Lincoln National Variable Annuity Account C
Filed: 26 Feb 13, 12:00am
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Lincoln National Variable Annuity Account C
Individual Variable Annuity Contracts
Home Office:
The Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46802
www.LincolnFinancial.com
1-800-454-6265
This prospectus describes an individual flexible premium deferred annuity
contract that is issued by The Lincoln National Life Insurance Company (Lincoln
Life or Company). This prospectus is primarily for use with nonqualified plans
and qualified retirement plans. Generally, you do not pay federal income tax on
the contract's growth until it is paid out. Qualified retirement plans already
provide for tax deferral. 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 to provide retirement income over a
certain period of time, or for life, subject to certain conditions. If the
Participant dies before the Annuity Commencement Date, a Death Benefit may be
payable.
Purchase Payments
This prospectus offers three types of contracts. They are single premium
deferred annuity, a flexible premium deferred annuity and a periodic premium
deferred annuity.
The minimum Purchase Payment requirement for each contract will not exceed:
1. Single premium deferred contract: $1,000 for Roth IRAs, Traditional IRAs and
SEPs; $3,000 for all others.
2. Flexible premium deferred contract (Multi-Fund (Reg. TM) 2,3,4): $1,000 for
Roth IRAs, Traditional IRAs and SEPs; $3,000 for all others (minimum $100
subsequent Purchase Payment); and
3. Periodic premium deferred contract (Multi-Fund (Reg. TM) 1): $600 per
contract year (minimum $25 per Purchase Payment).
Purchase Payments in total may not equal or exceed $1 million without Lincoln
Life approval. If you stop making Purchase Payments the contract will remain in
force as a paid up contract as long as the total Contract Value is at least
$600. Payments may be resumed at any time if your plan permits until the
Annuity Commencement Date, the maturity date, the surrender of the contract, or
payment of any Death Benefit, whichever comes first.
You choose whether your Contract Value accumulates on a variable or a fixed
(guaranteed) basis or both. If you put all your Purchase Payments into the
fixed account, we guarantee your principal and a minimum interest rate. We
limit withdrawals and transfers from the fixed side of the contract. See Fixed
Side of the Contract.
All purchase payments for benefits on a variable basis will be placed in
Lincoln Life Variable Annuity Account C (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 contracts 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.
AllianceBernstein Variable Products Series Fund (Class B):
AllianceBernstein VPS Global Thematic Growth Portfolio
AllianceBernstein VPS Growth and Income Portfolio**
American Century Investments Variable Products (Class I):
American Century VP Inflation Protection Fund**
American Funds Insurance SeriesSM (Class 2):
American Funds Global Growth Fund
American Funds Growth Fund
American Funds Growth-Income Fund
American Funds International 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) High Yield Series
Delaware VIP (Reg. TM) REIT Series
Delaware VIP (Reg. TM) Smid Cap Growth Series
Delaware VIP (Reg. TM) Value Series
Delaware VIP (Reg. TM) Trust (Service Class):
Delaware VIP (Reg. TM) Small Cap Value Series
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DWS Investments VIT Funds (Class A):
DWS Equity 500 Index VIP Portfolio**
DWS Small Cap Index VIP Portfolio**
DWS Variable Series II (Class A):
DWS Alternative Asset Allocation VIP Portfolio
Fidelity (Reg. TM) Variable Insurance Products (Service Class):
Fidelity (Reg. TM) Contrafund (Reg. TM) Portfolio
Fidelity (Reg. TM) Growth Portfolio
Lincoln Variable Insurance Products Trust (Service Class):
LVIP Baron Growth Opportunities Fund
LVIP Delaware Diversified Floating Rate Fund
LVIP Vanguard Domestic Equity ETF Fund
LVIP Vanguard International Equity ETF Fund
Lincoln Variable Insurance Products Trust (Standard Class):
LVIP BlackRock Equity Dividend RPM Fund
(formerly LVIP Wells Fargo Intrinsic Value Fund)
LVIP BlackRock Inflation Protected Bond Fund*
LVIP Clarion Global Real Estate Fund
(formerly LVIP Cohen & Steers Global Real Estate Fund)
LVIP Delaware Bond Fund
LVIP Delaware Foundation (Reg. TM) Aggressive Allocation Fund
LVIP Delaware Foundation (Reg. TM) Conservative Allocation Fund
LVIP Delaware Foundation (Reg. TM) Moderate Allocation Fund
LVIP Delaware Growth and Income Fund
LVIP Delaware Social Awareness Fund
LVIP Delaware Special Opportunities Fund
LVIP Global Income Fund
LVIP Mondrian International Value Fund
LVIP Money Market Fund
LVIP SSgA Bond Index 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 S&P 500 Index Fund***
LVIP SSgA Small Cap Index Fund
LVIP T. Rowe Price Structured Mid-Cap Growth Fund
LVIP UBS Large Cap Growth RPM Fund
(formerly LVIP Janus Capital Appreciation Fund)
LVIP Protected Profile 2010 Fund
LVIP Protected Profile 2020 Fund
LVIP Protected Profile 2030 Fund
LVIP Protected Profile 2040 Fund
LVIP Protected Profile 2050 Fund
LVIP Protected Profile Conservative Fund
LVIP Protected Profile Growth Fund
LVIP Protected Profile Moderate Fund
MFS (Reg. TM) Variable Insurance TrustSM (Initial Class):
MFS (Reg. TM) Utilities Series
Neuberger Berman Advisers Management Trust (I Class):
Mid-Cap Growth Portfolio**
PIMCO Variable Insurance Trust (Administrative Class):
PIMCO VIT Total Return Portfolio
* Not all funds are available in all contracts. Refer to Description of Funds
for specific information regarding the availability of funds.
**It is currently anticipated that during the third quarter of 2013, we will
close and replace these investment options. See Investments in the VAA -
Description of the Funds for further information.
*** "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 that accompany this prospectus, 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 terms are
made part of this prospectus, and for a free copy of the SAI, write: The
Lincoln National Life Insurance Company, P.O. Box 2340, Fort Wayne, IN 46801 or
call 1-800-454-6265. 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 11
The Lincoln National Life Insurance Company 14
Fixed Side of the Contract 15
Variable Annuity Account (VAA) 15
Investments of the VAA 16
Charges and Other Deductions 20
Surrender Charge 21
Additional Information 23
The Contracts 30
Transfers On or Before the Annuity Commencement Date 33
Surrenders and Withdrawals 35
Death Benefit Before the Annuity Commencement Date 36
Investment Requirements 38
Living Benefit Riders 42
Lincoln Lifetime IncomeSM Advantage 2.0 (for Non-Qualified Contracts or IRAs only) 42
Lincoln Lifetime IncomeSM Advantage (for Non-Qualified Contracts or IRAs only) 52
Lincoln SmartSecurity (Reg. TM) Advantage (for Non-Qualified Contracts and IRAs only) 61
i4LIFE (Reg. TM) Advantage for Non-Qualified Contracts and IRAs 67
Guaranteed Income Benefit with i4LIFE (Reg. TM) Advantage (for Non-Qualified Contracts 70
or IRAs only)
i4LIFE (Reg. TM) Advantage for Qualified Contracts 76
4LATER (Reg. TM) Advantage (for Non-Qualified Contracts or IRAs only) 81
Annuity Payouts 86
Distribution of the Contracts 93
Federal Tax Matters 95
Additional Information 99
Voting Rights 99
Return Privilege 100
Other Information 101
Legal Proceedings 101
Contents of the Statement of Additional Information (SAI)
for Lincoln National Variable Annuity Account C 102
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Special Terms
In this prospectus, the following terms have the indicated meanings:
4LATER (Reg. TM) Advantage or 4LATER (Reg. TM)-An option that provides an
Income Base during the accumulation period, which can be used to establish a
Guaranteed Income Benefit with i4LIFE (Reg. TM) Advantage in the future.
5% Enhancement-A feature under Lincoln Lifetime IncomeSM Advantage and Lincoln
Lifetime IncomeSM Advantage 2.0 in which the Guaranteed Amount or Income Base,
as applicable, 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 C, 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.
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 and Lincoln
Lifetime IncomeSM Advantage 2.0, the Guaranteed Amount or Income Base, as
applicable, will automatically step-up to the contract value on each Benefit
Year anniversary, subject to certain conditions.
Beneficiary-The person or entity designated by you to receive any Death Benefit
paid if the annuitant dies before the Annuity Commencement Date.
Benefit Year-Under Lincoln Lifetime IncomeSM Advantage 2.0, Lincoln Lifetime
IncomeSM Advantage and Lincoln SmartSecurity (Reg. TM) Advantage, 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 a
designated Beneficiary if the annuitant dies.
Enhancement Period-Under Lincoln Lifetime IncomeSM Advantage 2.0 and Lincoln
Lifetime IncomeSM Advantage , the 10-year period during which the 5%
Enhancement is in effect. A 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.
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FINRA-Financial Industry Regulatory Authority.
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 Lifetime IncomeSM Advantage or 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).
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.
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, the Income Base will be used to calculate the minimum payouts
available under your contract at a later date. The amount of the Income Base
varies based on when you elect the rider, and is adjusted as set forth in this
prospectus.
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 Lifetime IncomeSM Advantage-Provides minimum guaranteed lifetime
periodic withdrawals that may increase, regardless of the investment
performance of the contract and provided certain conditions are met. The
Lincoln Lifetime IncomeSM Advantage Plus may provide an amount equal to the
excess of the initial Guaranteed Amount over the current Contract Value.
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, if the 1 Year Automatic Step-Up option is chosen),
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 the Lincoln SmartSecurity (Reg. TM) Advantage, Lincoln
Lifetime IncomeSM Advantage 2.0, Lincoln Lifetime IncomeSM Advantage, 4LATER
(Reg. TM) Advantage 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 Lifetime IncomeSM Advantage and Lincoln SmartSecurity (Reg. TM)
Advantage.
Maximum Annual Withdrawal Amount Annuity Payout Option - A fixed Annuity Payout
option available under Lincoln Lifetime IncomeSM Advantage under which the
Contractowner (and spouse if applicable) will receive annual annuity payments
equal to the Maximum Annual Withdrawal amount for life.
Nursing Home Enhancement-A feature that will increase the Guaranteed Annual
Income amount under Lincoln Lifetime IncomeSM Advantage 2.0 or the Maximum
Annual Withdrawal amount under Lincoln Lifetime IncomeSM Advantage upon
admittance to an approved nursing care facility, subject to certain conditions.
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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.
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.
SEC-Securities and Exchange Commission.
Secondary Life-Under i4LIFE (Reg. TM) Advantage 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:
Surrender charge - Periodic Contract (as a percentage of contract value 8.0%
surrendered/withdrawn):1 .
Surrender charge - Single Premium (as a percentage of contract value 7.0%
surrendered/withdrawn) .
Surrender charge - Flexible Premium (as a percentage of purchase payments 7.0%
surrendered/withdrawn) .
Loan set-up fee2:....................................................................... $35
Payout Phase:
Maximum Lincoln SmartIncomeSM Inflation Unscheduled Payment charge (as a percentage of
the Unscheduled
Payment):3............................................................................. 7.00%
1 The surrender charge percentage is reduced over time. The later the
redemption occurs, the lower the surrender charge with respect to that
surrender or withdrawal. We may reduce or waive this charge in certain
situations. See Charges and Other Deductions - Surrender Charge.
2 Loans are available only if your group plan allows for loans and such fee is
permissible by state law.
3 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 qualified contract that has elected the
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit.
o Table C reflects the expenses for a non-qualified or IRA contract that has
elected the i4LIFE (Reg. TM) Advantage.
o Table D reflects the expenses for a non-qualified or IRA contract that has
elected i4LIFE (Reg. TM) Advantage and previously purchased the Lincoln
Lifetime IncomeSM Advantage 2.0.
o Table E reflects the expenses for a non-qualified or IRA contract that has
elected i4LIFE (Reg. TM) Advantage and previously purchased the 4LATER
(Reg. TM) Advantage.
TABLE A
Annual Account Fee:1...................................................................... $ 25
Separate Account Annual Expenses (as a percentage of average daily net assets in the
subaccounts):2
Enhanced Guaranteed Minimum Death Benefit (EGMDB)
Mortality and Expense Risk Charge....................................................... 1.002%
Enhanced Death Benefit Charge........................................................... 0.300%
Total Separate Account Expenses......................................................... 1.302%
Without Enhanced Guaranteed Minimum Death Benefit
Mortality and Expense Risk Charge....................................................... 1.002%
Total Separate Account Expenses......................................................... 1.002%
Single Joint
Optional Living Benefit Rider Charges:3 Life Life
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Lincoln Lifetime IncomeSM Advantage 2.0:4
Guaranteed Maximum Charge..................................................... 2.00% 2.00%
Current Charge................................................................ 1.05% 1.25%
Lincoln Lifetime IncomeSM Advantage:5
Guaranteed Maximum Charge..................................................... 1.50% 1.50%
Current Charge................................................................ 0.90% 0.90%
Additional Charge for Lincoln Lifetime IncomeSM Advantage Plus................ 0.15% 0.15%
Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up option:6
Guaranteed Maximum Charge..................................................... 1.50% 1.50%
Current Charge................................................................ 0.85% 1.00%
Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year Elective Step-up option:6
Guaranteed Maximum Charge..................................................... 0.95% N/A
Current Charge................................................................ 0.85% N/A
4LATER (Reg. TM) Advantage:7
Guaranteed Maximum Charge..................................................... 1.50% N/A
Current Charge................................................................ 0.65% N/A
1 Applies only to Periodic Multi-Fund (Reg. TM) 1 and Flexible Premium
Multi-Fund (Reg. TM) 2 contracts.
2 The mortality and expense risk charge and administrative charge together are
1.002% on and after the Annuity Commencement Date. Assets invested in the
Delaware VIP Value Series on or after May 1, 2009, will have a mortality and
expense risk charge of 0.952%.
3 Only one Living Benefit rider may be elected from this chart and these riders
are only available for nonqualified or IRA contracts.
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 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. After April 2, 2012, this rider is no longer available for sale.
5 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, Automatic Annual Step-ups, 5% Enhancements and
the 200% Step-up and decreased for withdrawals. This charge is deducted from
the contract value on a quarterly basis. For Lincoln Lifetime IncomeSM
Advantage riders purchased before January 20, 2009, the current annual
percentage charge will increase from 0.75% to 0.90% upon the earlier of (a)
the next Automatic Annual Step-up of the Guaranteed Amount or (b) the next
Benefit Year anniversary if cumulative purchase payments received after the
first Benefit Year anniversary equal or exceed $100,000. See Charges and
Other Deductions - Lincoln Lifetime IncomeSM Advantage Charge for further
information. After December 31, 2010 (or later in some states), these riders
are no longer available for sale.
6 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 for withdrawals.
This charge is deducted from the contract value on a quarterly basis. For
Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up options
riders purchased prior to May 20, 2013, 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. For Lincoln
SmartSecurity (Reg. TM) Advantage - 5 Year Elective Step-up option riders
purchased prior to May 20, 2013, the current annual percentage charge will
increase to 0.85% upon the next election of a step-up of the Guaranteed
Amount. As of January 16, 2009, the Lincoln SmartSecurity (Reg. TM)
Advantage - 5 Year Elective Step-up option is no longer available for sale.
As of May 20, 2013, the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year
Automatic Step-up option will no longer be available for purchase. See
Charges and Other Deductions - Lincoln SmartSecurity (Reg. TM) Advantage
Charge for further information.
7 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 15% Enhancements, and Resets and decreased for
withdrawals. This charge is deducted from the subaccounts on a quarterly
basis. For riders purchased before January 20, 2009, the current annual
percentage charge will increase from 0.50% to 0.65% upon the next election
to reset the Income Base. See Charges and Other Deductions - 4LATER (Reg.
TM) Advantage Charge for further information. After July 16, 2012, this
rider is no longer for sale.
TABLE B
Annual Account Fee:1.................................................................... $ 25
i4LIFE (Reg. TM) Advantage With Guaranteed Income Benefit (version 4):2
Subaccount Charge (as a percentage of average daily net assets in the subaccounts).... 1.002%
Plus i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit Rider charge3.......... 0.48%
1 Applies only to Periodic Multi-Fund (Reg. TM) 1 and Flexible Premium
Multi-Fund (Reg. TM) 2 contracts.
2 This benefit is not available with the Enhanced Guaranteed Minimum Death
Benefit.
3 As an annualized percentage of Account Value deducted on a monthly basis
(0.04% per month).
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TABLE C
Annual Account Fee:1...................................................... $ 25
i4LIFE (Reg. TM) Advantage Without Guaranteed Income Benefit (version 4):2
Account Value Death Benefit............................................. 1.302%
Enhanced Guaranteed Minimum Death Benefit (EGMDB)....................... 1.652%
Single Joint
i4LIFE (Reg. TM) Advantage With Guaranteed Income Benefit (version 4):3 Life Life
Account Value Death Benefit
Guaranteed Maximum Charge............................................ 3.302% 3.302%
Current Charge....................................................... 1.952% 2.152%
Enhanced Guaranteed Minimum Death Benefit (EGMDB)
Guaranteed Maximum Charge............................................ 3.652% 3.652%
Current Charge....................................................... 2.302% 2.502%
i4LIFE (Reg. TM) Advantage With Guaranteed Income Benefit (versions 1, 2 and 3):4
Account Value Death Benefit
Guaranteed Maximum Charge...................................................... 2.802%
Current Charge................................................................. 1.802%
Enhanced Guaranteed Minimum Death Benefit (EGMDB)
Guaranteed Maximum Charge...................................................... 3.152%
Current Charge................................................................. 2.152%
1 Applies only to Periodic Multi-Fund (Reg. TM) 1 and Flexible Premium
Multi-Fund (Reg. TM) 2 contracts.
2 As an annualized percentage of average Account Value, computed daily. This
charge is assessed only on and after the effective date of i4LIFE (Reg. TM)
Advantage. See Charges and Other Deductions - i4LIFE (Reg. TM) Advantage
Rider Charge for further information. These charges continue during the
Access Period. The i4LIFE (Reg. TM) Advantage charge is reduced to 1.65%
during the Lifetime Income Period.
3 As an annualized percentage of average 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 the 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 the i4LIFE (Reg. TM) Advantage charges
to comprise the total charges reflected. During the Lifetime Income Period,
the Guaranteed Income Benefit charge is added to the i4LIFE (Reg. TM)
Advantage charge of 1.65%. See Charges and Other Deductions - i4LIFE (Reg.
TM) Advantage with Guaranteed Income Benefit (version 4) Charge for further
information.
4 As an annualized percentage of average 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 the Guaranteed Income Benefit
is 0.50% of Account Value with a guaranteed maximum charge of 1.50%. This
charge is added to the i4LIFE (Reg. TM) Advantage charges to comprise the
total charges reflected. During the Lifetime Income Period, the Guaranteed
Income Benefit charge is added to the i4LIFE (Reg. TM) Advantage charge of
1.65%. The percentage charge may change to the current charge in effect at
the time you elect an additional step-up period, not to exceed the
guaranteed maximum charge percentage. See Charges and Other Deductions -
i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit Charge for further
information.
TABLE D
Annual Account Fee:1...................................................................... $ 25
i4LIFE (Reg. TM) Advantage With Guaranteed Income Benefit (version 4) for purchasers who Single Joint
previously
purchased Lincoln Lifetime IncomeSM Advantage 2.0:........................................ Life Life
Separate Account Annual Expenses (as a percentage of average daily net assets in the
subaccounts):
Account Value Death Benefit............................................................. 1.002% 1.002%
Enhanced Guaranteed Minimum Death Benefit (EGMDB)....................................... 1.302% 1.302%
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i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit (version 4):2,3
Guaranteed Maximum Charge.............................................. 2.00% 2.00%
Current Charge......................................................... 1.05% 1.25%
1 Applies only to Periodic Multi-Fund (Reg. TM) 1 and Flexible Premium
Multi-Fund (Reg. TM) 2 contracts.
