fixed account meets your investment criteria. Any amount
withdrawn from the fixed account may be subject to any applicable account fees
and premium taxes.
We will notify the Contractowner in writing at least 30 days prior to the
expiration date for any Guaranteed Period amount. A new Guaranteed Period of
the same duration as the previous Guaranteed Period will begin automatically at
the end of the previous Guaranteed Period, unless we receive, prior to the end
of a Guaranteed Period, a written election by the Contractowner. The written
election may request the transfer of the Guaranteed Period amount to a
different fixed account or to a variable Subaccount from among those being
offered by us. Transfers of any Guaranteed Period amount which become effective
upon the date of expiration of the applicable Guaranteed Period are not subject
to the limitation of twelve transfers per contract year or the additional fixed
account transfer restrictions.
Interest Adjustment
Any surrender, withdrawal or transfer of a Guaranteed Period amount before the
end of the Guaranteed Period (other than dollar cost averaging or Regular
Income Payments under i4LIFE (Reg. TM) Advantage) will be subject to the
Interest Adjustment. A surrender, withdrawal or transfer effective upon the
expiration date of the Guaranteed Period will not be subject to the Interest
Adjustment. The Interest Adjustment will be applied to the amount being
surrendered, withdrawn or transferred. The Interest Adjustment will be applied
after the deduction of any applicable account fees and before any applicable
transfer charges. Any transfer, withdrawal, or surrender of Contract Value from
a fixed account will be increased or decreased by an Interest Adjustment,
unless the transfer, withdrawal or surrender is effective:
o during the free look period (See Return Privilege).
o on the expiration date of a Guaranteed Period.
o as a result of the death of the Contractowner or Annuitant.
o subsequent to the diagnosis of a terminal illness of the Contractowner.
Diagnosis of the terminal illness must be after the effective date of the
contract and result in a life expectancy of less than one year, as
determined by a qualified professional medical practitioner.
o subsequent to the admittance of the Contractowner into an accredited nursing
home or equivalent health care facility. Admittance into such facility must
be after the effective date of the contract and continue for 90 consecutive
days prior to the surrender or withdrawal.
o subsequent to the permanent and total disability of the Contractowner if
such disability begins after the effective date of the contract and prior
to the 65th birthday of the Contractowner.
o upon annuitization of the contract.
These provisions may not be applicable to your contract or available in your
state. Please check with your investment representative regarding the
availability of these provisions.
In general, the Interest Adjustment reflects the relationship between the yield
rate in effect at the time a Purchase Payment is allocated to a Guaranteed
Period under the contract and the yield rate in effect at the time of the
Purchase Payment's surrender, withdrawal or
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transfer. It also reflects the time remaining in the Guaranteed Period. If the
yield rate at the time of the surrender, withdrawal or transfer is lower than
the yield rate at the time the Purchase Payment was allocated, then the
application of the Interest Adjustment will generally result in a higher
payment at the time of the surrender, withdrawal or transfer. Similarly, if the
yield rate at the time of surrender, withdrawal or transfer is higher than the
yield rate at the time of the allocation of the Purchase Payment, then the
application of the Interest Adjustment will generally result in a lower payment
at the time of the surrender, withdrawal or transfer. The yield rate is
published by the Federal Reserve Board.
The Interest Adjustment is calculated by multiplying the transaction amount
by:
(1+A)n
------------
-1
(1+B +K)n
where:
A = yield rate for a U.S. Treasury security with time to maturity equal to
the Guaranteed Period, determined at the beginning of the Guaranteed
Period.
B = yield rate for a U.S. Treasury security with time to maturity equal to
the time remaining in the Guaranteed Period if greater than one year,
determined at the time of surrender, withdrawal or transfer. For remaining
periods of one year or less, the yield rate for a one year U.S. Treasury
security is used.
K = a 0.25% adjustment (unless otherwise limited by applicable state law).
This adjustment builds into the formula a factor representing direct and
indirect costs to us associated with liquidating general account assets in
order to satisfy surrender requests. This adjustment of 0.25% has been
added to the denominator of the formula because it is anticipated that a
substantial portion of applicable general account portfolio assets will be
in relatively illiquid securities. Thus, in addition to direct transaction
costs, if such securities must be sold (e.g., because of surrenders), the
market price may be lower. Accordingly, even if interest rates decline,
there will not be a positive adjustment until this factor is overcome, and
then any adjustment will be lower than otherwise, to compensate for this
factor. Similarly, if interest rates rise, any negative adjustment will be
greater than otherwise, to compensate for this factor. If interest rates
stay the same, there will be no Interest Adjustment.
n = The number of years remaining in the Guaranteed Period (e.g., 1 year
and 73 days = 1 + (73 divided by 365) = 1.2 years)
Straight-Line interpolation is used for periods to maturity not quoted.
See the SAI for examples of the application of the Interest Adjustment.
Small Contract Surrenders
We may surrender your contract, in accordance with the laws of your state if:
o your Contract Value drops below certain state specified minimum amounts
($1,000 or less) for any reason, including if your Contract Value decreases
due to the performance of the Subaccounts you selected;
o no Purchase Payments have been received for two (2) full, consecutive
Contract Years; and
o the annuity benefit at the Annuity Commencement Date would be less than
$20.00 per month (these requirements may differ in some states).
At least 60 days before we surrender your contract, we will send you a letter
at your last address we have on file, to inform you that your contract will be
surrendered. You will have the opportunity to make additional Purchase Payments
to bring your Contract Value above the minimum level to avoid surrender. We
will not surrender your contract if you are receiving guaranteed payments from
us under one of the Living Benefit riders.