2 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 Account Value. 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.
TABLE E
Annual Account Fee:1...................................................................... $ 25
i4LIFE (Reg. TM) Advantage With 4LATER (Reg. TM) Advantage Guaranteed Income Benefit for
purchasers who previously purchased
4LATER (Reg. TM) Advantage:2
Account Value Death Benefit
Guaranteed Maximum Charge............................................................... 2.802%
Current Charge.......................................................................... 1.952%
Enhanced Guaranteed Minimum Death Benefit (EGMDB)
Guaranteed Maximum Charge............................................................... 3.152%
Current Charge.......................................................................... 2.302%
1 Applies only to Periodic Multi-Fund (Reg. TM) 1 and Flexible Premium
Multi-Fund (Reg. TM) 2 contracts.
2 As an annualized percentage of average 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 the Guaranteed Income Benefit
is 0.65% of the Account Value with a guaranteed maximum charge of 1.50%.
This charge is added to the i4LIFE (Reg. TM) Advantage charges to comprise
the total charges reflected. During the Lifetime Income Period, the
Guaranteed Income Benefit charge is added to the i4LIFE (Reg. TM) Advantage
charge of 1.65%. The percentage charge will change to the current charge in
effect upon election of a new step-up period, not to exceed the guaranteed
maximum charge percentage. For riders purchased before January 20, 2009, the
current annual percentage charge will increase from 0.50% to 0.65% upon the
next election to reset the Income Base. See Charges and Other Deductions -
4LATER (Reg. TM) Advantage Guaranteed Income Benefit Charge for further
information.
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% 5.30%
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.
EXAMPLES
This Example is 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, contract fees, separate
account annual expenses, and fund fees and expenses. The Example has been
calculated using the fees and expenses of the funds prior to the application of
any contractual waivers and/or reimbursements.
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The 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 EGMDB and the Lincoln Lifetime IncomeSM Advantage 2.0 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 period:
Periodic Single MF2 MF3 & MF4
---------- -------- --------- ----------
1 year............ $1,659 $1,563 $1,671 $1,671
3 years........... 3,299 3,028 3,332 3,332
5 years........... 4,839 4,418 4,890 4,890
10 years.......... 8,012 7,728 8,578 8,578
2) If you do not surrender your contract at the end of the applicable time
period:
Periodic Single MF2 MF3 & MF4
---------- -------- -------- ----------
1 year............ $ 886 $ 886 $ 971 $ 971
3 years........... 2,577 2,577 2,832 2,832
5 years........... 4,165 4,165 4,590 4,590
10 years.......... 7,728 7,728 8,578 8,578
The Expense Tables reflect expenses of the VAA as well as the maximum expense
of any of the underlying funds. For the single premium deferred contract and
the flexible premium (Multi-Fund (Reg. TM) 2,3,4) deferred contracts, the
examples assume that an enhanced Death Benefit and the Lincoln Lifetime
IncomeSM Advantage 2.0 are in effect. Without this benefit, expenses would be
lower.
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. We also reserve the right to impose a charge on
transfers between Subaccounts and to and from the fixed account. Currently,
there is no charge. Different fees and expenses not reflected in the
examples may be imposed during a period in which Regular Income Payments or
Annuity Payouts are made. See The Contracts - i4LIFE (Reg. TM) Advantage,
Guaranteed Income Benefit with i4LIFE (Reg. TM) Advantage, 4LATER (Reg. TM)
Guaranteed Income Benefit and 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.
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"). 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.
Summary of Common Questions
What kind of contract am I buying? It is an individual annuity contract between
you and Lincoln Life. It may provide for a fixed annuity and/or a variable
annuity. This prospectus describes the variable side of the contract. See The
Contracts. This prospectus provides a general description of the contract. The
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. Please check
with your investment representative regarding their availability.
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 can invest in certain Subaccounts. Different
Investment Requirements apply to different riders. Lincoln Lifetime IncomeSM
Advantage Plus also has specific Investment Requirements, but is no longer
available for sale. 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. You may also allocate
Purchase Payments to the fixed account.
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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. See Charges and Other Deductions.
If you withdraw Account Value, you pay a surrender charge from 0% to 8.0%,
depending upon how many contract years have elapsed (single premium and
periodic premium), or how many contract years the Purchase Payment has been in
the contract (flexible premium), and which type of contract you choose. We may
reduce or waive surrender charges in certain situations. See Charges and Other
Deductions - Surrender Charges.
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.
Charges may also be imposed during the regular income or Annuity Payout period,
including if you elect i4LIFE (Reg. TM) Advantage. See The Contracts and
Annuity Payouts.
Each fund pays a management fee based on its average daily net asset value. See
Investments of the Variable Annuity Account-Investment Adviser. Each fund also
has additional operating expenses. These are described in the Prospectuses for
the fund.
What Purchase Payments do I make, and how often? Subject to the minimum and
maximum payment amounts for each type of contract, your payments may be
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 the Annuitant dies before I annuitize? The Death Benefit
provision applicable under your contract depends on whether your contract is a
single premium deferred, flexible premium deferred or periodic premium deferred
contract. See The Contracts - Death Benefit.
May I transfer contract value between variable options and between the variable
and fixed side of the contract? Yes, subject to currently effective
restrictions. For example, transfers made before the annuity commencement date
are generally restricted to no more than twelve (12) per contract year. 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.
What are Living Benefit Riders? Living Benefit riders are optional riders
available to purchase for an additional fee. These riders provide different
types of minimum guarantees if you meet certain conditions. These riders offer
either a minimum withdrawal benefit (Lincoln SmartSecurity (Reg. TM) Advantage,
Lincoln Lifetime IncomeSM Advantage 2.0, and Lincoln Lifetime IncomeSM
Advantage) or, a minimum Annuity Payout (4LATER (Reg. TM) Advantage 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 (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. 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? (for Non-Qualified Contracts
or IRAs only) 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
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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. As of April 2, 2012, this rider is unavailable for purchase under
any contract option. See The Contracts - Investment Requirements.
What is Lincoln Lifetime IncomeSM Advantage? (for Non-Qualified Contracts or
IRAs only) Lincoln Lifetime IncomeSM Advantage is a rider that provides minimum
guaranteed, periodic withdrawals for your life (single life option) or for the
lives of you and your spouse (joint life option) regardless of the investment
performance of the contract provided certain conditions are met. Withdrawals
are based on the Guaranteed Amount which is equal to the initial Purchase
Payment (or Contract Value if elected after contract issue). The Guaranteed
Amount is not available as a separate benefit upon death or surrender and is
increased by subsequent Purchase Payments, Automatic Annual Step-ups, the 5%
Enhancements, and the Step-up to 200% (if applicable to your contract) of the
initial Guaranteed Amount and is decreased by withdrawals in accordance with
provisions described later in this prospectus. See The Contracts - Lincoln
Lifetime IncomeSM Advantage. You may not simultaneously elect Lincoln Lifetime
IncomeSM Advantage and another one of the Living Benefit riders. By electing
this rider you will be subject to Investment Requirements. See The Contracts -
Investment Requirements. This rider is no longer available for sale.
What is Lincoln Lifetime IncomeSM Advantage Plus? Lincoln Lifetime IncomeSM
Advantage Plus provides an increase in your Contract Value of an amount equal
to the excess of the initial Guaranteed Amount over the current Contract Value
on the seventh Benefit Year anniversary so long as no withdrawals have been
taken and you adhere to certain Investment Requirements. This rider is no
longer available for sale.
What is the Lincoln SmartSecurity (Reg. TM) Advantage (for Non-Qualified
Contracts and IRAs only)? 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
January 16, 2009, the Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year
Elective Step-up option is no longer available for purchase. As of May 20,
2013, the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up
option is longer 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, that provides periodic variable lifetime
income payments, a Death Benefit, and the ability to make purchase payments
(IRA contracts only) and withdrawals during a defined period of time. We assess
a charge, imposed only during the i4LIFE (Reg. TM) Advantage payout phase. For
qualified contracts, the Guaranteed Income Benefit is included in the election
of i4LIFE (Reg. TM) Advantage.
What is the Guaranteed Income Benefit? The Guaranteed Income Benefit provides a
minimum payout floor for your i4LIFE (Reg. TM) Regular Income Payments. For
non-qualified contracts and IRAs, the i4LIFE (Reg. TM) Guaranteed Income
Benefit is purchased at the time you elect i4LIFE (Reg. TM) Advantage or any
time during the Access Period. 4LATER (Reg. TM) Advantage, Lincoln Smart
Security (Reg. TM) Advantage and Lincoln Lifetime IncomeSM Advantage have
features that may be used to establish the amount of the Guaranteed Income
Benefit. 4LATER (Reg. TM) Advantage is purchased prior to the time you elect
i4LIFE (Reg. TM) Advantage and provides a guaranteed value, the Income Base,
which can be used to establish the Guaranteed Income Benefit floor in the
future. The i4LIFE (Reg. TM) Guaranteed Income Benefit does not have an Income
Base; the minimum floor is based on the Contract Value at the time you elect
i4LIFE (Reg. TM) with the Guaranteed Income Benefit. You may use your
Guaranteed Amount from Lincoln Smart Security (Reg. TM) Advantage or Lincoln
Lifetime IncomeSM Advantage to establish the Guaranteed Income Benefit at the
time you terminate Lincoln Smart Security (Reg. TM) Advantage or Lincoln
Lifetime IncomeSM Advantage to purchase i4LIFE (Reg. TM) Advantage. The i4LIFE
(Reg. TM) Advantage feature available for purchase by owners of qualified
contracts includes the Guaranteed Income benefit as one benefit. Neither
feature can be selected independently of the other. For all Contractowners, by
electing this benefit, you will be subject to Investment Requirements. See The
Contracts - i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit, 4LATER (Reg.
TM) Advantage Guaranteed Income Benefit, and Lincoln Lifetime IncomeSM
Advantage - i4LIFE (Reg. TM) Advantage option.
What is 4LATER (Reg. TM) Advantage? 4LATER (Reg. TM) Advantage, which may be
available for purchase at an additional charge, is a way to guarantee today a
minimum payout floor in the future for the i4LIFE (Reg. TM) Advantage regular
income payments. 4LATER (Reg. TM) Advantage provides an initial Income Base
that is guaranteed to increase at a specified percentage over the accumulation
period of the annuity. As of July 16, 2012, this rider is no longer available
for purchase. By electing this benefit, you will be subject to Investment
Requirements. See The Contracts - 4LATER (Reg. TM) Advantage. This rider is no
longer available for sale as of July 16, 2012, or when 4LATER (Reg. TM)
Advantage Protected Funds is available in your state.
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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. If
you surrender the contract or make a withdrawal, certain charges may apply. See
Charges and Other Deductions. 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
The VAA advertises the annual performance of the subaccounts for the funds on
both a standardized and non-standardized basis.
The standardized calculation measures average annual total return. This is
based on a hypothetical $1,000 payment made at the beginning of a one-year, a
five-year and a 10-year period. This calculation reflects all fees and charges
that are or could be imposed on all contractowner accounts.
The nonstandardized calculation compares changes in accumulation unit values
from the beginning of the most recently completed calendar year to the end of
that year. It may also compare changes in accumulation unit values over shorter
or longer time periods. This calculation reflects mortality and expense risk
charges. It also reflects management fees and other expenses of the fund. It
does not include the surrender charge or the account charge; if included, they
would decrease the performance.
The money market subaccount's yield is based upon investment performance over a
7-day period, which is then annualized. During extended periods of low interest
rates, 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
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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. 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 2340, Fort
Wayne, IN 46801-2340 , or call 1-800-454-6265. 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.
Fixed Side of the Contract
The portion of the contract value allocated to the fixed side of the contract
becomes part of our general account, and does not participate in the investment
experience of the VAA. The general account is subject to regulation and
supervision by the Indiana Insurance Department 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
(1933 Act) and have not registered the general account as an investment company
under the Investment Company Act of 1940 (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.
Variable Annuity Account (VAA)
On June 3, 1981, 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 Lincoln Life in addition to the contracts described in this prospectus. The
other annuity contracts supported by the VAA invest in the same portfolios of
the funds as the contracts described in this prospectus. These other annuity
contracts may have different charges that could affect performance of the
subaccount.
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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 1-800-454-6265.
Investments of the VAA
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. We reserve the right to add, delete or substitute
funds.
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. 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.
Most of the funds offered as part of this contract make payments to us under
their distribution plans (12b-1 plans). The payment rates range up to 0.30%
based on the amount of assets invested in those funds. Payments made out of the
assets of the fund will reduce the amount of assets that otherwise would be
available for investment, and will reduce the fund's investment return. The
dollar amount of future asset-based fees is not predictable because these fees
are a percentage of the fund's average net assets, which can fluctuate over
time. If, however, the value of the fund goes up, then so would the payment to
us (or our affiliates). Conversely, if the value of the funds goes down,
payments to us or our affiliates would decrease.
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.
Funds of funds structures may have higher expenses than funds that invest
directly in debt or equity securities.
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<PAGE>
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.
We currently anticipate closing and replacing the following funds on May 20,
2013:
o Alliance Bernstein VPS Growth and Income Portfolio with LVIP SSgA S&P 500
Index Fund
o American CenturyVP Inflation Protection Fund with LVIP BlackRock Inflation
Protected Bond Fund
o DWS Equity 500 Index VIP Portfolio with LVIP SSgA S&P 500 Index Fund
o DWS Small Cap Index VIP Portfolio with LVIP SSgA Small-Cap Index Fund
o Neuberger Berman AMT Mid-Cap Growth Portfolio with LVIP SSgA S&P 500 Index
Fund
AllianceBernstein Variable Products Series Fund, advised by AllianceBernstein,
L.P.
o AllianceBernstein VPS Global Thematic Growth Portfolio: Long-term growth of
capital.
o AllianceBernstein VPS Growth and Income Portfolio: Long-term growth of
capital.
It is currently anticipated that during the fourth quarter of 2012, we
will close and replace this investment option.
American Century Investments Variable Products, advised by American Century
Investment Management, Inc.
o American Century VP Inflation Protection Fund: Long-term total return using
a strategy that seeks to protect against U.S. inflation.
It is currently anticipated that during the fourth quarter of 2012, we
will close and replace this investment option.
American Funds Insurance SeriesSM, advised by Capital Research and Management
Company
o Global Growth Fund: Long-term growth of capital.
o Growth Fund: Capital growth.
o Growth-Income Fund: Long-term growth of capital and income.
o International Fund: Long-term growth 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 Diversified Income Series: Maximum long-term total return consistent with
reasonable risk.
o High Yield Series: Total return and, as a secondary objective, high current
income.
o REIT Series: Maximum long-term total return, with capital appreciation as a
secondary objective.
o Small Cap Value Series: Capital appreciation.
o Smid Cap Growth Series: Long-term capital appreciation.
o Value Series: Long-term capital appreciation.
DWS Investments VIT Funds, advised by Deutsche Investment Management Americas,
Inc. and sub-advised by Northern Trust Investments, Inc.
o DWS Equity 500 Index VIP Portfolio: To replicate, as closely as possible,
before the deduction of expenses, the performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500( (Reg. TM)) Index"), which
emphasizes stocks of large US companies.
It is currently anticipated that during the fourth quarter of 2012, we
will close and replace this investment option.
o DWS Small Cap Index VIP Portfolio: To replicate, as closely as possible,
before the deduction of expenses, the performance of the Russell
2000((Reg. TM)) Index, which emphasizes stocks of small US companies..
It is currently anticipated that during the fourth quarter of 2012, we
will close and replace this investment option.
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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.
Fidelity (Reg. TM) Variable Insurance Products, advised by Fidelity Management
and Research Company and sub-advised by FMR Co., Inc.
o Contrafund (Reg. TM) Portfolio: Long-term capital appreciation.
o Growth Portfolio: To achieve capital appreciation.
Lincoln Variable Insurance Products Trust, advised by Lincoln Investment
Advisors Corporation.
o LVIP Baron Growth Opportunities Fund: Capital appreciation.
(Sub-advised by BAMCO, Inc.)
o LVIP BlackRock Equity Dividend RPM Fund: Reasonable income by investing
primarily in income-producing equity in securities.
(Sub-advised by BlackRock Investment Management LLC)
(formerly LVIP Wells Fargo Intrinsic Value Fund)
o LVIP BlackRock Inflation Protected Bond Fund: To maximize real return,
consistent with preservation of real capital and prudent investment
management.
This fund will be available on or about May 14, 2012. Consult your
financial advisor.
o LVIP Clarion Global Real Estate Fund: Total return through a combination of
current income and long-term capital appreciation.
(Sub-advised by CBRE Clarion Securities LLC)
(formerly LVIP Cohen & Steers Global Real Estate Fund)
o LVIP Delaware Bond Fund: Maximum current income (yield) consistent with a
prudent investment strategy.
(Sub-advised by Delaware Management Company)*
o LVIP Delaware Diversified Floating Rate Fund: Total return.
o LVIP Delaware Foundation (Reg. TM) Aggressive Allocation Fund: Long-term
capital growth.
(Sub-advised by Delaware Management Company)*
o LVIP Delaware Foundation (Reg. TM) Conservative Allocation Fund: A
combination of current income and preservation of capital with capital
appreciation.
(Sub-advised by Delaware Management Company)*
o LVIP Delaware Foundation (Reg. TM) Moderate Allocation Fund: Capital
appreciation with current income as a secondary objective.
(Sub-advised by Delaware Management Company)*
o LVIP Delaware Growth and Income Fund: To maximize long-term capital
appreciation.
(Sub-advised by Delaware Management Company)*
o LVIP Delaware Social Awareness Fund: To maximize long-term capital
appreciation.
(Sub-advised by Delaware Management Company)*
o LVIP Delaware Special Opportunities Fund: To maximize long-term capital
appreciation.
(Sub-advised by Delaware Management Company)*
o LVIP Global Income Fund: Current income consistent with preservation of
capital.
(Sub-advised by Mondrian Investment Partners Limited and Franklin
Advisors, Inc.)
o LVIP Mondrian International Value Fund: Long-term capital appreciation as
measured by the change in the value of fund shares over a period of three
years or longer.
(Sub-advised by Mondrian Investment Partners Limited)
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 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 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)
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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 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 T. Rowe Price Structured Mid-Cap Growth Fund: To maximize capital
appreciation.
(Sub-advised by T. Rowe Price Associates, Inc.)
o LVIP Vanguard Domestic Equity ETF Fund: Long-term capital appreciation; a
fund of funds.
o LVIP Vanguard International Equity ETF Fund: Long-term capital
appreciation; a fund of funds.
o LVIP UBS Large Cap Growth RPM Fund: Long-term growth of capital in a manner
consistent with the preservation of capital.
(Sub-advised by UBS Global Asset Management (Americas) Inc.)
(formerly LVIP Janus Capital Appreciation Fund)
o LVIP Protected Profile 2010 Fund: The highest total return over time with
an increased emphasis on capital preservation as the target date
approaches; a fund of funds.
o LVIP Protected Profile 2020 Fund: The highest total return over time with
an increased emphasis on capital preservation as the target date
approaches; a fund of funds.
o LVIP Protected Profile 2030 Fund: The highest total return over time with
an increased emphasis on capital preservation as the target date
approaches; a fund of funds.
o LVIP Protected Profile 2040 Fund: The highest total return over time with
an increased emphasis on capital preservation as the target date
approaches; a fund of funds.
o LVIP Protected Profile 2050 Fund: The highest total return over time with
an increased emphasis on capital preservation as the target date
approaches; 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.