Delay of Payments
Contract proceeds from the VAA will be paid within seven days, except:
o when the NYSE is closed (other than weekends and holidays);
o times when market trading is restricted or the SEC declares an emergency,
and we cannot value units or the funds cannot redeem shares; or
o when the SEC so orders to protect Contractowners.
If, pursuant to SEC rules, an underlying money market fund suspends payment of
redemption proceeds in connection with a liquidation of the fund, we will delay
payment of any transfer, partial withdrawal, surrender, loan, or Death Benefit
from the money market sub-account until the fund is liquidated. Payment of
contract proceeds from the fixed account may be delayed for up to six months.
Due to federal laws designed to counter terrorism and prevent money laundering
by criminals, we may be required to reject a Purchase Payment and/or deny
payment of a request for transfers, withdrawals, surrenders, or Death Benefits,
until instructions are received from the appropriate regulator. We also may be
required to provide additional information about a Contractowner's account to
government regulators.
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Reinvestment Privilege
You may elect to make a reinvestment purchase with any part of the proceeds of
a surrender/withdrawal .
This election must be made by your written authorization to us on an approved
Lincoln reinvestment form and received in our Home Office within 30 days of the
date of the surrender/withdrawal, and the repurchase must be of a contract
covered by this prospectus. In the case of a qualified retirement plan, a
representation must be made that the proceeds being used to make the purchase
have retained their tax-favored status under an arrangement for which the
contracts offered by this prospectus are designed. The number of Accumulation
Units which will be credited when the proceeds are reinvested will be based on
the value of the Accumulation Unit(s) on the next Valuation Date. This
computation will occur following receipt of the proceeds and request for
reinvestment at the Home Office. You may utilize the reinvestment privilege
only once. For tax reporting purposes, we will treat a surrender/withdrawal and
a subsequent reinvestment purchase as separate transactions (and a Form 1099
may be issued, if applicable). Any taxable distribution that is reinvested may
still be reported as taxable. You should consult a tax adviser before you
request a surrender/withdrawal or subsequent reinvestment purchase.
Amendment of Contract
We reserve the right to amend the contract to meet the requirements of the 1940
Act or other applicable federal or state laws or regulations. You will be
notified in writing of any changes, modifications or waivers. Any changes are
subject to prior approval of your state's insurance department (if required).
Distribution of the Contracts
Lincoln Financial Distributors, Inc. ("LFD") serves as Principal Underwriter of
this contract. LFD is affiliated with Lincoln Life and is registered as a
broker-dealer with the SEC under the Securities Exchange Act of 1934 and is a
member of FINRA. The Principal Underwriter has entered into a selling agreement
with Lincoln Financial Investment Services Corporation ("LFISC"), an affiliate
of ours. While the Principal Underwriter has the legal authority to make
payments to LFISC, we will make such payments on behalf of the Principal
Underwriter in compliance with appropriate regulations. We also pay on behalf
of LFD certain of its operating expenses related to the distribution of this
and other of our contracts. The following paragraphs describe how payments are
made by us and the Principal Underwriter to various parties. We pay LFD a
wholesaling allowance for distribution of the contract.
Compensation Paid to LFISC. No commissions are paid to LFISC in connection with
the sale of this contract. However, Lincoln Life pays for the operating and
other expenses of LFISC, including the following sales expenses: sales
representative training allowances; compensation and bonuses for LFISC's
management team; advertising expenses; and all other expenses of distributing
the contracts. LFISC sales representatives and their managers are also eligible
for various cash benefits, such as bonuses and insurance benefits that we may
provide jointly with LFISC. LFISC sales representatives and their managers may
receive other payments from us for services that do not directly involve the
sale of the contracts, including payments made for the recruitment and training
of personnel, production of promotional literature and similar services. The
payment of bonuses to the registered representatives and their managers may
provide them incentives to recommend the contract for purchase. You may wish to
take such payment arrangement into account when considering and evaluating any
recommendation relating to the contract. Additional information relating to
compensation paid in 2011 is contained in the SAI.
Compensation Paid to Other Parties. A marketing expense allowance is paid to
American Funds Distributors (AFD) in consideration of the marketing assistance
AFD provides to LFD. This allowance, which ranges from 0.10% to 0.16% is based
on the amount of purchase payments initially allocated to the American Funds
Insurance Series underlying the variable annuity. Commissions and other
incentives or payments described above are not charged directly to contract
owners or the Separate Account. All compensation is paid from our resources,
which include fees and charges imposed on your contract.
Contractowner Questions
The obligations to purchasers under the contracts are those of Lincoln Life.
This prospectus provides a general description of the material features of the
contract. Contracts, endorsements and riders may vary as required by state law.
Questions about your contract should be directed to us at 1-877-534-8255.
Federal Tax Matters
Introduction
The Federal income tax treatment of the contract is complex and sometimes
uncertain. The Federal income tax rules may vary with your particular
circumstances. This discussion does not include all the Federal income tax
rules that may affect you and your contract.
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This discussion also does not address other Federal tax consequences (including
consequences of sales to foreign individuals or entities), or state or local
tax consequences, associated with the contract. As a result, you should always
consult a tax adviser about the application of tax rules found in the Internal
Revenue Code ("Code"), Treasury Regulations and applicable IRS guidance to your
individual situation.
Nonqualified Annuities
This part of the discussion describes some of the Federal income tax rules
applicable to nonqualified annuities. A nonqualified annuity is a contract not
issued in connection with a qualified retirement plan, such as an IRA or a
section 403(b) plan, receiving special tax treatment under the Code. We may not
offer nonqualified annuities for all of our annuity products.
Tax Deferral On Earnings
Under the Code, you are generally not subject to tax on any increase in your
contract value until you receive a contract distribution. However, for this
general rule to apply, certain requirements must be satisfied:
o An individual must own the contract (or the Code must treat the contract as
owned by an individual).
o The investments of the VAA must be "adequately diversified" in accordance
with IRS regulations.
o Your right to choose particular investments for a contract must be limited.
o The Annuity Commencement Date must not occur near the end of the Annuitant's
life expectancy.
Contracts Not Owned By An Individual
If a contract is owned by an entity (rather than an individual) the Code
generally does not treat it as an annuity contract for Federal income tax
purposes. This means that the entity owning the contract pays tax currently on
the excess of the Contract Value over the Purchase Payments for the contract.
Examples of contracts where the owner pays current tax on the contract's
earnings, Bonus Credits and Persistency Credits, if applicable, are contracts
issued to a corporation or a trust. Some exceptions to the rule are:
o Contracts in which the named owner is a trust or other entity that holds the
contract as an agent for an individual; however, this exception does not
apply in the case of any employer that owns a contract to provide deferred
compensation for its employees;
o Immediate annuity contracts, purchased with a single premium, when the
annuity starting date is no later than a year from purchase and
substantially equal periodic payments are made, not less frequently than
annually, during the Annuity Payout period;
o Contracts acquired by an estate of a decedent;
o Certain qualified contracts;
o Contracts purchased by employers upon the termination of certain qualified
plans; and
o Certain contracts used in connection with structured settlement agreements.
Investments In The VAA Must Be Diversified
For a contract to be treated as an annuity for Federal income tax purposes, the
investments of the VAA must be "adequately diversified." IRS regulations define
standards for determining whether the investments of the VAA are adequately
diversified. If the VAA fails to comply with these diversification standards,
you could be required to pay tax currently on the excess of the Contract Value
over the contract Purchase Payments. Although we do not control the investments
of the underlying investment options, we expect that the underlying investment
options will comply with the IRS regulations so that the VAA will be considered
"adequately diversified."
Restrictions
The Code limits your right to choose particular investments for the contract.
Because the IRS has issued little guidance specifying those limits, the limits
are uncertain and your right to allocate Contract Values among the Subaccounts
may exceed those limits. If so, you would be treated as the owner of the assets
of the VAA and thus subject to current taxation on the income, Bonus Credits,
Persistency Credits and gains, if applicable, from those assets. We do not know
what limits may be set by the IRS in any guidance that it may issue and whether
any such limits will apply to existing contracts. We reserve the right to
modify the contract without your consent in an attempt to prevent you from
being considered as the owner of the assets of the VAA for purposes of the
Code, you as the owner of the assets of the VAA.
Loss Of Interest Deduction
After June 8, 1997, if a contract is issued to a taxpayer that is not an
individual, or if a contract is held for the benefit of an entity, the entity
will lose a portion of its deduction for otherwise deductible interest
expenses.
Age At Which Annuity Payouts Begin
The Code does not expressly identify a particular age by which Annuity Payouts
must begin. However, those rules do require that an annuity contract provide
for amortization, through Annuity Payouts, of the contract's Purchase Payments,
Bonus Credits, Persistency
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Credits and earnings. If Annuity Payouts under the contract begin or are
scheduled to begin on a date past the Annuitant's 85th birthday, it is possible
that the contract will not be treated as an annuity for purposes of the Code.
In that event, you would be currently taxed on the excess of the Contract Value
over the Purchase Payments of the contract.
Tax Treatment Of Payments
We make no guarantees regarding the tax treatment of any contract or of any
transaction involving a contract. However, the rest of this discussion assumes
that your contract will be treated as an annuity under the Code and that any
increase in your Contract Value will not be taxed until there is a distribution
from your contract.
Taxation Of Withdrawals And Surrenders
You will pay tax on withdrawals to the extent your Contract Value exceeds your
Purchase Payments in the contract. This income (and all other income from your
contract) is considered ordinary income (and does not receive capital gains
treatment and is not qualified dividend income). A higher rate of tax is paid
on ordinary income than on capital gains. You will pay tax on a surrender to
the extent the amount you receive exceeds your Purchase Payments. In certain
circumstances, your Purchase Payments are reduced by amounts received from your
contract that were not included in income. Surrender and reinstatement of your
contract will generally be taxed as a withdrawal. If your contract has a Living
Benefit rider, and if the guaranteed amount under that rider immediately before
a withdrawal exceeds your Contract Value, the Code may require that you include
those additional amounts in your income. Please consult your tax adviser.
Taxation Of Annuity Payouts, Including Regular Income Payments
The Code imposes tax on a portion of each Annuity Payout (at ordinary income
tax rates) and treats a portion as a nontaxable return of your Purchase
Payments in the contract. We will notify you annually of the taxable amount of
your Annuity Payout. Once you have recovered the total amount of the Purchase
Payment in the contract, you will pay tax on the full amount of your Annuity
Payouts. If Annuity Payouts end because of the Annuitant's death and before the
total amount in the contract has been distributed, the amount not received will
generally be deductible. If withdrawals, other than Regular Income Payments,
are taken from i4LIFE (Reg. TM) Advantage during the Access Period, they are
taxed subject to an exclusion ratio that is determined based on the amount of
the payment.
Taxation Of Death Benefits
We may distribute amounts from your contract because of the death of a
Contractowner or an Annuitant. The tax treatment of these amounts depends on
whether you or the Annuitant dies before or after the Annuity Commencement
Date.
Death prior to the Annuity Commencement Date:
o If the Beneficiary receives Death Benefits under an Annuity Payout option,
they are taxed in the same manner as Annuity Payouts.
o If the Beneficiary does not receive Death Benefits under an Annuity Payout
option, they are taxed in the same manner as a withdrawal.