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.
MFS (Reg. TM) Variable Insurance TrustSM, advised by Massachusetts Financial
Services Company
o Utilities Series: Total return.
Neuberger Berman Advisers Management Trust, advised by Neuberger Berman
Management, Inc. and sub-advised by Neuberger Berman, LLC.
o Mid-Cap Growth Portfolio: Growth of capital.
It is currently anticipated that during the fourth quarter of 2012, we
will close and replace this investment option.
PIMCO Variable Insurance Trust, advised by PIMCO
o PIMCO VIT Total Return Portfolio: Maximum total return, consistent with
preservation of capital and prudent investment management.
* Investments in Delaware Investments VIP Series, Delaware Funds, LVIP Delaware
Funds or Lincoln Life accounts managed by Delaware Investment Advisors, 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 or
accounts, the repayment of capital from the Series or Funds or account, or
any particular rate of return.
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.
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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 or
participants as additional units, but are reflected as changes in unit values.
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, automatic withdrawal, and
cross-reinvestment/earnings sweep services);
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 electronic fund transfer services.
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The risks we assume include:
o the risk that annuitants receiving Annuity Payouts, including Lincoln
SmartIncomeSM Inflation payouts, under contracts 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 death benefits paid will exceed the actual contract value;
o the risk that more owners than expected will qualify for waivers of the
surrender charge;
o the risk that lifetime payments to individuals from Lincoln SmartSecurity
(Reg. TM) Advantage, Lincoln Lifetime IncomeSM Advantage 2.0 or Lincoln
Lifetime IncomeSM Advantage will exceed the Contract Value;
o the risk that our costs in providing the services will exceed our revenues
from contract charges (which we cannot change).
o the risk that, if i4LIFE (Reg. TM) Advantage with the Guaranteed Income
Benefit or 4LATER (Reg. TM) Guaranteed Income Benefit is in effect, the
required regular income payments will exceed the account value.
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. For example, the surrender charge collected may not fully cover all of
the sales and distribution expenses actually incurred by us. 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.
Account Charge
There is no account charge for flexible premium Multi-Fund (Reg. TM) 3 and 4.
Periodic premium Multi-Fund (Reg. TM) 1 contracts and flexible premium
Multi-Fund (Reg. TM) 2 contracts will deduct $25 from the contract value on the
last valuation date of each contract year; this $25 account charge will also be
deducted from the contract value upon surrender.
Surrender Charge
A surrender charge applies (except as described below) to surrenders and
withdrawals of other Purchase Payments that have been invested for the periods
indicated as follows.
A. Periodic premium deferred contract
There will be a surrender charge for the first withdrawal each Contract Year in
excess of 15% of Contract Value. Any subsequent withdrawals in the same
Contract Year or upon surrender of contract will also incur a surrender
charge.
Contract year in which surrender/withdrawal occurs
-----------------------------------------------------------
0 1 2 3 4 5 6 7 8 9 10 11+
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Surrender charge as a percentage of the
proceeds withdrawn.................... 8% 8% 8% 8% 8% 8% 4% 4% 4% 4% 4% 0%
A surrender charge does not apply to:
o A surrender or withdrawal of Contract Value after ten full Contract Years.
o Withdrawals of Contract Value during a Contract Year to the extent that the
total Contract Value withdrawn during the current Contract Year does not
exceed the free amount which is equal to 15% of the Contract Value.
o A surrender of the contract as a result of the death of the Annuitant.
o A surrender or withdrawal as a result of the onset of a permanent and total
disability of the Contractowner as defined in Section 22(e)(3) of the tax
code, after the effective date of the contract and before the 65th birthday
of the Contractowner.
o Contract Value used in the calculation of the initial periodic income
payment and the initial Account Value under the i4LIFE (Reg. TM) Advantage
option or the Contract Value applied to calculate the benefit amount under
any Annuity Payout option made available by us.
o Regular Income Payment made under i4LIFE (Reg. TM) Advantage, including any
payments to provide the 4LATER (Reg. TM) or i4LIFE (Reg. TM) Guaranteed
Income Benefits, or periodic payments made under any Annuity Payout option
made available by us.
o Amounts up to the Maximum Annual Withdrawal Limit under Lincoln
SmartSecurity (Reg. TM) Advantage or Lincoln Lifetime IncomeSM Advantage,
or amounts up to the Guaranteed Annual Income Amount under Lincoln Lifetime
IncomeSM Advantage 2.0, subject to certain conditions.
In addition, for 403(b) and 457 contracts, if the Participant:
1) has terminated employment with the employer that sponsored the contract; and
2) has been in the contract for at least five years (the five year date
beginning either November 1, 1991 or the date of the contract, whichever is
later); and
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3) is at least age 55.
B. Single premium deferred contract or nonrecurring lump sum payment to
periodic premium deferred contract
For a single premium deferred contract or a nonrecurring lump sum payment made
to a periodic premium deferred contract, the surrender/withdrawal charges (when
applicable as described below) will be:
Contract year in which surrender/withdrawal
occurs
-------------------------------------------
0 1 2 3 4 5 6 7 8
---- ---- ---- ---- ---- ---- ---- ---- ---
Surrender charge as a percentage of the proceeds
withdrawn...................................... 7% 7% 6% 5% 4% 3% 2% 1% 0%
Investment gains attributable to a nonrecurring lump sum payment made to a
periodic premium deferred contract will be subject to surrender charges of 8%
in years 1-5, 4% in years 6-10, and no charge after the contract has been in
force for 10 years. For periodic premium deferred contracts under which a
nonrecurring lump sum has been received, withdrawals will be made first from
any amount subject to the lowest charge until that amount is gone. A surrender
charge does not apply to:
o A surrender or withdrawal of a Purchase Payment after 7 full Contract Years.
o Withdrawals of Contract Value during a Contract Year to the extent that the
total Contract Value withdrawn during the current Contract Year does not
exceed the free amount which is equal to 15% of the Contract Value.
o A surrender of the contract as a result of the death of the Annuitant.
o A surrender or withdrawal as a result of the onset of a permanent and total
disability of the Contractowner as defined in Section 22(e)(3) of the tax
code, after the effective date of the contract and before the 65th birthday
of the Contractowner.
o Contract Value used in the calculation of the initial periodic income
payment and the initial Account Value under the i4LIFE (Reg. TM) Advantage
option or the Contract Value applied to calculate the benefit amount under
any Annuity Payout option made available by us.
o Regular Income Payment made under i4LIFE (Reg. TM) Advantage, including any
payments to provide the 4LATER (Reg. TM) or i4LIFE (Reg. TM) Guaranteed
Income Benefits, or periodic payments made under any Annuity Payout option
made available by us.
o Amounts up to the Maximum Annual Withdrawal Limit under Lincoln
SmartSecurity (Reg. TM) Advantage or Lincoln Lifetime IncomeSM Advantage or
amounts up to the Guaranteed Annual Income Amount under Lincoln Lifeime
Income Advantage 2.0, subject to certain conditions.
C. Flexible premium deferred contract
For a flexible premium deferred contract, the surrender/withdrawal charges
(when applicable as described previously) will be:
Number of contract anniversaries since
Purchase Payment was invested
--------------------------------------
0 1 2 3 4 5 6 7+
---- ---- ---- ---- ---- ---- ---- ---
Surrender charge as a percentage of total Purchase Payments
surrendered/withdrawn in a Contract Year................... 7% 6% 5% 4% 3% 2% 1% 0%
A surrender charge does not apply to:
o A surrender or withdrawal of a Purchase Payment beyond the 7th anniversary
since the Purchase Payment was invested.
o Withdrawals of Contract Value during a Contract Year to the extent that the
total Contract Value withdrawn during the current Contract Year does not
exceed the free amount which is equal to 15% of the Purchase Payments.
o A surrender of the contract as a result of the death of the Annuitant.
o A surrender or withdrawal as a result of the onset of a permanent and total
disability of the Annuitant as defined in Section 22(e)(3) of the tax code,
after the effective date of the contract and before the 65th birthday of
the Contractowner.
o Contract Value used in the calculation of the initial periodic income
payment and the initial Account Value under the i4LIFE (Reg. TM) Advantage
option or the Contract Value applied to calculate the benefit amount under
any Annuity Payout option made available by us.
o Regular Income Payment made under i4LIFE (Reg. TM) Advantage, including any
payments to provide the 4LATER (Reg. TM) or i4LIFE (Reg. TM) Guaranteed
Income Benefits, or periodic payments made under any Annuity Payout option
made available by us.
o Amounts up to the Maximum Annual Withdrawal Limit under Lincoln
SmartSecurity (Reg. TM) Advantage or Lincoln Lifetime IncomeSM Advantage or
amounts up to the Guaranteed Annual Income amount under Lincoln Lifetime
IncomeSM Advantage 2.0, subject to certain conditions.
We apply the surrender charge as a percentage of Purchase Payments, which means
that you would pay the same surrender charge at the time of surrender
regardless of whether your Contract Value has increased or decreased.
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The surrender charge is calculated separately for each Contract Year's Purchase
Payments to which a charge applies. (For purposes of calculating this charge,
we assume that Purchase Payments are withdrawn on a first in-first out basis,
and that all Purchase Payments are withdrawn before any earnings are
withdrawn.) The surrender charges associated with surrender or withdrawal are
paid to us to compensate us for the loss we experience on contract
distributions costs when Contractowners surrender or withdraw before
distribution costs have been recovered.
Additional Information
Participants in the Texas Optional Retirement Program should refer to
Restrictions Under the Texas Optional Retirement Program, later in this
prospectus booklet.
The charges described previously may be reduced or eliminated for any
particular contract. However, these charges will be reduced 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.
In certain circumstances a holder of an annuity contract issued by Lincoln Life
may decide to surrender such a contract and purchase another (second) annuity
contract issued by Lincoln Life. In that instance, the surrender charges (if
any) applicable to the first annuity contract may be waived (depending on the
type of second contract purchased) and the funds held in the first annuity
contract will be transferred to the second annuity contract.
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 Enhanced Guaranteed Without Enhanced Guaranteed
Minimum Death Minimum Death
Benefit (EGMDB) Benefit (EGMDB)
-------------------------- ----------------------------
Mortality and expense risk charge........... 1.002%* 1.002%*
Enhanced Death Benefit charge............... 0.300% 0.000%
----- -----
Total annual charge for each Subaccount..... 1.302% 1.002%
*Assets invested in the Delaware VIP Value Series on and after May 1, 2009 will
have a mortality and expense risk charge of 0.952%.
This charge is made up of two parts:
1. our assumption of mortality risks (0.900%) and
2. our assumption of expense risks (0.102%).
The level of this charge is guaranteed not to change.
Deduction for the Enhanced Guaranteed Minimum Death Benefit (EGMDB)
When the EGMDB becomes effective, we will begin deducting from the VAA an
amount, computed daily, which is equal to an annual rate of 0.30% of the daily
net asset value. This charge will start at the beginning of the next valuation
period. This charge will continue for all future contract years unless the
owner elects to discontinue the EGMDB. If the EGMDB is discontinued, the 0.30%
annual charge will stop at the end of the valuation period when the EGMDB is
terminated. See The Contracts-Death Benefit Before the Annuity Commencement
Date.
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 (for Non-Qualified Contracts or
IRAs only). 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.
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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.
Lincoln Lifetime IncomeSM Advantage Charge (for Non-Qualified Contracts or IRAs
only). While this rider is in effect, there is a charge for the Lincoln
Lifetime IncomeSM Advantage. The rider charge is currently equal to an annual
rate of 0.90% of the Guaranteed Amount (0.225% quarterly) for the Lincoln
Lifetime IncomeSM Advantage single life or joint life option. For riders
purchased before January 20, 2009, the current annual percentage charge will
increase from 0.75% to 0.90% upon the earlier of (a) the next Automatic Annual
Step-up of the Guaranteed Amount or (b) the next Benefit Year anniversary if
cumulative Purchase Payments received after the first Benefit Year anniversary
equal or exceed $100,000. If the Lincoln Lifetime IncomeSM Advantage Plus is
purchased, an additional 0.15% is added, for a total current cost of 1.05% of
the Guaranteed Amount. See The Contracts - Living Benefit Riders - Lincoln
Lifetime IncomeSM Advantage - Guaranteed Amount for a description of the
calculation of the Guaranteed Amount.
The charge is applied to the Guaranteed Amount as increased for subsequent
Purchase Payments, Automatic Annual Step-ups, 5% Enhancements, and the 200%
Step-up and decreased for withdrawals. The 200% Step-up is not available for
riders purchased on or after October 5, 2009. 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 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 the Lincoln Lifetime IncomeSM
Advantage Guaranteed Amount section for a discussion and example of the impact
of the changes to the Guaranteed Amount.
The annual rider percentage charge may increase each time the Guaranteed Amount
increases as a result of the Automatic Annual Step-up, but the charge will
never exceed the guaranteed maximum annual percentage charge of 1.50% of the
Guaranteed Amount. 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. This opt out will only apply for this particular
Automatic Annual Step-up and is not available if
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<PAGE>
additional Purchase Payments would cause your charge to increase (see below).
You will need to notify us each time the percentage charge increases if you do
not want the Automatic Annual Step-up.
An increase in the Guaranteed Amount as a result of the 5% Enhancement or 200%
Step-up will not cause an increase in the annual rider percentage charge but
will increase the dollar amount of charge.
Once cumulative additional Purchase Payments into your annuity contract after
the first Benefit Year equal or exceed $100,000, any additional Purchase
Payment will potentially cause the charge for your rider to change to the
current charge in effect on the next Benefit Year anniversary, but the charge
will never exceed the guaranteed maximum annual charge. The new charge will
become effective on the Benefit Year anniversary.
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 Guaranteed Amount is reduced to zero while the Contractowner is
receiving a lifetime Maximum Annual Withdrawal, no rider charge will be
deducted.
If you purchase Lincoln Lifetime IncomeSM Advantage Plus Option, an additional
0.15% of the Guaranteed Amount will be added to the Lincoln Lifetime IncomeSM
Advantage charge for a total current charge of 1.05% applied to the Guaranteed
Amount. This total charge (which may change as discussed above) is in effect
until the 7th Benefit Year anniversary. If you exercise your Plus Option, this
entire rider and its charge will terminate. If you do not exercise the Plus
Option, after the 7th Benefit Year anniversary, the 0.15% charge for the Plus
Option will be removed and the Lincoln Lifetime IncomeSM Advantage rider and
charge will continue. If you make a withdrawal prior to the 7th Benefit Year
anniversary, you will not be able to exercise the Plus Option, but the
additional 0.15% charge will remain on your contract until the 7th Benefit Year
anniversary.
As of December 31, 2010 (or later in certain states), this rider is no longer
available for purchase.
Lincoln SmartSecurity (Reg. TM) Advantage Charge (for Non-Qualified Contracts
or IRAs only). While this rider is in effect, there is a charge for the 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 - 5 Year Elective Step-up option (for
riders purchased prior to May 20, 2013, the current annual percentage
charge will increase to 0.85% upon the next election of a step-up of the
Guaranteed Amount); or
2) 0.85% of the Guaranteed Amount (0.2125% quarterly) for the Lincoln
SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up, single life
option (and also the prior version of Lincoln SmartSecurity (Reg. TM)
Advantage - 1 Year Automatic Step-up) (for riders purchased prior to May
20, 2013, 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
3) 1.00% of the Guaranteed Amount (0.25% quarterly) for the Lincoln
SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up, joint life
option (for riders purchased prior to May 20, 2013, the current annual
percentage charge will increase from 0.80% 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.
As of January 16, 2009, the Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year
Elective Step-up option is no longer available for purchase. As of May 20,
2013, the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up
option 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. In Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year Elective
Step-up option and the prior version of the Lincoln SmartSecurity (Reg. TM)
Advantage - 1 Year Automatic Step-up (without the single or joint life option),
the charge may be deducted in proportion to the value in the fixed account as
well. 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 the Lincoln SmartSecurity (Reg. TM) Advantage, Guaranteed Amount
section, for a discussion and example of the impact of changes to the
Guaranteed Amount.
Under the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up
option, 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 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
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<PAGE>
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 0.95% of the Guaranteed Amount for the Lincoln SmartSecurity (Reg.
TM) Advantage - 5 Year Elective Step-up option or 1.50% of the Guaranteed
Amount for the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic
Step-up option. 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.
Rider Charge Waiver. For the Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year
Elective Step-up option, after the later of the fifth anniversary of the
effective date of the rider or the fifth anniversary of the most recent step-up
of the Guaranteed Amount, the rider charge may be waived. For the Lincoln
SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up option, no rider
charge waiver is available with the single life and joint life options. The
earlier version of the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year
Automatic Step-up option has a waiver charge provision which may occur after
the fifth Benefit Year anniversary following the last automatic step-up
opportunity.
Whenever the above conditions are met, on each valuation date the rider charge
is to be deducted, if the total withdrawals from the contract have been less
than or equal to 10% of the sum of: (1) the Guaranteed Amount on the effective
date of this rider or on the most recent step-up date; and (2) Purchase
Payments made after the step-up, then the quarterly rider charge will be
waived. If the withdrawals have been more than 10%, then the rider charge will
not be waived.
4LATER (Reg. TM) Advantage Charge (for Non-Qualified Contracts or IRAs only).
Prior to the Periodic Income Commencement Date (which is defined as the
Valuation Date the initial Regular Income Payment under i4LIFE (Reg. TM)
Advantage is determined), the annual 4LATER (Reg. TM) charge is currently 0.65%
of the Income Base. For riders purchased before January 20, 2009, the current
annual percentage charge will increase from 0.50% to 0.65% upon the next
election to reset the Income Base. The Income Base (an amount equal to the
initial Purchase Payment if purchased at contract issue, or Contract Value at
the time of election if elected after the contract effective date), as
adjusted, is a value that will be used to calculate the 4LATER (Reg. TM)
Guaranteed Income Benefit. The Income Base is increased for subsequent Purchase
Payments, automatic 15% enhancements and resets, and decreased for withdrawals.
An amount equal to the quarterly 4LATER (Reg. TM) rider charge multiplied by
the Income Base will be deducted from the Subaccounts on every third month
anniversary of the later of the 4LATER (Reg. TM) rider effective date or the
most recent reset of the Income Base. This deduction will be made in proportion
to the value in each Subaccount on the Valuation Date the 4LATER (Reg. TM)
rider charge is assessed. The amount we deduct will increase as the Income Base
increases, because the charge is based on the Income Base. As described in more
detail below, the only time the Income Base will change is when there are
additional Purchase Payments, withdrawals, automatic enhancements at the end of
the 3-year waiting periods or in the event of a reset to the current Account
Value. This rider is no longer available for sale as of July 16, 2012, or when
4LATER (Reg. TM) Advantage Protected Funds is available in your state.
Upon a reset of the Income Base, a pro-rata deduction of the 4LATER (Reg. TM)
rider charge based on the Income Base immediately prior to the reset will be
made on the Valuation Date of the reset. This deduction covers the cost of the
4LATER (Reg. TM) rider from the time of the previous deduction to the date of
the reset. After the reset, we will deduct the 4LATER (Reg. TM) rider charge
for the reset Income Base on a quarterly basis, beginning on the Valuation Date
on or next following the three-month anniversary of the reset. At the time of
the reset, the annual charge will be the current charge in effect at the time
of reset, not to exceed the guaranteed maximum charge of 1.50% of the Income
Base. If you never elect to reset your Income Base, your 4LATER (Reg. TM) rider
percentage charge will never change, although the amount we deduct will change
as your Income Base changes.
Prior to the Periodic Income Commencement Date, a pro-rata amount of the 4LATER
(Reg. TM) rider charge will be deducted upon termination of the 4LATER (Reg.
TM) rider for any reason other than death. On the Periodic Income Commencement
Date, a pro-rata deduction of the 4LATER (Reg. TM) rider charge will be made to
cover the cost of 4LATER (Reg. TM) since the previous deduction.
i4LIFE (Reg. TM) Advantage Charge (for Non-Qualified Contracts or IRAs only).
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: 1.302% for the i4LIFE (Reg. TM) Advantage Account Value Death
Benefit; and 1.652% for the i4LIFE (Reg. TM) Advantage EGMDB. During the
Lifetime Income Period, the charge for all Death Benefit options is
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1.65%. 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 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 (for
Non-Qualified Contracts or IRAs only). 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 (0.50% for versions 1,
2 and 3) (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: 1.952% (1.802% for version 1, 2, and 3) for the i4LIFE (Reg.
TM) Advantage Account Value Death Benefit; and 2.302% (2.152% for version 1, 2
and 3) 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: 2.152% for the i4LIFE (Reg.
TM) Advantage Account Value death benefit; and 2.502% for the i4LIFE (Reg. TM)
Advantage EGMDB. These charges replace the Separate Account Annual Expenses for
the base contract.
The Guaranteed Income Benefit percentage charge will not change until there is
an automatic step up of the Guaranteed Income Benefit (version 4) or you elect
an additional step-up period (version 2 and version 3) 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% (version 4) or 1.50% (version 2 and version 3) of the Account Value. If
we automatically administer the step-up (version 4) or step-up period election
(versions 2 or 3) for you and your percentage charge is increased, you may ask
us to reverse the step-up or the step-up period election by giving us notice
within 30 days after the date on which the step-up or the step-up period
election 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 or the step-up period election
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 2 and version 3, you will have no more step-ups unless you notify us
that you wish to start a new step-up period (described in the i4LIFE (Reg. TM)
Advantage section of this prospectus). 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. Version
1 does not step-up; therefore the charge does not change.
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
.. 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 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
, 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
the Account Value. Refer to Lincoln Lifetime IncomeSM Advantage 2.0 for a
description of the Income Base. The total annual Subaccount charges of 1.302%
for the EGMDB and 1.002% for the Account Value Death Benefit also apply.
Purchasers of Lincoln Lifetime IncomeSM Advantage 2.0 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 .
The charge for i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit
(version 4) for purchasers of Lincoln Lifetime IncomeSM Advantage 2.0 will not
change until there is an automatic step-up of the Guaranteed Income Benefit
(described later in the i4LIFE (Reg. TM) Advantage
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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 current charge rate. (The Lincoln Lifetime
IncomeSM Advantage 2.0 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 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 65 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)....................................................... $ 5,066
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.
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 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.
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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.
i4LIFE (Reg. TM) Advantage with 4LATER (Reg. TM) Guaranteed Income Benefit
Charge for purchasers who previously purchased 4LATER (Reg. TM) Advantage (for
Non-Qualified Contracts or IRAs only). The 4LATER (Reg. TM) Guaranteed Income
Benefit for purchasers who previously purchased 4LATER (Reg. TM) Advantage is
subject to a current annual charge of 0.65% 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: 1.952% for the i4LIFE
(Reg. TM) Account Value Death Benefit; and 2.302% for the EGMDB. (For riders
purchased before January 20, 2009, the current annual percentage charge is
0.50%, but will increase to 0.65% upon the next election to reset the Income
Base.) These charges apply only during the i4LIFE (Reg. TM) Advantage payout
phase.
On and after the Periodic Income Commencement Date, the 4LATER (Reg. TM)
Guaranteed Income Benefit charge will be added to the i4LIFE (Reg. TM) charge
as a daily percentage of average Account Value. This is a change to the
calculation of the 4LATER (Reg. TM) charge because after the Periodic Income
Commencement Date, when the 4LATER (Reg. TM) Guaranteed Income Benefit is
established, the Income Base is no longer applicable. The percentage 4LATER
(Reg. TM) charge is the same immediately before and after the Periodic Income
Commencement Date; however, the charge is multiplied by the Income Base (on a
quarterly basis) prior to the Periodic Income Commencement Date and then
multiplied by the average daily Account Value after the Periodic Income
Commencement Date.
After the Periodic Income Commencement Date, the 4LATER (Reg. TM) Guaranteed
Income Benefit percentage charge will not change unless the Contractowner
elects additional 15-year step-up periods during which the 4LATER (Reg. TM)
Guaranteed Income Benefit (described later) is stepped-up to 75% of the current
Regular Income Payment. At the time you elect a new 15-year step-up period, the
4LATER (Reg. TM) 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 1.50% of Account Value.
After the Periodic Income Commencement Date, if the 4LATER (Reg. TM) Guaranteed
Income Benefit is terminated, the 4LATER (Reg. TM) Guaranteed Income Benefit
annual charge will also terminate but the i4LIFE (Reg. TM) Advantage charge
will continue.
Guaranteed Income Benefit Charge for Lincoln Lifetime IncomeSM Advantage
purchasers (for Non-Qualified Contracts or IRAs only). For purchasers of
Lincoln Lifetime IncomeSM Advantage who terminate their rider and purchase
i4LIFE (Reg. TM) Advantage with the Guaranteed Income Benefit (version 2 or 3
as stated in your rider), the Guaranteed Income Benefit which is purchased with
i4LIFE (Reg. TM) Advantage is subject to a current annual charge of 0.50% 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: 1.802% for the i4LIFE (Reg. TM) Advantage Account Value Death Benefit;
and 2.152% for the i4LIFE (Reg. TM) Advantage EGMDB.
Purchasers of Lincoln Lifetime IncomeSM Advantage are guaranteed that in the
future the guaranteed maximum charge for the Guaranteed Income Benefit will be
the guaranteed maximum charge then in effect at the time that they purchase the
Lincoln Lifetime IncomeSM Advantage.
The Guaranteed Income Benefit percentage charge will not change unless you
elect an additional step-up period during which the Guaranteed Income Benefit
is stepped-up to 75% of the current Regular Income Payment (described later).
At the time you elect a new step-up period, the 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 1.50% of the Account
Value. If we automatically administer the step-up period election for you and
your percentage charge is increased, you may ask us to reverse the step-up
period election by giving us notice within 30 days after the date on which the
step-up period election 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 period election occurred. You will have no more step-
ups unless you notify us that you wish to start a new step-up period (described
later in the i4LIFE (Reg. TM) Advantage section of this prospectus).
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 Charges (for Qualified Contracts). The annual rate
of the i4LIFE (Reg. TM) Advantage charge is currently 0.48% of the Account
Value. During the Access Period, an amount equal to the monthly i4LIFE (Reg.
TM) Advantage percentage charge multiplied by the Account Value will be
deducted from the Subaccounts on a monthly basis at a rate of 0.04%. The amount
we deduct will increase or decrease as the Account Value increases or
decreases, because the charge is based on the Account Value. The i4LIFE (Reg.
TM) Advantage rider charge is in addition to the mortality and expense risk
charge without the EGMDB of 1.002% and other charges applicable to your
contract as set forth in the Expense Table. During the Lifetime Income Period,
the i4LIFE (Reg. TM) Advantage charge will be computed daily based on the net
asset value in the Subaccounts and added to the mortality and expense risk
charge for a total charge of 1.482%. If you purchase i4LIFE (Reg. TM) Advantage
in the future, the annual percentage charge and maximum annual percentage
charge will be the charges in effect at the time you elect i4LIFE (Reg. TM)
Advantage.
Each time you elect to begin a new 15-year step-up period, the i4LIFE (Reg. TM)
Advantage charge will be the current charge in effect at the time up to the
maximum i4LIFE (Reg. TM) Advantage charge of 1.50%. If you do not elect a new
15-year step-up period, your charge will not change.
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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 mortality and expense risk charge of 1.002% of the contract value 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
serices 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. Among these deductions and expenses are 12b-1 fees which reimburse us or
an affiliate for certain expenses incurred in connection with certain
administrative and distribution support services provided to the funds.
Charges for Lincoln SmartIncomeSM Inflation (for Non-Qualified Contracts or
IRAs only). 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)*
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.
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.
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. While attempting to finish an incomplete application, we may
hold the initial Purchase Payment for no more than five business days. If the
incomplete application cannot be completed within those five days, you will be
informed of the reasons, and the Purchase Payment will be returned immediately
(unless you have authorized us to keep it until the application is complete).
Current applicants will be notified if we implement this procedure. Once the
application is complete, we will allocate your initial Purchase Payment must be
priced within two business days.
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Who Can Invest
To apply for a contract, you must be of legal age in a state where the contract
may be lawfully sold and also be eligible to participate in the type of
contract for which you're applying. 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, 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.
For a periodic premium deferred contract (MF 1), the annuitant must be under
age 75. For a non-recurring lump sum payment to a periodic premium deferred
contract, the annuitant must be under age 85.
For a flexible premium (MF 2, 3, 4) deferred contract or a single premium
deferred contract, the annuitant must be under age 85.
Do not purchase this contract if you plan to use it, or any of its riders, for
speculation, arbitrage, viatical arrangement, or other collective investment
scheme. The contract may not be 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 carefully consider the cost 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
This prospectus offers three types of contracts. They are single premium
deferred annuity, a flexible premium deferred annuity and a periodic premium
deferred annuity.
The minimum Purchase Payment requirement for each contract will not exceed:
1. Single premium deferred contract: $1,000 for Roth IRAs, Traditional IRAs and
SEPs; $3,000 for all others.
2. Flexible premium deferred contract (Multi-Fund (Reg. TM) 2,3,4): $1,000 for
Roth IRAs, Traditional IRAs and SEPs; $3,000 for all others (minimum $100
subsequent Purchase Payment); and
3. Periodic premium deferred contract (Multi-Fund (Reg. TM) 1): $600 per
contract year (minimum $25 per Purchase Payment).
Purchase Payments in total may not equal or exceed $1 million without Lincoln
Life approval. 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
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.
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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.
You choose whether your Contract Value accumulates on a variable or a fixed
(guaranteed) basis or both. If you put all your Purchase Payments into the
fixed account, we guarantee your principal and a minimum interest rate. We
limit withdrawals and transfers from the fixed side of the contract. See Fixed
Side of the Contract.
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 are placed into the VAA's subaccounts, each of which invests
in shares of its corresponding fund, according to your instructions.
The minimum amount of any purchase payment which can be put into any one
subaccount is $20 under MF1 periodic premium deferred contracts, $1,000 under
single premium deferred contracts and $100 under flexible premium deferred
contracts.
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 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 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. Contracts with different features have
different daily charges, and therefore, will have different corresponding
accumulation unit values on any given day.
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.
In certain circumstances, 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.
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Loans
If you participate in a tax deferred retirement plan that allows participant
loans, you may be eligible to take a loan against your contract value.
If you desire to apply for a loan, contact us for information on your plan's
loan provisions and we will provide you with a loan brochure and the required
Contract Loan Request form. A loan set-up fee will be charged where allowed by
law. The loan brochure will disclose the amount of the loan set-up fee.
Transfers On or Before the Annuity Commencement Date
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.
For single premium deferred contracts, periodic premium Multi-Fund (Reg. TM) 1
contracts and flexible premium Multi-Fund (Reg. TM) 2 and 3 contracts,
transfers within the VAA and between the variable and fixed account are
restricted to once every 30 days. Transfers cannot be made during the first 30
days after the contract date for flexible premium Multi-Fund (Reg. TM) 4 and no
more than six transfers will be allowed in any Contract Year. We reserve the
right to waive any of these restrictions. The minimum amount which may be
transferred between subaccounts is $500 or the entire amount in the subaccount,
if less than $500. If the transfer from a subaccount would leave you with less
than $100 for periodic premium Multi-Fund (Reg. TM) 1, flexible premium
Multi-Fund (Reg. TM) 2 and 3 contracts for $500 for flexible premium Multi-Fund
(Reg. TM) 4 contracts, we may transfer the total balance of the subaccount. We
have the right to reduce these minimum amounts.
A transfer request may be made to us using written, telephone, fax, or
electronic instructions, if the appropriate authorization is on file with us.
Our address, telephone number, and internet address are on the first page of
this prospectus. 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 requests will be
recorded and written confirmation of all transfer requests 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 or 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 transfer request by writing
to our Home Office.
Requests for transfers will be processed on the valuation date that they are
received in good order in our customer service center before the end of the
valuation date (normally 4:00 p.m. New York time). If we receive a transfer
request received 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.
When thinking about a transfer of contract value, you should consider the
inherent risk involved. Frequent transfers based on short-term expectations may
increase the risk that a transfer will be made at an inopportune time.
For transfers from the fixed account of the contract to the variable account,
the sum of the percentages of fixed value transferred will be limited to 25% in
any 12 month period. We reserve the right to waive any of these restrictions.
There is no charge to you for a transfer. However, we reserve the right to
impose a charge of $10 per transfer in the future for any transfers above the
maximum transfers allowed in a contract year.
Transfers may be delayed as permitted by the 1940 Act. See Delay of Payments.
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,
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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 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
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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
If you select i4LIFE (Reg. TM) Advantage your transfer rights and restrictions
for the variable Subaccounts and the fixed account are the same as they were on
or before the Annuity Commencement Date.
If you do not select i4LIFE (Reg. TM) Advantage, 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.
Ownership
Contractowners 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. Qualified contracts may not be assigned or transferred except as
permitted by applicable law and upon written notification to us. Variable Not
Found
Joint/Contingent Ownership
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. Only spouses may be a joint owner on Multi-Fund (Reg.
TM) 4, flexible premium deferred annuity contracts except where not permitted
by law.
A contingent owner may exercise ownership rights in this contract only after
the contractowner dies.
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),
subject to the rules below. A surrender/withdrawal after the Annuity
Commencement Date depends upon the annuity option selected. See Annuity Payouts
- Annuity Options.
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. Unless a request
for withdrawal specifies otherwise, withdrawals will be made from all
Subaccounts within the VAA and from the general account in the same proportion
that the amount of withdrawal bears to the total Contract Value. The minimum
amount which can be withdrawn is $100. Where permitted by contract,
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.
There are charges associated with surrender of a contract or withdrawal of
Contract Value. You may specify that the charges be deducted from the amount
you request withdrawn or from the remaining Contract Value. If the charges are
deducted from the remaining Contract Value, the amount of the total withdrawal
will increase according to the impact of the applicable surrender charge
percentage; consequently, the amount of the charge associated with the
withdrawal will also increase. In other words, the amount deducted to cover the
surrender charge is also subject to a surrender charge. See Charges and Other
Deductions.
As of January 17, 2012, we will no longer offer SecureLine (Reg. TM) for
withdrawals or surrenders. SecureLine (Reg. TM) is an interest bearing account
established from the proceeds payable on a policy or contract administered by
us. We will, however, continue to offer SecureLine (Reg. TM) for Death Benefit
proceeds. Please see the General Death Benefit Information section in this
prospectus for more information about SecureLine (Reg. TM).
The tax consequences of a surrender/withdrawal are discussed later in this
booklet. See Federal Tax Matters.
Special restrictions on surrenders/withdrawals apply if your contract is
purchased as part of a retirement plan of a public school system or Section
501(c)(3) organization under Section 403(b) of the tax code. Beginning January
1, 1989, in order for a contract to retain its tax-qualified status, Section
403(b) prohibits a withdrawal from a Section 403(b) contract of post-1988
contributions (and earnings on those contributions) pursuant to a salary
reduction agreement. However, this restriction does not apply if the annuitant:
a. attains age 59 1/2
b. separates from service
c. dies
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d. becomes totally and permanently disabled and/or
e. experiences financial hardship (in which event the income attributable to
those contributions may not be withdrawn).
Pre-1989 contributions and earnings through December 31, 1988, are not subject
to the previously stated restriction. Funds transferred to the contract from a
403(b)(7) custodial account will also be subject to restrictions. Participants
in the Texas Optional Retirement Program should refer to the Restrictions Under
the Texas Optional Retirement Program, later in this prospectus.
Additional Services
These are the additional services available to you under your contract:
dollar-cost averaging (DCA), portfolio rebalancing, automatic withdrawal
service (AWS), cross-reinvestment/earnings sweep. 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
or certain variable subaccounts into the variable subaccounts on a monthly
basis. Currently, there is no charge for this service. However, we reserve the
right to impose one. 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.
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.
The cross-reinvestment/earnings sweep service allows you to automatically
transfer the account value in a designated variable subaccount that exceeds a
baseline amount to another specific variable subaccount at specific intervals.
Only one of the three additional services (DCA, portfolio rebalancing and cross
reinvestment) may be used at one time. In other words, you cannot have DCA and
cross reinvestment running simultaneously.
Death Benefit Before the Annuity Commencement Date
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. 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 the life of the Annuitant and change the
Beneficiary by filing a written request with the 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.
The Contract Value available upon death is the value of the contract at the end
of the Valuation Period during which the death claim is approved by payment by
Lincoln Life. The approval of the death claim payment will occur after receipt
of all of the following:
o proof, satisfactory to us, of the death of the Annuitant;
o written authorization for payment; and our receipt of all required claim
forms fully completed.
Flexible premium deferred contracts (Multi-Fund (Reg. TM) 2,3,4) and Single
premium deferred contracts
If the Annuitant dies before the Annuity Commencement Date and the enhanced
guaranteed minimum Death Benefit (EGMDB) is not in effect, a Death Benefit
equal to the Contract Value will be paid to your designated Beneficiary.
Prior to the Annuity Commencement Date, an optional EGMDB is available for
nonqualified, Roth IRA and IRA flexible premium deferred annuity contracts, for
Annuitants up to age 75. Please check with your financial adviser for
availability to current Contractowners.
If the Annuitant dies before the Annuity Commencement Date and the EGMDB is in
effect, the Death Benefit paid to your designated Beneficiary will be the
greater of:
1. The Contract Value at the end of the Valuation Period when the death
claim is approved for payment by Lincoln Life, or
2. The highest of:
a. the Contract Value at the end of the Valuation Period when the EGMDB
becomes effective and;
b. the sum of all Purchase Payments less the sum of all withdrawals,
partial annuitization and premium taxes incurred, if any; and
c. the highest Contract Value, at the end of the Valuation Period, on any
contract anniversary date up to and including age 75 following election of
the EGMDB; increased by Purchase Payments and decreased by any withdrawals,
annuitizations and premium taxes incurred after the EGMDB effective date or
the contract anniversary on which the highest Contract Value occurred.
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The EGMDB is not available under contracts issued to a Contractowner, joint
owner or Annuitant who is age 75 or older at the time of issuance.
If you add the EGMDB after purchase, the benefit will take effect as of the
Valuation Date following our receipt of the election request, and we will begin
deducting the charge for the benefit as of that date. When calculating the
Death Benefit under the EGMDB, the highest Contract Value on the effective date
when the benefit is added to the contract or any contract anniversary after the
effective date will be used.
The EGMDB will take effect on the Valuation Date when the EGMDB election form
is approved at our Home Office, if before 4:00 p.m. New York time. If after
4:00 p.m. New York time, the EGMDB election or termination will be effective
with the next Valuation Date. The owner may not reelect the EGMDB once it is
discontinued. As of the Annuity Commencement Date the EGMDB will be
discontinued and the charge for the EGMDB will stop. See Charges and Other
Deductions-Deduction for the EGMDB.