Death after the Annuity Commencement Date:
o If Death Benefits are received in accordance with the existing Annuity
Payout option, they are excludible from income if they do not exceed the
Purchase Payments not yet distributed from the contract. All Annuity
Payouts in excess of the Purchase Payments not previously received are
includible in income.
o If Death Benefits are received in a lump sum, the Code imposes tax on the
amount of Death Benefits which exceeds the amount of Purchase Payments not
previously received.
Penalty Taxes Payable On Withdrawals, Surrenders, Or Annuity Payouts
The Code may impose a 10% penalty tax on any distribution from your contract
which you must include in your gross income. The 10% penalty tax does not apply
if one of several exceptions exists. These exceptions include withdrawals,
surrenders, or Annuity Payouts that:
o you receive on or after you reach 591/2,
o you receive because you became disabled (as defined in the Code),
o you receive from an immediate annuity,
o a Beneficiary receives on or after your death, or
o you receive as a series of substantially equal periodic payments based on
your life or life expectancy (non-natural owners holding as agent for an
individual do not qualify).
Unearned Income Medicare Contribution
Congress enacted the "Unearned Income Medicare Contribution" as a part of the
Health Care and Education Reconciliation Act of 2010. This new tax, which
affects individuals whose modified adjusted gross income exceeds certain
thresholds, is a 3.8% tax on the lesser of (i) the individual's "unearned
income", or (ii) the dollar amount by which the individual's modified adjusted
gross income
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exceeds the applicable threshold. Unearned income includes the taxable portion
of distributions that you take from your annuity contract. The tax is effected
for tax years after December 31, 2012. Please consult your tax advisor to
determine whether your annuity distributions are subject to this tax.
Special Rules If You Own More Than One Annuity Contract
In certain circumstances, you must combine some or all of the nonqualified
annuity contracts you own in order to determine the amount of an Annuity
Payout, a surrender, or a withdrawal that you must include in income. For
example, if you purchase two or more deferred annuity contracts from the same
life insurance company (or its affiliates) during any calendar year, the Code
treats all such contracts as one contract. Treating two or more contracts as
one contract could affect the amount of a surrender, a withdrawal or an Annuity
Payout that you must include in income and the amount that might be subject to
the penalty tax described previously.
Loans and Assignments
Except for certain qualified contracts, the Code treats any amount received as
a loan under your contract, and any assignment or pledge (or agreement to
assign or pledge) of any portion of your Contract Value, as a withdrawal of
such amount or portion.
Gifting A Contract
If you transfer ownership of your contract to a person other than to your
spouse (or to your former spouse incident to divorce), and receive a payment
less than your Contract's Value, you will pay tax on your Contract Value to the
extent it exceeds your Purchase Payments not previously received. The new
owner's Purchase Payments in the contract would then be increased to reflect
the amount included in income.
Charges for Additional Benefits
Your contract automatically includes a basic Death Benefit and may include
other optional riders. Certain enhancements to the basic Death Benefit may also
be available to you. The cost of the basic Death Benefit and any additional
benefit are deducted from your contract. It is possible that the tax law may
treat all or a portion of the Death Benefit and other optional rider charges,
if any, as a contract withdrawal.
Qualified Retirement Plans
We also designed the contracts for use in connection with certain types of
retirement plans that receive favorable treatment under the Code. Contracts
issued to or in connection with a qualified retirement plan are called
"qualified contracts." We issue contracts for use with various types of
qualified plans. The Federal income tax rules applicable to those plans are
complex and varied. As a result, this prospectus does not attempt to provide
more than general information about the use of the contract with the various
types of qualified plans. Persons planning to use the contract in connection
with a qualified plan should obtain advice from a competent tax adviser.
Types of Qualified Contracts and Terms of Contracts
Qualified plans may include the following:
o Individual Retirement Accounts and Annuities ("Traditional IRAs")
o Roth IRAs
o Traditional IRA that is part of a Simplified Employee Pension Plan ("SEP")
o SIMPLE 401(k) plans (Savings Incentive Matched Plan for Employees)
o 401(a) plans (qualified corporate employee pension and profit-sharing plans)
o 403(a) plans (qualified annuity plans)
o 403(b) plans (public school system and tax-exempt organization annuity
plans)
o H.R. 10 or Keogh Plans (self-employed individual plans)
o 457(b) plans (deferred compensation plans for state and local governments
and tax-exempt organizations)
o Roth 403(b) plans
Beginning January 1, 2012, our individual variable annuity products will no
longer be available for use in connection with qualified plan accounts
described in the lists above, with the exception of Traditional IRA, SEP IRA
and Roth IRA arrangements or Plans.
We will amend contracts to be used with a qualified plan as generally necessary
to conform to the Code's requirements for the type of plan. However, the rights
of a person to any qualified plan benefits may be subject to the plan's terms
and conditions, regardless of the contract's terms and conditions. In addition,
we are not bound by the terms and conditions of qualified plans to the extent
such terms and conditions contradict the contract, unless we consent.
Pursuant to new tax regulations, starting September 24, 2007, the contract is
not available for purchase under a 403(b) plan and since July 31, 2008, we do
not accept additional premiums or transfers to existing 403(b) contracts. Also,
we now are generally required to confirm, with your 403(b) plan sponsor or
otherwise, that surrenders, loans or transfers you request comply with
applicable tax requirements and to decline requests that are not in compliance.