Periodic premium deferred contracts (Multi-Fund (Reg. TM) 1)
If the annuitant dies before the annuity commencement date, Lincoln Life will
pay the beneficiary a death benefit equal to the greater of the following
amounts:
1. The net purchase payments, or
2. The value of the contract less any outstanding loan balance.
Net purchase payments will mean the sum of all purchase payments credited to
the contract less any amounts paid when a withdrawal occurs and less any
outstanding loan balance.
If your state has not approved this death benefit provision, the applicable
death benefit will be equal to the contract value.
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 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 1940 Act.
Annuity payouts will be made in accordance with applicable laws and regulations
governing payment of death benefits. Notwithstanding any provision to the
contrary, the payment of death benefits provided under the 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 are taxable. See - Federal Tax Matters - Taxation of Death Benefits.
Unless otherwise provided in the beneficiary designation, one of the following
procedures will take place upon the death of a beneficiary:
1. If any beneficiary dies before the annuitant, the contractowner may
elect a new beneficiary. If no new beneficiary election is made, that
beneficiary's interest will go to any other beneficiaries named, according
to their respective interest. There are no restrictions on the
beneficiary's use of the proceeds; and/or
2. If no beneficiary survives the annuitant, the proceeds will be paid to
the contractowner or to his/her estate, as applicable.
Death of Contractowner
If the contractowner of a nonqualified contract dies before the annuity
commencement date, then, in compliance with the tax code, the cash surrender
value (contract value less any applicable charges, fees, and taxes) of the
contract will be paid as follows:
1. Upon the death of a non-annuitant contractowner, the proceeds shall be
paid to any surviving joint or contingent owner(s). If no joint or
contingent owner has been named, then the cash surrender value shall be
paid to the annuitant named in the contract; and
2. Upon the death of a contractowner, who is also annuitant, the death will
be treated as death of the annuitant and the provisions of this contract
regarding death of annuitant will control. If the recipient of the
proceeds is the surviving spouse of the contractowner, the contract may be
continued in the name of that spouse as the new contractowner or as a
contract for the benefit of the surviving spouse. 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.
If you are a non-spouse beneficiary, the tax code requires that any
distribution to be paid within five years of the death of the contractowner
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
period certain not exceeding the beneficiary's life expectancy.
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
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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 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 purchase a Living Benefit rider (Lincoln Lifetime IncomeSM Advantage
2.0, Lincoln Lifetime IncomeSM Advantage, 4LATER (Reg. TM) Advantage, Lincoln
SmartSecuritySM 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. 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. The Living Benefit rider you purchase and the date of purchase will
determine which Investment Requirements Option will apply to your contract. See
Option 1, Option 2, and Option 3 below. 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.
Under each option, 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 (or when the rider
Investment Requirements are enforced, if later). 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.
The chart below is provided to help you determine which option of Investment
Requirements, if any, applies to the Living Benefit rider you purchase. If you
do not elect a Living Benefit rider, the Investment Requirements will not apply
to your contract. Different Investment Requirements may apply if you drop one
rider and elect another rider.
IF YOU ELECT... AND THE DATE OF ELECTION IS...
Lincoln Lifetime IncomeSM Advantage 2.0 On or After November 15, 2010
Lincoln Lifetime IncomeSM Advantage Between February 19, 2008 and January 20, 2009
On or after January 20, 2009
Lincoln SmartSecurity (Reg. TM) Advantage Prior to April 10, 2006
April 10, 2006 through January 19, 2009
On or after January 20, 2009
4LATER (Reg. TM) Advantage April 10, 2006 through January 19, 2009
On or after January 20, 2009
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit Prior to April 10, 2006
(v.1) (for Non-Qualified Contracts or IRAs only) On or after April 10, 2006
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit April 10, 2006 through January 19, 2009
(v.2) (for Non-Qualified Contracts or IRAs only) On or after January 20, 2009
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit Between October 6, 2008 and January 20, 2009
(v.3) (for Non-Qualified Contracts or IRAs only) On or after January 20, 2009
YOU WILL BE SUBJECT TO
IF YOU ELECT... INVESTMENT REQUIREMENTS
Lincoln Lifetime IncomeSM Advantage 2.0 Option 3
Lincoln Lifetime IncomeSM Advantage Option 2
Option 3
Lincoln SmartSecurity (Reg. TM) Advantage N/A
Option 1
Option 3
4LATER (Reg. TM) Advantage Option 1
Option 3
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit N/A
(v.1) (for Non-Qualified Contracts or IRAs only) Option 1
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit Option 1
(v.2) (for Non-Qualified Contracts or IRAs only) Option 3
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit Option 2
(v.3) (for Non-Qualified Contracts or IRAs only) Option 3
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YOU WILL BE SUBJECT TO
IF YOU ELECT... AND THE DATE OF ELECTION IS... INVESTMENT REQUIREMENTS
i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit On or after November 15, 2010 Option 3
(v.4) (for Non-Qualified Contracts or IRAs only)
i4LIFE (Reg. TM) Advantage (Qualified Contracts only) After May 4, 2007 Option 1
Investment Requirements - Option 1
No more than 35% of your Contract Value (includes Account Value if i4LIFE (Reg.
TM) Advantage is in effect) can be invested in the following Subaccounts
("Limited Subaccounts") (Note: not all Subaccounts are available with all
contracts):
o AllianceBernstein VPS Global Thematic Growth Portfolio
o American Funds Global Growth Fund
o American Funds International Fund
o Delaware VIP High Yield Series
o Delaware VIP REIT Series
o Delaware VIP Small Cap Value Series
o Delaware VIP Smid Cap Growth Series
o DWS Small Cap Index VIP
o LVIP Cohen & Steers Global Real Estate Fund
o LVIP Delaware Foundation Aggressive Allocation Fund
o LVIP Delaware Special Opportunities Fund o LVIP Mondrian International Value
Fund
o LVIP SSgA Emerging Markets 100 Fund
o LVIP SSgA Global Tactical Allocation
o LVIP SSgA International Index Fund
o LVIP SSgA Small-Cap Index Fund
o LVIP T. Rowe Price Structured Mid-Cap Growth Fund
o LVIP Vanguard Domestic Equity Fund
o LVIP Protected Profile 2040 Fund
o LVIP Protected Profile 2050 Fund
o MFS VIT Utilities Series
o Neuberger Berman AMT Mid-Cap Growth Portfolio
All other variable Subaccounts will be referred to as "Non-Limited Subaccounts"
except the DWS Alternative Asset Allocation VIP Portfolio, which is unavailable
to any contract holder with a Living Benefit rider.
You can select the percentages of Contract Value, if any, allocated to the
Limited Subaccounts, but the cumulative total investment in all the Limited
Subaccounts cannot exceed 35% of the total Contract Value. On each quarterly
anniversary of the effective date of any of these benefits, if the Contract
Value in the Limited Subaccounts exceeds 35%, Lincoln will rebalance your
contract value so that the Contract Value in the Limited Subaccounts is 30%. If
you are enrolled in portfolio rebalancing, the cumulative total investment in
all the Limited Subaccounts cannot exceed 35% of total Contract Value. If your
current portfolio rebalancing does not adhere to this requirement, your
portfolio rebalancing program will be terminated.
If rebalancing is required, the Contract Value in excess of 30% will be removed
from the Limited Subaccounts on a pro rata basis and invested in the remaining
Non-Limited Subaccounts on a pro rata basis according to the Contract Value
percentages in the Non-Limited Subaccounts at the time of the reallocation. If
there is no Contract Value in the Non-Limited Subaccounts at that time, all
Contract Value removed from the Limited Subaccounts will be placed in the LVIP
Money Market Fund Subaccount. We reserve the right to designate a different
investment option other than the LVIP Money Market Fund as the default
investment option should there be no Contract Value in the Non-Limited
Subaccounts. We will provide you with notice of such change. Confirmation of
the rebalancing will appear on your quarterly statement and you will not
receive an individual confirmation after each reallocation.
We may move Subaccounts on or off the Limited Subaccount list, exclude
Subaccounts from being available for investment, change the number of Limited
Subaccount groups, change the percentages of Contract Value allowed in the
Limited Subaccounts or change the frequency of the Contract Value rebalancing,
at any time, in our sole discretion. We will not make changes more than once
per calendar year. 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 or when you are notified that we
will begin enforcing 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;
2. submit your own reallocation instructions for the Contract Value in excess
of 35% in the Limited Subaccounts; or
3. take no action and be subject to the quarterly rebalancing as described
above.
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Investment Requirements - Option 2
You can select the percentages of contract value (includes Account Value if
i4LIFE (Reg. TM) Advantage is in effect) to allocate to individual Subaccounts
within each group, but the total investment for all Subaccounts in a 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. We reserve the right to change the rebalancing frequency, at any
time, in our sole discretion. We will not make changes more than once per
calendar year. You will be notified at least 30 days prior to the date of any
change in frequency. 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 LVIP Money
Market Fund 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
or change the investment options that are or are not available to you, at any
time, in our sole discretion. We will not make changes more than once per
calendar year. 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 the new terms of the Investment
Requirements;
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. if you take no action, such changes will apply only to additional Purchase
Payments or to future transfers of Contract Value. You will not be required to
change allocations to existing Subaccounts, but you will not be allowed to add
money, by either an additional Purchase Payment or a contract transfer, in
excess of the new percentage applicable to a Subaccount or Subaccount group.
This does not apply to Subaccounts added to Investment Requirements on or after
June 30, 2009.
4. for Subaccounts added to Investment Requirements on or after June 30, 2009,
you may be subject to 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
Group 1 Investments cannot exceed 75% of Contract Value or
Investments must be at least 25% of Contract Value or Account Value Account Value -------------------------------------
--------------------------------------------------------------------- --------------
1. American Century VP Inflation Protection Fund All other investment options except as discussed below.
2. Delaware VIP High Yield Series
3. LVIP Delaware Bond Fund
4. Delaware VIP Diversified Income Series
5. LVIP BlackRock Inflation Protected Bond Fund
6. LVIP SSgA Bond Index Fund
7. LVIP Global Income Fund
8. LVIP Delaware Diversified Floating Rate Fund
9. PIMCO VIT Total Return Portfolio
Group 3
Investments cannot exceed 10% of Contract Value or Account Value
------------------------------------------------------------------
1. LVIP SSgA Emerging Markets 100 Fund
2. DWS Alternative Asset Allocation VIP Portfolio
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To satisfy the Investment Requirements, you may allocate 100% of your Contract
Value or i4LIFE (Reg. TM) Advantage Account Value to or among the funds listed
below. If you allocate less than 100% of Contract 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 will fall
into Group 2 and will be subject to Group 2 restrictions. These funds will be
considered as part of Group 1 or 2 above, as applicable, and you will be
subject to the Group 1 or 2 restrictions. The fixed account is only available
for dollar cost averaging.
o American Century VP Inflation Protection*
o BlackRock Global Allocation VI Fund
o Delaware VIP (Reg. TM) Diversified Income Series*
o Delaware VIP (Reg. TM) High Yield Series *
o LVIP BlackRock Inflation Protected Bond Fund*
o LVIP Delaware Bond Fund*
o LVIP Delaware Foundation Conservative Allocation Fund
o LVIP Delaware Foundation Moderate Allocation Fund
o LVIP Global Bond Fund*
o LVIP SSgA Bond Index Fund*
o LVIP Protected Profile 2010 Fund
o LVIP Protected Profile 2020 Fund
o LVIP Protected Profile 2030 Fund
o LVIP Protected Profile 2040 Fund
o LVIP Protected Profile Conservative Fund
o LVIP Protected Profile Moderate Fund
o LVIP Protected Profile Growth Fund
As discussed in the Lincoln Lifetime IncomeSM Advantage Plus section, if you
purchased the Lincoln Lifetime IncomeSM Advantage Plus rider before January 20,
2009, your only investment options until the seventh Benefit Year anniversary
are to allocate 100% of your Contract Value to the LVIP Protected Profile
Moderate Fund, the LVIP Protected Profile Conservative Fund or the LVIP
Delaware Foundation Conservative Allocation Fund.
Investment Requirements - Option 3
You can select the percentages of Contract Value (includes Account Value if
i4LIFE (Reg. TM) Advantage 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 LVIP Money Market
Fund 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
or change the investment options that are or are not available to you, 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 or when you are notified that we
will begin enforcing 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
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 become your new allocation instructions until you tell us otherwise.
At this time, the Subaccount groups are as follows:
Group 2
Group 1 Investments cannot exceed 70% of Contract Value or
Investments must be at least 30% of Contract Value or Account Value Account Value -------------------------------------
--------------------------------------------------------------------- --------------
1. American Century VP Inflation Protection Fund All other funds except as described below.
2. LVIP Delaware Bond Fund
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<PAGE>
Group 2
Group 1 Investments cannot exceed 70% of Contract Value or
Investments must be at least 30% of Contract Value or Account Value Account Value -------------------------------------
--------------------------------------------------------------------- --------------
3. Delaware VIP Diversified Income Series
4. LVIP BlackRock Inflation Protected Bond Fund
5. LVIP SSgA Bond Index Fund
6. LVIP Global Income Fund
7. LVIP Delaware Diversified Floating Rate Fund
8. PIMCO VIT Total Return Portfolio
Group 3
Investments cannot exceed 10% of Contract Value or Account Value
------------------------------------------------------------------
1. LVIP SSgA Emerging Markets 100 Fund
2. Delaware VIP REIT Series
3. LVIP Cohen & Steers Global Real Estate Fund
4. MFS VIT Utilities Series
5. AllianceBernstein VPS Global Thematic Growth Portfolio
6. DWS Alternative Asset Allocation VIP Portfolio
To satisfy these Investment Requirements, you may allocate 100% of your
Contract Value or i4LIFE (Reg. TM) Advantage Account Value among the funds on
the following list; however, if you allocate less than 100% of Contract Value
to or among these funds, then the funds listed below that are in Group 1 will
be subject to Group 1 restrictions. *Any remaining funds listed below will fall
into Group 2 and will be subject to Group 2 restrictions. The fixed accounts
are not available with these riders.
o American Century VP Inflation Protection*
o BlackRock Global Allocation VI Fund
o Delaware VIP (Reg. TM) Diversified Income Series *
o LVIP BlackRock Inflation Protected Bond Fund*
o LVIP Delaware Bond Fund*
o LVIP Delaware Foundation Conservative Allocation Fund
o LVIP Delaware Foundation Moderate Allocation Fund
o LVIP Global Income Fund*
o LVIP SSgA Bond Index Fund*
o LVIP Protected Profile 2010 Fund
o LVIP Protected Profile 2020 Fund
o LVIP Protected Profile Conservative Fund
o LVIP Protected Profile Moderate Fund
o LVIP Protected Profile Growth Fund
If you purchased the Lincoln Lifetime IncomeSM Advantage Plus rider on or after
January 20, 2009, your only investment options until the seventh Benefit Year
anniversary are to allocate 100% of your Contract Value to the LVIP Delaware
Foundation (Reg. TM) Conservative Allocation Fund and the LVIP Protected
Profile Conservative 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, Lincoln Lifetime
IncomeSM Advantage, and Lincoln SmartSecurity (Reg. TM) Advantage) or a minimum
Annuity Payout (i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit and
4LATER (Reg. TM) Advantage). 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).
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. i4LIFE (Reg. TM) Advantage is the only Living
Benefit rider currently available to owners of qualified contracts.
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 (for Non-Qualified Contracts or IRAs
only)
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);
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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).
The Lincoln Lifetime IncomeSM Advantage 2.0 rider is no longer available for
purchase on or after April 2, 2012.
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 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. Surrender charges are waived on cumulative
withdrawals less than or equal to the Guaranteed Annual Income amount. 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 no longer 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 or Lincoln SmartIncomeSM Inflation, both
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 Lifetime IncomeSM Advantage or Lincoln Lifetime IncomeSM Advantage
Plus, Lincoln SmartSecurity (Reg. TM) Advantage, 4LATER (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.
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<PAGE>
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 - Option 3.
In addition, the fixed account is not available except for use with dollar cost
averaging. See Investment Requirements for more information ..
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 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 - Lincoln Lifetime IncomeSM Advantage,
4LATER (Reg. TM) Advantage 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 $100,000the charge for Lincoln Lifetime IncomeSM
Advantage 2.0 will change to the then current charge in effect on the next
Benefit Year anniversary. If we grant approval to exceed the $100,000
additional Purchase Payment restriction, the charge 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
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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.
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 surrender charges, the rider charge and
account fee), plus any Purchase Payments made on that date and Persistency
Credits, if any, added 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):
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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.
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 60 (single life option), your Guaranteed Annual
Income percentage is 4%. If you waited until you were age 70 (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.
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Guaranteed Annual Income Percentages by Ages:
Guaranteed Annual Age (Joint Life Guaranteed Annual
Income amount percentage Option - younger of Income amount percentage
Age (Single Life Option) (Single Life Option) you and your spouse's age) (Joint Life Option)
--------------------------------- -------------------------- ---------------------------- -------------------------
At Least 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. Surrender charges are waived on cumulative withdrawals less than or
equal to the Guaranteed Annual Income amount.
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 60 (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:
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 60................................... $ 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 60 (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 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. 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
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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.
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 60 (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:
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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.
Surrender charges are waived on cumulative withdrawals less than or equal to
the Guaranteed Annual Income amount. Excess Withdrawals will be subject to
surrender charges unless one of the waivers of surrender charge provisions set
forth in this prospectus is applicable. Continuing with the prior example of
the $12,000 withdrawal: the $3,400 Guaranteed Annual Income amount is not
subject to surrender charges; the $8,600 Excess Withdrawal may be subject to
surrender charges according to the surrender charge schedule in this
prospectus. See Charges and Other Deductions - Surrender Charge.
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 and will not be subject to surrender charges. 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.
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. 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.
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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.
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 the 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 the 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, the 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 the 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,
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which is age 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 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 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.
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 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.
You should consider that not all i4LIFE (Reg. TM) Advantage death benefit
options will be available to you. Refer to the Expense Table: i4LIFE (Reg. TM)
Advantage with Guaranteed Income Benefit (version 4) for purchasers who
previously purchased Lincoln Lifetime IncomeSM Advantage 2.0 for available
death benefit options.
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
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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 Lifetime IncomeSM Advantage (for Non-Qualified Contracts or IRAs only)
The Lincoln Lifetime IncomeSM Advantage is a Rider that is available for
purchase with your variable annuity contract if the Purchase Payment or
Contract Value (if purchased after the contract is issued) is at least $25,000.
Lincoln Lifetime IncomeSM Advantage is available for purchase with
non-qualified contracts and IRAs only. This rider provides minimum, 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 or primary Beneficiary (joint life option) regardless of the
investment performance of the contract, provided that certain conditions are
met. A minimum guaranteed amount (Guaranteed Amount) is used to calculate the
periodic withdrawals from your contract, but is not available as a separate
benefit upon death or surrender. The Guaranteed Amount is equal to the initial
Purchase Payment (or Contract Value if elected after contract issue) increased
by subsequent purchase payments, Automatic Annual Step-ups, 5% Enhancements and
the Step-up to 200% (if applicable to your contract) of the initial Guaranteed
Amount and decreased by 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. The Lincoln Lifetime IncomeSM Advantage and Lincoln
Lifetime IncomeSM Advantage Plus riders will no longer be available for
purchase after December 31, 2010 or 60 days from the date that Lincoln Lifetime
IncomeSM Advantage 2.0 is approved in your state, whichever date is later.