We will defer processing payments you request until all information
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required under the Code has been received. By requesting a surrender, loan or
transfer, you consent to the sharing of confidential information about you,
your contract, and transactions under the contract and any other 403(b)
contracts or accounts you have under the 403(b) plan among us, your employer or
plan sponsor, any plan administrator or recordkeeper, and other product
providers.
Tax Treatment of Qualified Contracts
The Federal income tax rules applicable to qualified plans and qualified
contracts vary with the type of plan and contract. For example:
o Federal tax rules limit the amount of Purchase Payments that can be made,
and the tax deduction or exclusion that may be allowed for the Purchase
Payments. These limits vary depending on the type of qualified plan and the
plan participant's specific circumstances, e.g., the participant's
compensation.
o Minimum annual distributions are required under most qualified plans once
you reach a certain age, typically age 701/2, as described below.
o Loans are allowed under certain types of qualified plans, but Federal income
tax rules prohibit loans under other types of qualified plans. For example,
Federal income tax rules permit loans under some section 403(b) plans, but
prohibit loans under Traditional and Roth IRAs. If allowed, loans are
subject to a variety of limitations, including restrictions as to the loan
amount, the loan's duration, the rate of interest, and the manner of
repayment. Your contract or plan may not permit loans.
Tax Treatment of Payments
The Federal income tax rules generally include distributions from a qualified
contract in the participant's income as ordinary income. These taxable
distributions will include Purchase Payments that were deductible or excludible
from income. Thus, under many qualified contracts, the total amount received is
included in income since a deduction or exclusion from income was taken for
purchase payments. There are exceptions. For example, you do not include
amounts received from a Roth IRA in income if certain conditions are satisfied.
Required Minimum Distributions
Under most qualified plans, you must begin receiving payments from the contract
in certain minimum amounts by the later of age 701/2 or retirement. You are
required to take distributions from your traditional IRAs beginning in the year
you reach age 701/2. If you own a Roth IRA, you are not required to receive
minimum distributions from your Roth IRA during your life.
Failure to comply with the minimum distribution rules applicable to certain
qualified plans, such as Traditional IRAs, will result in the imposition of an
excise tax. This excise tax equals 50% of the amount by which a minimum
required distribution exceeds the actual distribution from the qualified plan.
The IRS regulations applicable to required minimum distributions include a rule
that may impact the distribution method you have chosen and the amount of your
distributions. Under these regulations, the presence of an enhanced death
benefit, or other benefit which could provide additional value to your
contract, may require you to take additional distributions. An enhanced Death
Benefit is any Death Benefit that has the potential to pay more than the
Contract Value or a return of Purchase Payments. Annuity contracts inside
Custodial or Trusteed IRAs will also be subject to these regulations. Please
contact your tax adviser regarding any tax ramifications.
Federal Penalty Taxes Payable on Distributions
The Code may impose a 10% penalty tax on a distribution from a qualified
contract that must be included in income. The Code does not impose the penalty
tax if one of several exceptions applies. The exceptions vary depending on the
type of qualified contract you purchase. For example, in the case of an IRA,
exceptions provide that the penalty tax does not apply to a withdrawal,
surrender, or Annuity Payout:
o received on or after the Annuitant reaches 591/2,
o received on or after the Annuitant's death or because of the Annuitant's
disability (as defined in the Code),
o received as a series of substantially equal periodic payments based on the
Annuitant's life (or life expectancy), or
o received as reimbursement for certain amounts paid for medical care.
These exceptions, as well as certain others not described here, generally apply
to taxable distributions from other qualified plans. However, the specific
requirements of the exception may vary.
Unearned Income Medicare Contribution
Congress enacted the "Unearned Income Medicare Contribution" as a part of the
Health Care and Education Reconciliation Act of 2010. This new tax, which
affects individuals whose modified adjusted gross income exceeds certain
thresholds, is a 3.8% tax on the lesser of (i) the individual's "unearned
income", or (ii) the dollar amount by which the individual's modified adjusted
gross income exceeds the applicable threshold. Distributions that you take from
your contract are not included in the calculation of unearned income because
your contract is qualified plan contract. However, the amount of any such
distribution is included in determining
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whether you exceed the modified adjusted gross income threshold. The tax is
effective for tax years after December 31, 2012. Please consult your tax
advisor to determine whether your annuity distributions are subject to this
tax.
Transfers and Direct Rollovers
As a result of Economic Growth and Tax Relief Reconciliation Act of 2001
(EGTRRA), you may be able to move funds between different types of qualified
plans, such as 403(b) and 457(b) governmental plans, by means of a rollover or
transfer. You may be able to rollover or transfer amounts between qualified
plans and traditional IRAs. These rules do not apply to Roth IRAs and 457(b)
non-governmental tax-exempt plans. The Pension Protection Act of 2006 (PPA)
permits direct conversions from certain qualified, 403(b) or 457(b) plans to
Roth IRAs (effective for distributions after 2007). There are special rules
that apply to rollovers, direct rollovers and transfers (including rollovers or
transfers of after-tax amounts). If the applicable rules are not followed, you
may incur adverse Federal income tax consequences, including paying taxes which
you might not otherwise have had to pay. Before we send a rollover
distribution, we will provide a notice explaining tax withholding requirements
(see Federal Income Tax Withholding). We are not required to send you such
notice for your IRA. You should always consult your tax adviser before you move
or attempt to move any funds.
Death Benefit and IRAs
Pursuant to IRS regulations, IRAs may not invest in life insurance contracts.
We do not believe that these regulations prohibit the Death Benefit from being
provided under the contract when we issue the contract as a Traditional or Roth
IRA. However, the law is unclear and it is possible that the presence of the
Death Benefit under a contract issued as a Traditional or Roth IRA could result
in increased taxes to you. Certain Death Benefit options may not be available
for all of our products.