This rider provides annual withdrawals of 5% of the initial Guaranteed Amount
called Maximum Annual Withdrawal amounts. With the single life option, you may
receive Maximum Annual Withdrawal amounts for your lifetime. If you purchase
the joint life option, Maximum Annual Withdrawal amounts for the lifetimes of
you and your spouse will be available. Withdrawals in excess of the Maximum
Annual Withdrawal amount and any withdrawals prior to age 591/2 (for the single
life option) or age 65 (for the joint life option) may significantly reduce
your Maximum Annual Withdrawal amount. Withdrawals will also negatively impact
the availability of the 5% Enhancement, the 200% Step-up (if applicable to your
contract) and the Lincoln Lifetime IncomeSM Advantage Plus. These options are
discussed below in detail.
An additional option, available for purchase with your Lincoln Lifetime
IncomeSM Advantage provides that on the seventh Benefit Year anniversary,
provided you have not made any withdrawals, you may choose to cancel your
Lincoln Lifetime IncomeSM Advantage rider and receive an increase in your
Contract Value of an amount equal to the excess of your initial Guaranteed
Amount (and Purchase Payments made within 90 days of rider election) over your
Contract Value. This option is called Lincoln Lifetime IncomeSM Advantage Plus
and is discussed in detail below. You may consider purchasing this option if
you want to guarantee at least a return of your initial Purchase Payment after
7 years. Lincoln Lifetime IncomeSM Advantage Plus must be purchased with the
Lincoln Lifetime IncomeSM Advantage.
By purchasing the Lincoln Lifetime IncomeSM Advantage Rider, you will be
limited in how you can invest in the Subaccounts in your contract. In addition,
the fixed account is not available except for use with dollar cost averaging.
See The Contracts - Investment Requirements - Option 3 if you purchased the
Lincoln Lifetime IncomeSM Advantage on or after January 20, 2009. See The
Contracts - Investment Requirements - Option 2 if you purchased Lincoln
Lifetime IncomeSM Advantage prior to January 20, 2009.
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. These
riders are fully discussed in this prospectus. 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 and
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these other riders is included later in this prospectus (see Lincoln Lifetime
IncomeSM Advantage - Compare to Lincoln SmartSecurity (Reg. TM) Advantage and
i4LIFE (Reg. TM) Advantage option). Not all riders will be available at all
times.
We have designed the rider to protect you from outliving your Contract Value.
If the rider terminates or you (or your spouse, if applicable) die before your
Contract Value is reduced to zero, neither you nor your estate will receive any
lifetime withdrawals from us under the rider. We limit your withdrawals to the
Maximum Annual Withdrawal amount and impose Investment Requirements in order to
minimize the risk that your Contract Value will be reduced to zero before your
(or your spouse's) death.
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. You may not
simultaneously elect Lincoln Lifetime IncomeSM Advantage with any other Living
Benefit rider.
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.
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 you elect the rider. If you elect the rider at the time
you purchase the contract, the initial Guaranteed Amount will equal your
initial Purchase Payment. If you elect the rider after we issue the contract,
the initial Guaranteed Amount will equal the Contract Value on the effective
date of the rider. The maximum Guaranteed Amount is $10,000,000. This maximum
takes into consideration the total Guaranteed Amounts from all Lincoln Life
contracts (or contracts issued by our affiliates) in which you (or spouse if
joint life option) are the covered lives under either the Lincoln Lifetime
IncomeSM Advantage or Lincoln SmartSecurity (Reg. TM) Advantage.
Additional Purchase Payments automatically increase the Guaranteed Amount by
the amount of the Purchase Payment (not to exceed the maximum Guaranteed
Amount); 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. If after the first Benefit Year cumulative
additional Purchase Payments equal or exceed $100,000, the charge for Lincoln
Lifetime IncomeSM Advantage will change to the then current charge in effect on
the next Benefit Year anniversary. The charge will never exceed the guaranteed
maximum annual charge. See Charges and Other Deductions - Lincoln Lifetime
IncomeSM Advantage Charge. Additional Purchase Payments will not be allowed if
the Contract Value decreases to zero for any reason including market loss.
The following example demonstrates the impact of additional Purchase Payments
on the Lincoln Lifetime IncomeSM Advantage charge:
Initial Purchase Payment................... $100,000
Additional Purchase Payment in Year 2...... $ 95,000 No change to charge
Additional Purchase Payment in Year 3...... $ 75,000 Charge will be the current charge
Additional Purchase Payment in Year 4...... $ 25,000 Charge will be the current charge
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, Automatic Annual
Step-ups, 5% Enhancements and the 200% Step-up are made, and the cost decreases
as withdrawals are made because these transactions all adjust the Guaranteed
Amount. In addition, the percentage charge may change when cumulative Purchase
Payments exceed $100,000 and also when Automatic Annual Step-ups occur as
discussed below. See Charges and Other Deductions - Lincoln Lifetime IncomeSM
Advantage Charge.
5% Enhancement to the Guaranteed Amount. On each Benefit Year anniversary, the
Guaranteed Amount, 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 and the rider is within the 10
year period described below. Additional Purchase Payments must be invested in
the contract at least one Benefit Year before the 5% Enhancement will be made
on the portion of the Guaranteed Amount equal to that Purchase Payment. Any
Purchase Payments made within the first 90 days after the effective date of the
rider will be included in the Guaranteed Amount for purposes of receiving the
5% Enhancement on the first Benefit Year anniversary.
Note: The 5% Enhancement is not available in any year there is a withdrawal
from Contract Value including a Maximum Annual Withdrawal Amount. A 5%
Enhancement will occur in subsequent years after a withdrawal 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
Guaranteed Amount:
Initial purchase payment = $100,000; Guaranteed Amount = $100,000
Additional purchase payment on day 30 = $15,000; Guaranteed Amount = $115,000
Additional purchase payment on day 95 = $10,000; Guaranteed Amount = $125,000
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On the first Benefit Year Anniversary, the Guaranteed Amount is $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 from the effective date of
the rider. The 5% Enhancement will cease upon the death of the contract
owner/annuitant or upon the death of the survivor of the Contractowner or
spouse (if Joint Life option is in effect) or when the oldest of these
individuals reaches age 86. A new 10-year 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 Guaranteed Amount, you will not receive the 5% Enhancement. The 5%
Enhancement cannot increase the Guaranteed Amount above the maximum Guaranteed
Amount of $10,000,000. For contracts purchased prior to January 20, 2009, the
5% Enhancement will be in effect for 15 years from the effective date of the
Rider, and a new 15-year period will begin following each Automatic Annual
Step-up.
Any withdrawal from the contract value limits the 5% Enhancement as follows:
a. The 5% Enhancement will not occur on any Benefit Year anniversary in
which there is a withdrawal, including a Maximum Annual Withdrawal amount,
from the contract during that Benefit Year. The 5% Enhancement will occur
on the following Benefit Year anniversary if no other withdrawals are made
from the contract and the Rider is within the 10-year period as long as
the contract owner/ annuitant (Single Life Option) is 591/2 or older or
the contractowner and spouse (Joint Life Option) are age 65 or older.
b. If the contractowner/annuitant (Single Life Option) is under age 591/2
or the contractowner or spouse (Joint Life Option) is under age 65, and a
withdrawal is made from the contract, the 5% Enhancement will not occur
again until an Automatic Annual Step-Up to the contract value (as
described below) occurs.
An example of the impact of a withdrawal on the 5% Enhancement is included in
the Withdrawals section below.
If your Guaranteed Amount is increased by the 5% Enhancement on the Benefit
Year anniversary, your percentage charge for the Rider will not change.
However, the amount you pay for the Rider will increase since the charge for
the Rider is based on the Guaranteed Amount. See Charges and Other Deductions -
Lincoln Lifetime IncomeSM Advantage Charge.
Automatic Annual Step-ups of the Guaranteed Amount. The Guaranteed Amount 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 both still living and under age 86; and
b. the contract value on that Benefit Year anniversary is greater than the
Guaranteed Amount after the 5% Enhancement (if any) or 200% Step-up (if
any, as described below).
Each time the Guaranteed Amount 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 - Lincoln Lifetime IncomeSM
Advantage Charge.
If your percentage rider charge is increased upon an Automatic Annual Step-up,
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 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. If you decline the
Automatic Annual Step-up, you will receive the 200% Step-up (if you are
eligible as described below) or the 5% Enhancement (if you are eligible as
specified above); however, a new 10-year period for 5% Enhancements will not
begin. You may not decline the Automatic Annual Step-up, if applicable, if your
additional purchase payments would cause your charge to increase. See the
earlier Guaranteed Amount section.
Following is an example of how the Automatic Annual Step-ups and the 5%
Enhancement will work (assuming no withdrawals or additional purchase payments
and issue age above 591/2 (Single Life) or 65 (Joint Life):
Potential for Length of 5%
Contract Guaranteed Charge to Enhancement
Value Amount Change Period
---------- ------------ --------------- -------------
Initial Purchase Payment $50,000 . $50,000 $50,000 No 10
1st Benefit Year Anniversary........ $54,000 $54,000 Yes 10
2nd Benefit Year Anniversary........ $53,900 $56,700 No 9
3rd Benefit Year Anniversary........ $57,000 $59,535 No 8
4th Benefit Year Anniversary........ $64,000 $64,000 Yes 10
On the 1st Benefit Year anniversary, the Automatic Annual Step-up increased the
Guaranteed Amount 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
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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 Guaranteed Amount beyond the
maximum Guaranteed Amount of $10,000,000.
Step-up to 200% of the initial Guaranteed Amount. If you purchased Lincoln
Lifetime IncomeSM Advantage on or after October 5, 2009, the 200% Step-up will
not be available. For contractowners who purchased Lincoln Lifetime IncomeSM
Advantage on or after January 20, 2009, but before October 5, 2009, on the
Benefit Year anniversary after you (Single Life) or the younger of you and your
spouse (Joint Life) reach age 65, or the rider has been in effect for 10 years,
whichever event is later, we will step-up your Guaranteed Amount to 200% of
your initial Guaranteed Amount (plus any purchase payments made within 90 days
of rider election), less any withdrawals, if this would increase your
Guaranteed Amount to an amount higher than that provided by the 5% Enhancement
or the Automatic Annual Step-up for that year, if applicable. (You will not
also receive the 5% Enhancement or Automatic Annual Step-up if the 200% Step-up
applies.) This Step-up will not occur if:
1) any withdrawal was made prior to age 591/2 (Single Life) or age 65
(Joint Life);
2) an Excess Withdrawal (defined below) has occurred; or
3) cumulative withdrawals totaling more than 10% of the initial Guaranteed
Amount (plus purchase payments within 90 days of rider election) have been
made (even if these withdrawals were within the Maximum Annual Withdrawal
amount).
For example, assume the initial Guaranteed Amount is $200,000. A $10,000
Maximum Annual Withdrawal was made at age 65 and at age 66. If one more $10,000
Maximum Annual Withdrawal was made at age 67, the Step-up would not be
available since withdrawals cannot exceed $20,000 (10% of $200,000).
If you purchased the Lincoln Lifetime IncomeSM Advantage prior to January 20,
2009, you will not be eligible to receive the 200% Step-up of the Guaranteed
Amount until the Benefit Year anniversary after you (Single Life) or the
younger of you and your spouse (Joint Life) reach age 70, or the rider has been
in effect for 10 years, whichever event is later.
This Step-up is only available one time and it will not occur if, on the
applicable Benefit Year anniversary, your Guaranteed Amount exceeds 200% of
your initial Guaranteed Amount (plus purchase payments within 90 days of rider
election). Required minimum distributions from qualified contracts may
adversely impact this benefit because you may have to withdraw more than 10% of
your initial Guaranteed Amount. See the terms governing RMDs in the Maximum
Annual Withdrawal Amounts section below.
This Step-up will not cause a change to the percentage charge for your rider.
However, the amount you pay for the rider will increase since the charge is
based on the Guaranteed Amount. See Charges and Other Deductions - Lincoln
Lifetime IncomeSM Advantage Charge.
The following example demonstrates the impact of this Step-up on the Guaranteed
Amount:
Initial purchase payment at age 55 = $200,000; Guaranteed Amount =$200,000;
Maximum Annual Withdrawal amount = $10,000.
After 10 years, at age 65, the Guaranteed Amount is $272,339 (after applicable
5% Enhancements and two $10,000 Maximum Annual Withdrawal Amounts) and the
contract value is $250,000. Since the Guaranteed Amount is less than $360,000
($200,000 initial Guaranteed Amount reduced by the two $10,000 withdrawals
times 200%), the Guaranteed Amount is increased to $360,000.
The 200% Step-up (if applicable to your contract) cannot increase the
Guaranteed Amount beyond the Maximum Guaranteed Amount of $10,000,000.
Maximum Annual Withdrawal Amount. You may make periodic withdrawals up to the
Maximum Annual Withdrawal 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 you are at least age 591/2 (Single Life Option) or you
and your spouse are both at least age 65 (Joint Life Option) and your Maximum
Annual Withdrawal amount is greater than zero.
On the effective date of the Rider, the Maximum Annual Withdrawal amount is
equal to 5% of the initial 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.
If your contract value is reduced to zero because of market performance,
withdrawals equal to the Maximum Annual Withdrawal amount will continue
automatically for your life (and your spouse if applicable) under the Maximum
Annual Withdrawal Amount Annuity Payment Option (discussed later). You may not
withdraw the remaining Guaranteed Amount in a lump sum.
Note: if any withdrawal is made, the 5% Enhancement is not available during
that Benefit Year and the Lincoln Lifetime IncomeSM Advantage Plus is not
available (see below). Withdrawals may also negatively impact the 200% Step-up
(see above).
The tax consequences of withdrawals are discussed in Federal Tax Matters
section of this prospectus.
All withdrawals you make, whether or not within the Maximum Annual Withdrawal
amount, will decrease your contract value.
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The Maximum Annual Withdrawal amount will be doubled, called the Nursing Home
Enhancement, during a Benefit Year when the contractowner/annuitant is age
591/2 or older or the contractowner and spouse (Joint Life option), are both
age 65 or older, 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 (36 months or more for contractowners who purchased this Rider
prior to January 20, 2009), 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. Proof
of nursing home confinement will be required each year. If you leave the
nursing home, your Maximum Annual Withdrawal amount will be reduced by 50%
starting after the next Benefit Year anniversary.
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. For riders
purchased on or after January 20, 2009, 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 5% Maximum Annual Withdrawal amount also
include the Nursing Home Enhancement Maximum Annual Withdrawal amount.
The Maximum Annual Withdrawal amount is increased by 5% of any additional
purchase payments. For example, if the Maximum Annual Withdrawal amount of
$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).
5% Enhancements, Automatic Annual Step-ups and the 200% Step-up (if applicable
to your contract) will cause a recalculation of the eligible Maximum Annual
Withdrawal amount to the greater of:
a. the Maximum Annual Withdrawal amount immediately prior to the 5%
Enhancement, Automatic Annual Step-up or 200% Step-up; or
b. 5% of the Guaranteed Amount on the Benefit Year anniversary.
See the chart below for examples of the recalculation.
The Maximum Annual Withdrawal amount from both Lincoln Lifetime IncomeSM
Advantage and Lincoln SmartSecurity (Reg. TM) Advantage under all Lincoln Life
contracts (or contracts issued by our affiliates) applicable to you (or your
spouse if Joint Life Option) can never exceed 5% of the maximum Guaranteed
Amount.
Withdrawals after age 591/2 (Single Life Option) or age 65 (Joint Life Option).
If the cumulative amounts withdrawn from the contract during the Benefit Year
(including the current withdrawal) after age 591/2 (Single Life) or age 65
(Joint Life) 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.
The impact of withdrawals prior to age 591/2 or age 65 will be discussed later
in this section. The following example illustrates the impact of Maximum Annual
Withdrawals on the Guaranteed Amount and the recalculation of the Maximum
Annual Withdrawal amount (assuming no additional purchase payments and the
contractowner (Single Life) is older than 591/2 and the contractowner and
spouse (Joint Life) are both older than 65):
Contract Guaranteed Maximum Annual
Value Amount Withdrawal Amount
---------- ------------ ------------------
Initial Purchase Payment $50,000 . $50,000 $50,000 $2,500
1st Benefit Year Anniversary......... $54,000 $54,000 $2,700
2nd Benefit Year Anniversary......... $51,000 $51,300 $2,700
3rd Benefit Year Anniversary......... $57,000 $57,000 $2,850
4th Benefit Year Anniversary......... $64,000 $64,000 $3,200
The initial Maximum Annual Withdrawal amount is equal to 5% of the Guaranteed
Amount. Since withdrawals occurred each year (even withdrawals within the
Maximum Annual Withdrawal amount), the 5% Enhancement of the Guaranteed Amount
was not available. However, each year the Automatic Annual Step-up occurred
(1st, 3rd and 4th anniversaries), the Maximum Annual Withdrawal amount was
recalculated to 5% of the current Guaranteed Amount.
Withdrawals within the Maximum Annual Withdrawal amount are not subject to
surrender charges. Withdrawals from Individual Retirement Annuity 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 systematic monthly or quarterly installments of the amount
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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 monthly or quarterly 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 that Benefit Year
(except as described in next paragraph).
If your RMD withdrawals during a Benefit Year are less than the Maximum Annual
Withdrawal amount, an additional amount up to the Maximum Annual Withdrawal
amount may be withdrawn and will not be subject to surrender charges. If a
withdrawal, other than an RMD is made during the Benefit Year, then all amounts
withdrawn in excess of the Maximum Annual Withdrawal amount, including amounts
attributed to RMDs, will be treated as Excess Withdrawals (see below).
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.
Excess Withdrawals. Excess Withdrawals are the cumulative amounts withdrawn
from the contract during the Benefit Year (including the current withdrawal)
that exceed the Maximum Annual Withdrawal amount. When Excess Withdrawals
occur:
1. The Guaranteed Amount is reduced by the same proportion that the Excess
Withdrawal reduces the contract value. This means that the reduction in
the Guaranteed Amount could be more than a dollar-for-dollar reduction.
2. The Maximum Annual Withdrawal amount will be immediately recalculated to
5% of the new (reduced) Guaranteed Amount (after the pro rata reduction
for the Excess Withdrawal); and
3. The 200% Step-up will never occur.
The following example demonstrates the impact of an Excess Withdrawal on the
Guaranteed Amount and the Maximum Annual Withdrawal amount. A $12,000
withdrawal caused a $15,182 reduction in the Guaranteed Amount.
Prior to Excess Withdrawal:
Contract Value = $60,000
Guaranteed Amount = $85,000
Maximum Annual Withdrawal amount = $5,000 (5% of the initial Guaranteed Amount
of $100,000)
After a $12,000 Withdrawal ($5,000 is within the Maximum Annual Withdrawal
amount, $7,000 is the Excess Withdrawal):
The contract value and Guaranteed Amount are reduced dollar for dollar for the
Maximum Annual Withdrawal amount of $5,000:
Contract Value = $55,000
Guaranteed Amount = $80,000
The contract value is reduced by the $7,000 Excess Withdrawal and the
Guaranteed Amount is reduced by 12.72%, the same proportion that the Excess
Withdrawal reduced the $55,000 contract value ($7,000 - $55,000)
Contract value = $48,000
Guaranteed Amount = $69,818 ($80,000 X 12.72% = $10,181; $80,000 - $10,181 =
$69,818)
Maximum Annual Withdrawal amount = $3,491.00 (5% of $69,818)
In a declining market, withdrawals that exceed the Maximum Annual Withdrawal
amount may substantially deplete or eliminate your Guaranteed Amount and reduce
or deplete your Maximum Annual Withdrawal amount.
Excess Withdrawals will be subject to surrender charges unless one of the
waiver of surrender charge provisions set forth in your prospectus is
applicable. Continuing with the prior example of the $12,000 withdrawal: the
$5,000 Maximum Annual Withdrawal amount is not subject to surrender charges;
the $7,000 Excess Withdrawal may be subject to surrender charges. See Charges
and Other Deductions - Surrender Charge.
Withdrawals before age 591/2/65. If any withdrawal is made prior to the time
the contractowner, is age 591/2 (Single Life) or the contractowner and spouse
(Joint Life) are both age 65, including withdrawals equal to Maximum Annual
Withdrawal amounts, the following will occur:
1. The Guaranteed Amount will be reduced in the same proportion that the
entire withdrawal reduced the contract value (this means that the
reduction in the Guaranteed amount could be more than a dollar-for-dollar
reduction);
2. The Maximum Annual Withdrawal amount will be immediately recalculated
to 5% of the new (reduced) Guaranteed Amount;
3. The 5% Enhancement to the Guaranteed Amount is not available until after
an Automatic Annual Step-up to the contract value occurs. This Automatic
Annual Step-up will not occur until the contract value exceeds the
Guaranteed Amount on a Benefit Year anniversary. (see the 5% Enhancement
section above); and
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4. The 200% Step-up will never occur.
The following is an example of the impact of a withdrawal prior to age 591/2
for single or age 65 for joint:
o $100,000 purchase payment
o $100,000 Guaranteed Amount
o A 10% market decline results in a contract value of $90,000
o $5,000 Maximum Annual Withdrawal amount
If a $5,000 withdrawal is made before age 591/2, the Guaranteed Amount will be
$94,444 ($100,000 reduced by 5.56% ($5,000/
$90,000) and the new Maximum Annual Withdrawal amount is $4,722 (5% times
$94,444). Surrender charges will apply unless one of the waiver of surrender
charge provisions is applicable. See Charges and Other Deductions - Surrender
Charge.
In a declining market, withdrawals prior to age 591/2 (or 65 if Joint Life) may
substantially deplete or eliminate your Guaranteed Amount and reduce or deplete
your Maximum Annual Withdrawal amount.
Lincoln Lifetime IncomeSM Advantage Plus. If you have purchased Lincoln
Lifetime IncomeSM Advantage Plus ("Plus Option"), on the seventh Benefit Year
anniversary, you may elect to receive an increase in your contract value equal
to the excess of your initial Guaranteed Amount, (plus any purchase payments
made within 90 days of the rider effective date) over your current contract
value. Making this election will terminate the Plus Option as well as the
Lincoln Lifetime IncomeSM Advantage and the total charge for this rider and you
will have no further rights to Maximum Annual Withdrawal amounts or any other
benefits under this rider. You have 30 days after the seventh Benefit Year
anniversary to make this election, but you will receive no more than the
difference between the contract value and the initial Guaranteed Amount (plus
any purchase payments within 90 days of the rider effective date) on the
seventh Benefit Year anniversary. If you choose to surrender your contract at
this time, any applicable surrender charges will apply.
You may not elect to receive an increase in contract value if any withdrawal is
made, including Maximum Annual Withdrawal amounts or RMDs, prior to the seventh
Benefit Year anniversary. If you make a withdrawal prior to the seventh Benefit
Year anniversary, the charge for this Plus Option (in addition to the Lincoln
Lifetime IncomeSM Advantage charge) will continue until the seventh Benefit
Year anniversary. After the seventh Benefit Year anniversary, the 0.15% charge
for the Plus Option will be removed from your contract and the charge for your
Lincoln Lifetime IncomeSM Advantage will continue.
If you do not elect to exercise the Plus Option, after the seventh Benefit Year
anniversary, your Lincoln Lifetime IncomeSM Advantage and its charge will
continue and the Plus Option 0.15% charge will be removed from your contract.
The following example illustrates the Plus Option upon the seventh Benefit Year
anniversary:
Initial purchase payment of $100,000; Initial Guaranteed Amount of $100,000.
On the seventh Benefit Year anniversary, if the current contract value is
$90,000; the contractowner may choose to have $10,000 placed in the contract
and the Plus Option (including the right to continue the Lincoln Lifetime
IncomeSM Advantage) will terminate at that time.
If you purchased the Lincoln Lifetime IncomeSM Advantage Plus option, you have
limited investment options until the seventh Benefit Year anniversary as set
forth in the Investment Requirements section of this prospectus. After the
seventh Benefit Year anniversary, if your contract continues, you may invest in
other subaccounts in your contract, subject to the Investment Requirements
applicable to your purchase date of Lincoln Lifetime IncomeSM Advantage.
Maximum Annual Withdrawal Amount Annuity Payout Option. If you are required to
annuitize your Maximum Annual Withdrawal amount, because you have reached the
maturity date of the contract, the Maximum Annual Withdrawal Amount Annuity
Payout Option is available.
The Maximum Annual Withdrawal Amount Annuity Payment Option is a fixed
annuitization in which the contractowner (and spouse if applicable) will
receive annual annuity payments equal to the Maximum Annual Withdrawal amount
for life (this option is different from other annuity payment options discussed
in your prospectus, including i4LIFE (Reg. TM) Advantage, which are based on
your contract 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 Maximum Annual Withdrawal amount (including the
Nursing Home Enhancement if you qualify) for your life or the life of you and
your spouse for the Joint Life option.
If the contract value is zero and you have a remaining Maximum Annual
Withdrawal amount, you will receive the Maximum Annual Withdrawal Amount
Annuity Payment Option.
If you are receiving the Maximum Annual Withdrawal Amount Annuity Payout
Option, your beneficiary may be eligible for a 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 exercise of the Maximum Annual Withdrawal
Amount Annuity Payout Option must not be the Account Value Death Benefit.
The final payment is equal to the sum of all purchase payments, decreased by
withdrawals in the same proportion as the withdrawals reduce the contract
value; withdrawals less than or equal to the Maximum Annual Withdrawal amount
and payments under the Maximum Annual Withdrawal Annuity Payout Option will
reduce the sum of the purchase payments dollar for dollar. If your death
benefit
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option in effect immediately prior to the Maximum Annual Withdrawal Amount
Annuity Payout Option provided for deduction for withdrawals on a dollar for
dollar basis, then any withdrawals that occurred prior to the election of the
Lincoln Lifetime Income (Reg. TM) Advantage will reduce the sum of all purchase
payments on a dollar for dollar basis.
Death Prior to the Annuity Commencement Date. The Lincoln Lifetime IncomeSM
Advantage has no provision for a payout of the Guaranteed Amount 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 in the Death Benefit section of this prospectus) will be in effect.
Election of the Lincoln Lifetime IncomeSM Advantage 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 will
end and no further Maximum Annual Withdrawal amounts are available (even if
there was a Guaranteed Amount in effect at the time of the death). The Lincoln
Lifetime IncomeSM Advantage Plus will also terminate, if in effect. 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 Rider if available under the terms and
charge in effect at the time of the new purchase. There is no carryover of the
Guaranteed Amount.
Upon the first death under the Joint Life option, the lifetime payout of the
Maximum Annual Withdrawal amount will continue for the life of the surviving
spouse. The 5% Enhancement, 200% Step-up, Lincoln Lifetime IncomeSM Advantage
Plus and Automatic Annual Step-up will continue if applicable as discussed
above. Upon the death of the surviving spouse, the Lincoln Lifetime IncomeSM
Advantage will end and no further Maximum Annual Withdrawal amounts are
available (even if there was a Guaranteed Amount in effect at the time of the
death). The Lincoln Lifetime IncomeSM Advantage Plus will also terminate, if in
effect.
As an alternative, after the first death, the surviving spouse 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.
The surviving spouse must be under age 65. In deciding whether to make this
change, the surviving spouse should consider: 1) if the change will cause the
Guaranteed Amount and the Maximum Annual Withdrawal amount to decrease and 2)
if the Single Life Rider option for new issues will provide an earlier age
(591/2) to receive Maximum Annual Withdrawal amounts.
Impact of Divorce on Joint Life Option. In the event of a divorce, the
contractowner may terminate the Joint Life Option and purchase a Single Life
Option, if available, (if the contractowner is under age 65) at the current
Rider charge and the terms in effect for new sales of the Single Life Option.
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.
General Provisions.
Termination. After the seventh anniversary of the effective date of the Rider,
the contractowner may terminate the Rider by notifying us in writing. Lincoln
Lifetime IncomeSM Advantage will automatically terminate:
o Upon exercise of the Lincoln Lifetime IncomeSM Advantage Plus option to
receive an increase in the contract value equal to the excess of your
initial Guaranteed Amount over the contract value;
o on the annuity commencement date (except payments under the Maximum Annual
Withdrawal Amount Annuity Payment Option will continue if applicable);
o if the contractowner or annuitant is changed (except if the surviving spouse
under the Joint Life option 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 death under the Single Life option or the death of the surviving
spouse under the Joint Life option;
o when the Maximum Annual Withdrawal amount is reduced 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 any
Lincoln Lifetime IncomeSM Advantage, Lincoln SmartSecurity (Reg. TM) Advantage,
4LATER (Reg. TM) Advantage or any other living benefits we may offer in the
future. The one-year wait does not apply to the election of a new rider after
the exercise (and resulting termination) of the Lincoln Lifetime IncomeSM
Advantage Plus.
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 and the 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 has the opportunity to provide a higher Guaranteed
Amount because of the 5% Enhancement and Automatic Annual
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Step-up and this benefit also provides the potential for lifetime withdrawals
from an earlier age and for the Single Life Option only (59 1/2 rather than age
65 with the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic
Step-Up). However, the percentage charge for the Lincoln Lifetime IncomeSM
Advantage is higher for the Single Life (lower for the Joint Life) and has the
potential to increase on every Benefit Year Anniversary if the increase in
contract value exceeds the 5% Enhancement. Another factor to consider is that
immediate withdrawals from your contract, under the Lincoln Lifetime IncomeSM
Advantage, will adversely impact the 5% Enhancement. In addition, if the
withdrawal is made before age 591/2 (Single Life) or age 65 (Joint Life), the
5% Enhancement is further limited. The Lincoln SmartSecurity (Reg. TM)
Advantage provides that Maximum Annual Withdrawal amounts can continue to a
beneficiary to the extent of any remaining Guaranteed Amount while the Lincoln
Lifetime IncomeSM Advantage does not offer this feature. The Investment
Requirements and Termination provisions are different between these two riders.
i4LIFE (Reg. TM) Advantage Option. i4LIFE (Reg. TM) Advantage is an income
program, available for purchase at an additional charge, 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 purchase at the time you elect i4LIFE (Reg. TM) Advantage.
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 Maximum Annual
Withdrawal amounts under Lincoln Lifetime IncomeSM Advantage. You cannot have
both i4LIFE (Reg. TM) Advantage and Lincoln Lifetime IncomeSM Advantage in
effect on your contract at the same time.
Contractowners with an active Lincoln Lifetime IncomeSM Advantage may decide to
drop Lincoln Lifetime IncomeSM Advantage and purchase i4LIFE (Reg. TM)
Advantage since i4LIFE (Reg. TM) Advantage provides a different income stream.
If this decision is made, the contractowner can use any remaining Lincoln
Lifetime IncomeSM Advantage Guaranteed Amount to establish the Guaranteed
Income Benefit under the i4LIFE (Reg. TM) Advantage. Owners of the Lincoln
Lifetime IncomeSM Advantage rider are guaranteed the ability to purchase i4LIFE
(Reg. TM) Advantage in the future even if it is no longer generally available
for purchase. Owners of Lincoln Lifetime IncomeSM Advantage are also guaranteed
that the annuity factors that are used to calculate the initial Guaranteed
Income Benefit under i4LIFE (Reg. TM) Advantage will be the annuity factors in
effect as of the day they purchased Lincoln Lifetime IncomeSM Advantage. In
addition, owners of Lincoln Lifetime IncomeSM Advantage may in the future
purchase the Guaranteed Income Benefit at or below the guaranteed maximum
charge that is in effect on the date that they purchase Lincoln Lifetime
IncomeSM Advantage.
i4LIFE (Reg. TM) Advantage with the Guaranteed Income Benefit for Lincoln
Lifetime IncomeSM Advantage purchasers must be elected before the Annuity
Commencement Date and by age 99 for nonqualified contracts or age 85 for
qualified contracts. See i4LIFE (Reg. TM) Advantage and the Guaranteed Income
Benefit sections of this prospectus. The charges for these benefits will be the
current charge for new purchasers in effect for the i4LIFE (Reg. TM) Advantage
and the current Guaranteed Income Benefit charge in effect for prior purchasers
of Lincoln Lifetime IncomeSM Advantage at the time of election of these
benefits. If you use your Lincoln Lifetime IncomeSM Advantage Guaranteed Amount
to establish the Guaranteed Income Benefit, you must keep i4LIFE (Reg. TM)
Advantage and the Guaranteed Income Benefit in effect for at least 3 years.
Below is an example of how the Guaranteed Amount from the Lincoln Lifetime
IncomeSM Advantage is used to establish the Guaranteed Income Benefit with
i4LIFE (Reg. TM) Advantage.
Prior to i4LIFE (Reg. TM) Advantage election:
Contract Value = $100,000
Guaranteed Amount = $150,000
After i4LIFE (Reg. TM)Advantage election:
Regular Income Payment = $6,700 per year = Contract Value divided by the i4LIFE
(Reg. TM) Advantage annuity factor
Guaranteed Income Benefit = $7,537.50 per year = Guaranteed Amount divided by
Guaranteed Income Benefit Table factor applicable to owners of the Lincoln
Lifetime IncomeSM Advantage rider.
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. 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 the Lincoln Lifetime IncomeSM Advantage, withdrawals less than or equal
to the Maximum Annual Withdrawal amount, after age 591/2 for the Single Life
Option or age 65 for Joint Life Option, will reduce the sum of all purchase
payments option of the death benefit on a dollar for dollar basis. This applies
to the Guarantee of Principal Death Benefit, and only the sum of all purchase
payments alternative of the Enhanced Guaranteed Minimum Death Benefit or the
Estate Enhancement Benefit, whichever is in effect. See The Contracts - Death
Benefits. Any Excess Withdrawals and all withdrawals prior to age 591/2 for
Single Life or age 65 for Joint Life 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.
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The following example demonstrates how a withdrawal will reduce the death
benefit if both the Enhanced Guaranteed Minimum Death Benefit (EGMDB) and the
Lincoln Lifetime IncomeSM Advantage 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
Maximum Annual Withdrawal 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 calculations as follows:
a) $80,000 - $9,000 = $71,000 (Reduction $9,000)
b) $100,000 - $5,000 = $95,000 (dollar for dollar reduction of Maximum
Annual Withdrawal amount)
$95,000 - $5,067 = $89,933 [$95,000 times ($4,000/$75,000) = $5,067] Pro
rata 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 reduces the death benefit option pro rata.
Total reduction = $16,875.
Item c) provides the largest death benefit of $133,125.
Availability. The Lincoln Lifetime IncomeSM Advantage is available for purchase
with nonqualified contracts and IRAs. 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 on or after the purchase of i4LIFE
(Reg. TM) Advantage or on or after the Annuity Commencement Date and must wait
at least 12 months after terminating 4LATER (Reg. TM) Advantage, Lincoln
SmartSecurity (Reg. TM) Advantage or any other living benefits we may offer in
the future. If you decide to drop a rider to add Lincoln Lifetime IncomeSM
Advantage, your Guaranteed Amount will equal the current contract value on the
effective date of the change. Before you make this change, you should consider
that no guarantees or fee waiver provisions carry over from the previous rider.
The Lincoln Lifetime IncomeSM Advantage terminates after the death of a covered
life and the Guaranteed Amount is not available to a beneficiary. You will be
subject to additional Investment Requirements. See the comparison to Lincoln
SmartSecurity (Reg. TM) Advantage for other factors to consider before making a
change.
Lincoln Lifetime IncomeSM Advantage is no longer available for purchase (unless
your state has not approved Lincoln Lifetime IncomeSM Advantage 2.0). Check
with your investment representive regarding availability.
Lincoln SmartSecurity (Reg. TM) Advantage (for Non-Qualified Contracts and IRAs
only)
The Lincoln SmartSecurity (Reg. TM) Advantage is a rider that is available for
purchase with your variable annuity contract. Lincoln SmartSecutiy (Reg. TM)
Advantage is available for purchase with non-qualified contracts and IRAs only.
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. There are two
options that step-up the Guaranteed Amount to a higher level (the Contract
Value at the time of the step-up):
Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year Elective Step-up or
Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up
The Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year Elective Step-up option
is no longer available for purchase after January 16, 2009. The Lincoln
SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up option will no
longer be available for purchase after May 20, 2013. Under the Lincoln
SmartSecurity (Reg. TM) Advantage - 5 Year Elective Step-up, the Contractowner
has the option to step-up the Guaranteed Amount after five years. With the
Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up option,
the Guaranteed Amount will automatically step-up to the Contract Value, if
higher, on each Benefit Year anniversary through the 10th anniversary. With the
Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up, 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 the Lincoln SmartSecurity
(Reg. TM) Advantage - 1 Year Automatic Step-up 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.
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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 $5,000,000 under Lincoln
SmartSecurity (Reg. TM) Advantage - 5 Year Elective Step-up option and
$10,000,000 for Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic
Step-up option. 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 the Lincoln SmartSecurity (Reg. TM)
Advantage - 1 Year Automatic Step-up option, 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 surrender charges and Interest Adjustments), the
rider charge and account fee 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 the Lincoln SmartSecurity
(Reg. TM) Advantage - 1 Year Automatic Step-up option, (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.
Under the Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year Elective Step-up
option, after the fifth anniversary of the rider, you may elect (in writing) to
step-up the Guaranteed Amount to an amount equal to the Contract Value on the
effective date of the step-up. Additional step-ups are permitted, but you must
wait at least 5 years between each step-up.
Under both the Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year Elective
Step-up and the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic
Step-up options, 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:
o 7% of the Guaranteed Amount under the Lincoln SmartSecurity (Reg. TM)
Advantage - 5 Year Elective Step-up option and
o 5% of the Guaranteed Amount under the Lincoln SmartSecurity (Reg. TM)
Advantage - 1 Year Automatic Step-up option.
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 7% or 5% (depending
on your option) of any additional Purchase Payments . For example, if the
Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up option
with a Maximum Annual Withdrawal amount of $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. 7% or 5% (depending on your option) 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
surrender charges or the Interest Adjustment on the amount withdrawn from the
fixed account, if applicable. See The Contracts - Fixed Side of the Contract.
If the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up
option is in effect, 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
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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 7% or 5% (depending on your option) of the reduced Guaranteed Amount
immediately following the withdrawal (as specified above when
withdrawals exceed the Maximum Annual Withdrawal amount); or
o 7% or 5% (depending on your option) of the Contract Value immediately
following the withdrawal; or
o the new Guaranteed Amount.
The following example of the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year
Automatic Step-up option 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.
Under the Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year Elective Step-up
option for IRA contracts, the annual amount available for withdrawal within the
Maximum Annual Withdrawal amount may not be sufficient to satisfy your required
minimum distributions under the Internal Revenue Code. This is particularly
true for individuals over age 84. Therefore, you may have to make withdrawals
that exceed the Maximum Annual Withdrawal amount. Withdrawals over the Maximum
Annual Withdrawal amount may quickly and substantially decrease your Guaranteed
Amount and Maximum Annual Withdrawal amount, especially in a declining market.
You should consult your tax advisor to determine if there are ways to limit the
risks associated with these withdrawals. Such methods may involve the timing of
withdrawals or foregoing step-ups of the Guaranteed Amount.