Federal Income Tax Withholding
We will withhold and remit to the IRS a part of the taxable portion of each
distribution made under a contract unless you notify us prior to the
distribution that tax is not to be withheld. In certain circumstances, Federal
income tax rules may require us to withhold tax. At the time a withdrawal,
surrender, or Annuity Payout is requested, we will give you an explanation of
the withholding requirements.
Certain payments from your contract may be considered eligible rollover
distributions (even if such payments are not being rolled over). Such
distributions may be subject to special tax withholding requirements. The
Federal income tax withholding rules require that we withhold 20% of the
eligible rollover distribution from the payment amount, unless you elect to
have the amount directly transferred to certain qualified plans or contracts.
The IRS requires that tax be withheld, even if you have requested otherwise.
Such tax withholding requirements are generally applicable to 401(a), 403(a) or
(b), HR 10, and 457(b) governmental plans and contracts used in connection with
these types of plans.
Our Tax Status
Under the Code, we are not required to pay tax on investment income and
realized capital gains of the VAA. We do not expect that we will incur any
Federal income tax liability on the income and gains earned by the VAA.
However, the Company does expect, to the extent permitted under the Code, to
claim the benefit of the foreign tax credit as the owner of the assets of the
VAA. Therefore, we do not impose a charge for Federal income taxes. If there
are any changes in the Code that require us to pay tax on some or all of the
income and gains earned by the VAA, we may impose a charge against the VAA to
pay the taxes.
Changes in the Law
The above discussion is based on the Code, IRS regulations, and interpretations
existing on the date of this prospectus. However, Congress, the IRS, and the
courts may modify these authorities, sometimes retroactively.
Additional Information
Voting Rights
As required by law, we will vote the fund shares held in the VAA at meetings of
the shareholders of the funds. The voting will be done according to the
instructions of Contractowners who have interests in any Subaccounts which
invest in classes of the funds. If the 1940 Act or any regulation under it
should be amended or if present interpretations should change, and if as a
result we determine that we are permitted to vote the fund shares in our own
right, we may elect to do so.
The number of votes which you have the right to cast will be determined by
applying your percentage interest in a subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, fractional
shares will be recognized.
Each underlying fund is subject to the laws of the state in which it is
organized concerning, among other things, the matters which are subject to a
shareholder vote, the number of shares which must be present in person or by
proxy at a meeting of shareholders (a "quorum"), and the percentage of such
shares present in person or by proxy which must vote in favor of matters
presented. Because shares of the underlying fund held in the VAA are owned by
us, and because under the 1940 Act we will vote all such shares in the
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same proportion as the voting instruction which we receive, it is important
that each Contractowner provide their voting instructions to us. Even though
Contractowners may choose not to provide voting instruction, the shares of a
fund to which such Contractowners would have been entitled to provide voting
instruction will, subject to fair representation requirements, be voted by us
in the same proportion as the voting instruction which we actually receive. As
a result, the instruction of a small number of Contractowners could determine
the outcome of matters subject to shareholder vote. All shares voted by us will
be counted when the underlying fund determines whether any requirement for a
minimum number of shares be present at such a meeting to satisfy a quorum
requirement has been met. Voting instructions to abstain on any item to be
voted on will be applied on a pro-rata basis to reduce the number of votes
eligible to be cast.
Whenever a shareholders meeting is called, we will provide or make available to
each person having a voting interest in a subaccount proxy voting material,
reports and other materials relating to the funds. Since the funds engage in
shared funding, other persons or entities besides Lincoln Life may vote fund
shares. See Investments of the Variable Annuity Account - Fund Shares.
Return Privilege
Within the free-look period after you receive the contract, you may cancel it
for any reason by delivering or mailing it postage prepaid, to The Lincoln
National Life Insurance Company at PO Box 2348, Fort Wayne, IN 46801-2348. A
contract canceled under this provision will be void. Except as explained in the
following paragraph, we will return the Contract Value as of the Valuation Date
on which we receive the cancellation request, plus any premium taxes which had
been deducted. No Interest Adjustment will apply. A purchaser who participates
in the VAA is subject to the risk of a market loss on the Contract Value during
the free-look period.
For contracts written in those states whose laws require that we assume this
market risk during the free-look period, a contract may be canceled, subject to
the conditions explained before, except that we will return the greater of the
Purchase Payment(s) or Contract Value as of the Valuation Date we receive the
cancellation request, plus any premium taxes that had been deducted. IRA
purchasers will also receive the greater of Purchase Payments or Contract Value
as of the Valuation Date on which we receive the cancellation request.
State Regulation
As a life insurance company organized and operated under Indiana law, we are
subject to provisions governing life insurers and to regulation by the Indiana
Commissioner of Insurance. Our books and accounts are subject to review and
examination by the Indiana Department of Insurance at all times. A full
examination of our operations is conducted by that Department at least every
five years.
Records and Reports
As presently required by the 1940 Act and applicable regulations, we are
responsible for maintaining all records and accounts relating to the VAA. We
have entered into an agreement with The Bank of New York Mellon, One Mellon
Bank Center, 500 Grant Street, Pittsburgh, Pennsylvania, 15258, to provide
accounting services to the VAA. We will mail to you, at your last known address
of record at the Home Office, at least semi-annually after the first contract
year, reports containing information required by that Act or any other
applicable law or regulation.
Other Information
You may elect to receive your prospectus, prospectus supplements, quarterly
statements, and annual and semiannual reports electronically over the Internet,
if you have an e-mail account and access to an Internet browser. Once you
select eDelivery, via the Internet Service Center, all documents available in
electronic format will no longer be sent to you in hard copy. You will receive
an e-mail notification when the documents become available online. It is your
responsibility to provide us with your current e-mail address. You can resume
paper mailings at any time without cost, by updating your profile at the
Internet Service Center, or contacting us. To learn more about this service,
please log on to www.LincolnFinancial.com, select service centers and continue
on through the Internet Service Center.
Legal Proceedings
In the ordinary course of its business and otherwise, the Company and its
subsidiaries or its separate accounts and Principal Underwriter may become or
are involved in various pending or threatened legal proceedings, including
purported class actions, arising from the conduct of its business. In some
instances, the proceedings include claims for unspecified or substantial
punitive damages and similar types of relief in addition to amounts for alleged
contractual liability or requests for equitable relief.
After consultation with legal counsel and a review of available facts, it is
management's opinion that the proceedings, after consideration of any reserves
and rights to indemnification, ultimately will be resolved without materially
affecting the consolidated financial position of the Company and its
subsidiaries, or the financial position of its separate accounts or Principal
Underwriter. However, given the large and indeterminate amounts sought in
certain of these proceedings and the inherent difficulty in predicting the
outcome of such legal proceedings, it is possible that an adverse outcome in
certain matters could be material to the Company's operating results for any
particular reporting period.
81
<PAGE>
Contents of the Statement of Additional Information (SAI)
for Lincoln Life Variable Annuity Account N
Item
Special Terms
Services
Principal Underwriter
Purchase of Securities Being Offered
Interest Adjustment Example
Annuity Payouts
Examples of Regular Income Payment
Calculations
Determination of Accumulation and Annuity Unit
Value
Capital Markets
Advertising & Ratings
More About the S&P Index
Additional Services
Other Information
Financial Statements
For a free copy of the SAI complete the form below:
Statement of Additional Information Request Card
Lincoln InvestmentSolutionsSM
Lincoln Life Variable Annuity Account N
.
Please send me a free copy of the current Statement of Additional Information
for Lincoln Life Variable Annuity Account N Lincoln InvestmentSolutionsSM.
(Please Print)
Name: -------------------------------------------------------------------------
Address: ----------------------------------------------------------------------
City --------------------------------------------------- State ---------
Zip ---------
Mail to The Lincoln National Life Insurance Company, PO Box 2348, Fort Wayne,
IN 46801-2348.
82
<PAGE>
Appendix A - Overview of Living Benefit Riders
Overview of Living Benefit Riders
We offer a number of optional Living Benefit riders that, for an additional
fee, offer certain guarantees, if certain conditions are met. These Living
Benefit riders are described briefly below. Please see the more detailed
description in the prospectus discussion for each rider, as well as the Charges
and Other Deductions section of the prospectus, for important information on
the costs, restrictions, and availability of each rider. Please consult your
registered representative as to whether any Living Benefit rider is appropriate
for you based on factors such as your investment objectives, risk tolerance,
liquidity needs, and time horizon. Not all riders or features are available in
all states or with your contract. Please consult your registered representative
for the availability of any particular rider.
Lincoln SmartSecurity (Reg. TM) Advan- Lincoln Lifetime IncomeSM
tage Advantage 2.0
1. Overview Designed to guarantee that if you Designed to guarantee that if you
make your first withdrawal on or make your first withdrawal on or
after the date you reach age 65, after the date you reach age 55 you
you are guaranteed income for are guaranteed income for your life
your life (and your spouse's, under (and your spouse's, under joint life
joint life version), even after the version). Also includes age-based
entire amount of purchase increases to the withdrawal
payments has been returned to you amount.
through periodic withdrawals. If
lifetime withdrawals are not in
effect, you may make periodic
withdrawals of the Guaranteed
Amount.
4LATER (Reg. TM) Advantage Protected
i4LIFE (Reg. TM) Advantage Funds
1. Overview Designed to provide an income Designed to guarantee today a
program that combines variable future minimum payout floor for
lifetime income payments and a i4LIFE (Reg. TM) Advantage Regular Income
death benefit with the ability to Payments, regardless of
make withdrawals during an investment performance, by
Access Period. providing an Income Base during
the accumulation period that can
be used to establish in the future a
Guaranteed Income Benefit with
i4LIFE (Reg. TM) Advantage.
1) i4LIFE (Reg. TM) Advantage Guaranteed
Income Benefit (Version 4)
1. Overview Designed to use the Account
Value1 established under i4LIFE (Reg. TM)
Advantage (if i4LIFE (Reg. TM) Advantage
Guaranteed Income Benefit is
elected) or the greater of the
Income Base or Account Value
under Lincoln Lifetime IncomeSM
Advantage 2.0 or 4LATER (Reg. TM)
Advantage Protected Funds to
provide a minimum payout floor
for i4LIFE (Reg. TM) Advantage Regular
Income Payments, regardless of
investment performance.
1 Can instead use the remaining
Guaranteed Amount under Lincoln
SmartSecurity (Reg. TM) Advantage
A-1
<PAGE>
Lincoln SmartSecurity (Reg. TM) Advan- Lincoln Lifetime IncomeSM
tage Advantage 2.0
2. Current Fee 0.65% (single life) or 0.80% (joint Single life option 1.05% of Income
life) of Guaranteed Amount Base
Joint life option 1.25% of Income
Base
3. Guaranteed Maximum Fee 1.50% of Guaranteed Amount 2.00% of Income Base
4. Withdrawals Permitted Yes - 5% annually Yes - withdrawal rate varies based
on age at purchase.
Excess Withdrawals may
significantly reduce guaranteed Excess Withdrawals may
payments. significantly reduce guaranteed
payments.
5. Payments for Life Yes (if conditions are met) Yes (if conditions are met)
4LATER (Reg. TM) Advantage Protected
i4LIFE (Reg. TM) Advantage Funds
2. Current Fee Varies based on product and death 1.05% (single life) or 1.25% (joint
benefit option (assessed as a % of life) of Income Base for 4LATER (Reg. TM)
Account Value, and only during Advantage Protected Funds.
annuity payout phase)
3. Guaranteed Maximum Fee Same as current fee 2.00% of Income Base for
4LATER (Reg. TM) Advantage Protected
Funds
4. Withdrawals Permitted Yes, during Access Period Withdrawals may significantly
reduce your Income Base.
5. Payments for Life Yes (if conditions are met) When you elect i4LIFE (Reg. TM)Advantage
1) i4LIFE (Reg. TM) Advantage Guaranteed
Income Benefit (Version 4)
2. Current Fee 0.65% added to the i4LIFE (Reg. TM)
Advantage charge (0.85% if joint
life option is chosen)
Assessed as a % of Account Value,
and only during annuity payout
phase
For purchasers of Lincoln Lifetime
IncomeSM Advantage 2.0 or
4LATER (Reg. TM) Advantage Protected
Funds, 1.05% (single life option)
or 1.25 (joint life option) which is
the total charge for i4LIFE (Reg. TM)
Advantage Guaranteed Income
Benefit initially (assessed as a % of
the Income Base or Account Value,
if greater). This charge is in
addition to the daily mortality and
expense risk and administrative
charge for your death benefit
option on your base contract.
3. Guaranteed Maximum Fee 1) 2.00% added to the i4LIFE (Reg. TM)
Advantage charge (assessed as a
% of Account Value, and only
during annuity payout phase)
2) 2.00% charge for i4LIFE (Reg. TM)
Advantage Guaranteed Income
Benefit for purchasers of Lincoln
Lifetime IncomeSM Advantage 2.0
and 4LATER (Reg. TM) Advantage Protected
Funds (assessed as a % of the
Income Base). This charge is in
addition to the daily mortality and
expense risk and administrative
charge for your death benefit
option on your base contract.
4. Withdrawals Permitted Excess Withdrawals may
significantly reduce guaranteed
payments.
5. Payments for Life Yes (if conditions are met)
A-2
<PAGE>
Lincoln SmartSecurity (Reg. TM) Advan-
tage
6. Potential Increases to Purchase Payments
Guaranteed Amount, Income
Base, or Guaranteed Income Automatic Annual Step-Ups
Benefit (as applicable) (if conditions are met)
7. Investment Requirements Yes
8. Ability to Make Additional Yes, after the first rider
Purchase Payments if anniversary, if cumulative
Contract Value is greater than payments are over $100,000 and
zero prior Home Office approval is
provided
9. Ability to Cancel Rider Yes, after 5 years following the
later of rider effective date or
contractowner-elected step-up
10. Nursing Home Benefit No
11. May Elect Other Living No
Benefit Riders
Lincoln Lifetime IncomeSM
Advantage 2.0 i4LIFE (Reg. TM) Advantage
6. Potential Increases to Purchase Payments N/A
Guaranteed Amount, Income
Base, or Guaranteed Income 5% Enhancements
Benefit (as applicable)
Automatic Annual Step-Ups
(if conditions are met)
7. Investment Requirements Yes None
8. Ability to Make Additional Yes - may impact the charge No (for non-qualified)
Purchase Payments if (Cumulative purchase payments in
Contract Value is greater than excess of $100,000 require Home Yes, for qualified contracts, during
zero Office approval.) the Access Period, unless i4LIFE (Reg. TM)
Advantage Guaranteed Income
Benefit has been elected.
9. Ability to Cancel Rider Yes, after 5 Years Qualified contracts may terminate
the rider prior to the end of the
Access Period.
Non-qualified contracts may not
terminate the rider.
10. Nursing Home Benefit Yes No
(subject to state availability)
11. May Elect Other Living No Limited to Guaranteed Income
Benefit Riders Benefit
4LATER (Reg. TM) Advantage Protected 1) i4LIFE (Reg. TM) Advantage Guaranteed
Funds Income Benefit (Version 4)
6. Potential Increases to Additional Purchase Payments Automatic Annual Step-Ups (if
Guaranteed Amount, Income conditions are met)
Base, or Guaranteed Income 5% Enhancements
Benefit (as applicable)
Automatic Annual Step-Ups
(if conditions are met)
7. Investment Requirements Option 3. See Investment Yes
Requirements section of
prospectus for more details
Additional Investment
Requirements for 4LATER (Reg. TM)
Advantage Protected Funds
8. Ability to Make Additional Yes. 4LATER (Reg. TM) Advantage No
Purchase Payments if Protected Funds cumulative
Contract Value is greater than purchase payments in excess of
zero $100,000 require Home Office
approval.
9. Ability to Cancel Rider Yes, after 5 years for 4LATER (Reg. TM) Yes, at any time (termination of the
Advantage Protected Funds. Guaranteed Income Benefit does
not terminate i4LIFE (Reg. TM) Advantage)
Yes, qualified contracts only, after
5 years following the Lincoln
Lifetime IncomeSM Advantage 2.0
effective date for purchasers who
elect i4LIFE (Reg. TM) Advantage
Guaranteed Income Benefit.
Termination applies to both
i4LIFE (Reg. TM) Advantage and the
Guaranteed Income Benefit.
10. Nursing Home Benefit No No
11. May Elect Other Living No (prior to Periodic Income Limited to i4LIFE (Reg. TM) Advantage
Benefit Riders Commencement Date)
A-3