Withdrawals in excess of the Maximum Annual Withdrawal amount will be subject
to surrender charges (to the extent that total withdrawals exceed the free
amount of withdrawals allowed during a Contract Year) and 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. (Available only with the Lincoln SmartSecurity (Reg. TM)
Advantage - 1 Year Automatic Step-up single or joint life options and not the
Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year Elective Step-up option or
the prior version of the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year
Automatic Step-up option). 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:
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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 the Lincoln
SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up 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 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 7% or 5% (depending on your
option) 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 the Lincoln SmartSecurity (Reg. TM)
Advantage - 1 Year Automatic Step-up - 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
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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 the Lincoln SmartSecurity (Reg. TM) Advantage - 1
Year Automatic Step-up - 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.
If the surviving spouse of the deceased Contractowner continues the contract,
the remaining automatic step-ups under the Lincoln SmartSecurity (Reg. TM)
Advantage - 1 Year Automatic Step-up option, will apply to the spouse as the
new Contractowner. Under the Lincoln SmartSecurity (Reg. TM) Advantage - 5 Year
Elective Step-up option, the new Contractowner is eligible to elect to step-up
the Guaranteed Amount prior to the next available step-up date; however, all
other conditions for the step-up apply and any subsequent step-up by the new
Contractowner must meet all conditions for a step-up.
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 the Lincoln SmartSecurity (Reg. TM) Advantage if desired.
Automatic step-ups under the Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year
Automatic Step-up option 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 the
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.
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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, applicable guarantees and
applicable Investment Requirements. You should discuss this decision with your
registered representative. See i4LIFE (Reg. TM) Advantage.
Availability. The Lincoln SmartSecurity (Reg. TM) Advantage - 1 Year Automatic
Step-up option is available for purchase with nonqualified contracts and IRAs.
All Contractowners and the Annuitant of the contracts with the Lincoln
SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up option must be
under age 81 at the time this rider is elected. You cannot elect the rider on
or after the purchase of any other Living Benefit rider, or on or after the
Annuity Commencement Date. The Lincoln SmartSecurity (Reg. TM) Advantage - 5
Year Elective Step-up option is no longer available for purchase. The Lincoln
SmartSecurity (Reg. TM) Advantage - 1 Year Automatic Step-up option will no
longer be available on or after May 20, 2013.
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.
i4LIFE (Reg. TM) Advantage for Non-Qualified Contracts and IRAs
i4LIFE (Reg. TM) Advantage (the Variable Annuity Payout Option rider in your
contract) 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 either the i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit or the
4LATER Guaranteed Income Benefit (described below) for an additional charge.
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 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. If you purchased 4LATERSM
Advantage, you must wait at least one year before you can purchase i4LIFE (Reg.
TM) Advantage. 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 are age 591/2 or older at the time the option is
elected. 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 the 4LATER (Reg. TM) Advantage Guaranteed Income Benefit or
i4LIFE (Reg. TM) Advantage 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.
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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 under i4LIFE (Reg. TM)
Advantage, unless you elect a less expensive death benefit option. 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(if premium taxes have been deducted from the Contract
Value). 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 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 Income Benefit. Shortening the Access Period will
terminate the Guaranteed Income Benefit. See 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 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 made and Guaranteed Income Benefit payments 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 your 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 surrender charges. 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;
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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.
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)
dies 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) dies during the Access Period,
i4LIFE (Reg. TM) Advantage (and the 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. You 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.
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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 EGMDB. The i4LIFE (Reg. TM) Advantage EGMDB is only
available for nonqualified contracts 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 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 on a dollar for dollar basis.
When determining the highest anniversary value, if you elected the EGMDB 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.
All references to withdrawals include deductions for any applicable charges
associated with that withdrawal (surrender charges for example) and premium
taxes, if any.
Contracts with the i4LIFE (Reg. TM) Advantage EGMDB 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 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 i4LIFE (Reg. TM) Advantage Account Value
death benefit.
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, no death benefit 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
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 (for Non-Qualified
Contracts or IRAs only)
A Guaranteed Income Benefit (version 4) 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.
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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 or Lincoln Lifetime IncomeSM Advantage 2.0
(withdrawal benefit riders) prior to electing i4LIFE (Reg. TM) Advantage with
the Guaranteed Income Benefit (annuity payout rider). Refer to the 4LATER (Reg.
TM) Advantage section of this prospectus for a discussion of the 4LATER (Reg.
TM) Guaranteed Income Benefit.
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. The version of the
Guaranteed Income Benefit, the date that you purchased it, and/or whether you
previously owned Lincoln Lifetime IncomeSM Advantage 2.0 or Lincoln Lifetime
IncomeSM Advantage will determine which Investment Requirement option applies
to you.
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 the Lincoln Lifetime IncomeSM Advantage or the Lincoln
Lifetime IncomeSM Advantage 2.0 who decides to drop Lincoln Lifetime IncomeSM
Advantage or the 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 or 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 either the Lincoln SmartSecurity (Reg.
TM) Advantage or the Lincoln Lifetime IncomeSM Advantage riders 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.
There are four versions of the Guaranteed Income Benefit. Guaranteed Income
Benefit (version 1) is no longer available for election. Guaranteed Income
Benefit (version 2) may only be elected if you own a version of Lincoln
Lifetime IncomeSM Advantage that guarantees you the right to elect that
version. You may elect Guaranteed Income Benefit (version 3) after December 31,
2010 or after Guaranteed Income Benefit (version 4) is approved in your state,
if later, only if you own a version of Lincoln Lifetime IncomeSM Advantage that
guarantees you the right to elect that version. Guaranteed Income Benefit
(version 4) is the only version of the Guaranteed Income Benefit currently
available for election unless you are guaranteed the right to elect a prior
version pursuant to the terms of your Living Benefit rider. Please refer to
your Living Benefit rider regarding the availability of prior versions of
Guaranteed Income Benefit.
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 applicable table below.
Age-Banded Percentages for Calculating Initial Guaranteed Income Benefit for
i4LIFE (Reg. TM) Advantage elections 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 2.00% Under age 40 2.00%
40 - 54 2.50% 40 - 54 2.50%
55 - under 591/2 3.00% 55 - under 59 1/2 3.00%
591/2 - 64 3.50% 591/2 - 69 3.50%
65 - 69 4.00% 70 - 74 4.00%
70 - 74 4.50% 75+ 4.50%
75 and above 5.00%
* 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
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since the last Automatic Annual Step-up or the rider's effective date (if
there has not been any Automatic Annual Step-up) if greater than the Account
Value to establish the initial Guaranteed Income Benefit. Contractowners who
elected Lincoln SmartSecurity (Reg. TM) Advantage will receive the currently
available version of the Guaranteed Income Benefit.
Age-Banded Percentages for Calculating Initial Guaranteed Income Benefit for
i4LIFE (Reg. TM) Advantage elections between
May 21, 2012 and May 19, 2013.
Single & Joint Life Option* Single & Joint Life Option*
----------------------------- ----------------------------
Percentage of Account
Value, Income Base or
Age Guaranteed Amount**
----------------------------- ----------------------------
Under age 40 2.00%
40 - 54 2.50%
55 - under 591/2 3.00%
591/2 - 64 3.50%
65 - 69 4.00%
70 - 74 4.50%
75 and above 5.00%
* If joint life option is in effect, the younger of you and your spouse's age
applies.
** 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 or the rider's effective date (if there has not been any Automatic
Annual Step-up) if greater than the Account Value to establish the initial
Guaranteed Income Benefit. Contractowners who elected Lincoln SmartSecurity
(Reg. TM) Advantage will receive the currently available version of the
Guaranteed Income Benefit.
Age-Banded Percentages for Calculating Initial Guaranteed Income Benefit for
i4LIFE (Reg. TM) Advantage elections prior to May 21, 2012.
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.
** 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 or the rider's effective date (if there has not been any Automatic
Annual Step-up) if greater than the Account Value to establish the initial
Guaranteed Income Benefit. Contractowners who elected Lincoln SmartSecurity
(Reg. TM) Advantage will receive the currently available version of the
Guaranteed Income Benefit.
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
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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:
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 3.5% for a 60-year old per the Age-Banded
Percentages for Calculating Initial Guaranteed Income Benefit for Elections on
or after May 21, 2012, 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............................... $ 4,801
8/1/2013 Account Value at election of Guaranteed Income Benefit (version 4)..... $100,000
8/1/2013 Initial Guaranteed Income Benefit (3.5% times $100,000 Account Value) . $ 3,500
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 cCntractowner'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 any differences in how the Guaranteed Income Benefit
works for Guaranteed Income Benefit (version 3), Guaranteed Income Benefit
(version 2) and Guaranteed Income Benefit (version 1). All other features of
the Guaranteed Income Benefit not discussed below are the same as in Guaranteed
Income Benefit (version 4).
Guaranteed Income Benefit (version 3). Guaranteed Income Benefit (version 3)
was available for purchase on or after October 6, 2008 to December 31, 2010 or
when Guaranteed Income Benefit (version 4) was approved in your state whichever
occurred later (unless version 3 is available for election at any time per the
terms of a Living Benefit rider). For Guaranteed Income Benefit (version 3) the
Guaranteed Income Benefit is initially equal to 75% of the Regular Income
Payment (which is based on your Account Value as defined in the i4LIFE (Reg.
TM) Advantage rider section) in effect at the time the Guaranteed Income
Benefit is elected.
The Guaranteed Income Benefit 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. The step-up will occur on every
Periodic Income Commencement Date
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anniversary during a 5-year step-up period. At the end of a step-up period you
may elect a new step-up period by submitting a written request to the
HomeOffice. If you prefer, when you start the Guaranteed Income Benefit, you
can request that we administer this election for you.
At the time of a reset of the step-up period the i4LIFE (Reg. TM) Guaranteed
Income Benefit percentage charge may increase subject to the maximum guaranteed
charge of 1.50%. This means that your charge may change, once every five years.
If we administer a new step-up period for you at your election 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 Periodic Income Commencement Date
anniversary. If we receive this notice, 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. After a request to reverse a step-up you will have no more step-ups
unless you notify us that you wish to restart a new step-up period. 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.
Guaranteed Income Benefit (version 2). Guaranteed Income Benefit (version 2)
was available for election prior to October 6, 2008 (unless version 2 is
available for election at any time per the terms of a Living Benefit rider).
For Guaranteed Income Benefit (version 2) the Guaranteed Income Benefit is
initially equal to 75% of the Regular Income Payment (which is based on your
Account Value as defined in the i4LIFE (Reg. TM) Advantage rider section) in
effect at the time the Guaranteed Income Benefit is elected.
The Guaranteed Income Benefit will automatically step-up every three years on
the Periodic Income Commencement Date anniversary to 75% of the current Regular
Income Payment, if the result is greater than the immediately prior Guaranteed
Income Benefit. The step-up will occur on every third Periodic Income
Commencement Date anniversary during a 15-year step-up period. At the end of a
step-up period, you may elect a new 15-year step-up period by submitting a
written request to the Home Office. If you prefer, when you start the
Guaranteed Income Benefit, you can request that we administer this election for
you.
At the time of a reset of the 15-year step-up period the i4LIFE (Reg. TM)
Guaranteed Income Benefit percentage charge may increase subject to the maximum
guaranteed charge of 1.50%. This means that your charge may change, once every
15 years. If we administer a new step-up period for you at your election 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 Periodic Income Commencement Date
anniversary. If we receive this notice, 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. After a request to reverse a step-up you will have no more step-ups
unless you notify us that you wish to restart a new step-up period. 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.
Guaranteed Income Benefit (version 1). If you have Guaranteed Income Benefit
(version 1), your Guaranteed Income Benefit will not step-up on an anniversary,
but will remain level. This version is no longer available for election.
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 the
Lincoln SmartSecurity (Reg. TM) Advantage are guaranteed that they may use the
remaining Guaranteed Amount (if greater than the Account 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 found in the
Age-Banded Percentages for Calculating Initial Guaranteed Income Benefit for
elections on or after May 21, 2012 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 Account 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
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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
4.5% for a 70-year old per the Age-Banded Percentages for Calculating Initial
Guaranteed Income Benefit for elections on or after May 21, 2012 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.............................. $140,000
Amount of initial Regular Income Payment............................... $ 5,411 per year
Initial Guaranteed Income Benefit (4.5% x $140,000 Guaranteed
Amount/Income Base which is greater than $100,000 Account
Value)........................................................................ $ 6,300
Lincoln Lifetime IncomeSM Advantage. Contractowners who purchased Lincoln
Lifetime IncomeSM Advantage are guaranteed that they may use the remaining
Guaranteed Amount (if greater than the Account Value) at the time the
Guaranteed Income Benefit is determined, to increase the Guaranteed Income
Benefit (version 2 or version 3 only). The Guaranteed Income Benefit will be
increased by the ratio of the remaining Guaranteed Amount to the Contract Value
at the time the initial i4LIFE (Reg. TM) Advantage payment is calculated. In
other words, the Guaranteed Income Benefit will equal 75% of the initial
Regular Income Payment times the remaining Guaranteed Amount divided by the
Contract Value, if the Guaranteed Amount is greater than the Contract Value.
See the Lincoln Lifetime IncomeSM - i4LIFE (Reg. TM) Advantage Option section
for an example of calculation of the Guaranteed Income Benefit using the
purchased Lincoln Lifetime IncomeSM Advantage Guaranteed Amount.
Contractowners who purchased Lincoln Lifetime IncomeSM Advantage may also
choose to drop Lincoln Lifetime IncomeSM Advantage to purchase the version of
the Guaranteed Income Benefit that is then currently available; however, only
the Account Value and not the Guaranteed Amount will be used to establish the
Guaranteed Income Benefit. For Guaranteed Income Benefit (version 4), the
initial Guaranteed Income Benefit will be equal to the applicable percentage,
which is based on the age of either the Contractowner (single life option) or
the youngest age of either the Contractowner or Secondary Life (joint life
option) at the time the Guaranteed Income Benefit is elected, multiplied by the
Account Value. The applicable percentage is found in the Age-Banded Percentages
for Calculating Initial Guaranteed Income Benefit table above.
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 (15 years for versions 2 and 3) or the
difference between your age (nearest birthday) and age 100 (age 90 for
version 4 prior to May 21, 2012; age 85 for versions 2 and 3). 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 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 20 years or the difference
between your age (nearest birthday) and age 95 (15 years or the difference
between your age and age 85 prior to May 21, 2012).
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. For versions
1, 2 and 3 of Guaranteed Income Benefit, an extension of your Access Period
will also reduce your i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit in
proportion to the reduction in the Regular Income Payment. This reduction of
the i4LIFE (Reg. TM) Advantage Guaranteed Income Benefit does not apply to
Guaranteed Income Benefit (version 4). If you choose to shorten your Access
Period, the i4LIFE (Reg. TM) Advantage with Guaranteed Income Benefit will
terminate. Refer to the Example in the 4LATER (Reg. TM) Guaranteed Income
Benefit section of this prospectus.
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 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 used your Lincoln Lifetime IncomeSM Advantage Guaranteed Amount to
establish the Guaranteed
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Income Benefit, you must keep i4LIFE (Reg. TM) Advantage and the Guaranteed
Income Benefit in effect for at least 3 years. 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.
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. Withdrawals are subject to any
applicable surrender charges except when amounts may be withdrawn free of
surrender charges. See Charges and Other Deductions.
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. Withdrawals are subject to any applicable surrender charges
except when amounts may be withdrawn free of surrender charges. See Charges and
Other Deductions.
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 will have the Account
Value Death Benefit option. 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.
i4LIFE (Reg. TM) Advantage for Qualified Contracts
i4LIFE (Reg. TM) Advantage (the Variable Annuity Income rider in your contract)
is an optional annuity payout rider you may elect and is separate and distinct
from other annuity payout options offered under your contract and described
later in this prospectus.
In order to elect the i4LIFE (Reg. TM) Advantage benefit, you may need to
surrender your existing base contract and apply for a new contract. The
surrender charges and fees applicable to the new base contract will not be
higher than such fees applicable to the base contract being surrendered.
However, an additional charge will be incurred on the new base contract for
i4LIFE (Reg. TM) Advantage; just as it would be for a contract that need not be
surrendered to elect i4LIFE (Reg. TM) Advantage. Enhanced interest rates will
not be offered on the fixed account(s) of the new base contract. Please contact
your sales representative to determine if it is necessary to surrender your
contract in order to elect i4LIFE (Reg. TM) Advantage.
i4LIFE (Reg. TM) Advantage is a payout option that provides you with variable,
regular monthly income payments for life. These payouts begin and are made
during an Access Period, where you have access to the Account Value. After the
Access Period ends, Regular Income Payments continue for the rest of your life,
during the Lifetime Income Period. 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. The initial regular monthly income payment
is based on the Account Value on the Periodic Income Commencement Date. This
date is no more than 14 days prior to the date you begin receiving the regular
monthly income payments. This option is available for participants in 401(k),
403(b) and most 457 plans ("tax-deferred retirement plans"). This option, when
available in your state, is subject to a charge. See Charges and Other
Deductions - i4LIFE (Reg. TM) Advantage Charges for Qualified Contracts.
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i4LIFE (Reg. TM) Advantage may be elected at the time of application or at any
time before another annuity payout option is elected by sending a written
request to our Home Office. When you elect i4LIFE (Reg. TM) Advantage, you make
certain choices about your Regular Income Payments. The annuitant, or Secondary
Life, if applicable, may not be changed after i4LIFE (Reg. TM) Advantage is
elected. The Periodic Income Commencement Date will be within one month of when
your i4LIFE (Reg. TM) Advantage election form is approved by us.
i4LIFE (Reg. TM) Advantage for tax-deferred retirement plans is only available
if the annuitant is eligible to receive a payout pursuant to the terms and
conditions of his or her plan at the time the option is elected. Additional
limitations on issue ages and features may be necessary to comply with the
Internal Revenue Code provisions for required minimum distributions.
If i4LIFE (Reg. TM) Advantage is selected, in addition to the Investment
Requirements imposed by electing this option, the applicable transfer
provisions among subaccounts and the fixed account during the access period
will continue to be those specified in your prospectus. See The Contracts -
Transfers on or Before the Annuity Commencement Date. During the Lifetime
Income Period, the transfer provisions are those specified in your prospectus.
See The Contracts - Transfers after the Annuity Commencement Date. Once i4LIFE
(Reg. TM) Advantage begins, any automatic withdrawal service will terminate.
See The Contracts - Additional Services.
When you elect i4LIFE (Reg. TM) Advantage, you will receive the i4LIFE (Reg.
TM) Advantage Guarantee of Principal death benefit. See i4LIFE (Reg. TM)
Advantage Death Benefit.
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, regular monthly income payments and provide a death benefit, and
during which you may surrender the contract and make additional withdrawals
from your Account Value. During the Access Period, the Account Value is
available as a minimum death benefit, or for additional withdrawals or
surrender of the contract. At the end of the Access Period, the remaining
Account Value is used to determine the amount of regular monthly income
payments for the rest of your life (and the Secondary Life if applicable) and
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 the greater of 15 years or to age 85)
and maximum 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 the Access Period
by sending us notice. Additional restrictions may apply if you are under 591/2
when you request a change to the Access Period. A request to extend the Access
Period will be effective on the next Periodic Income Commencement Date
anniversary. Currently, if you extend the Access Period, it must be extended at
least 5 years.
If you extend the Access Period, subsequent Regular Income Payments and the
Guaranteed Income Benefit will be reduced accordingly. The Guaranteed Income
Benefit will be adjusted in proportion to the reduction in the new Regular
Income Payment. Extending the Access Period lowers the regular payment and
Guaranteed Income Benefit because these payments are spread out over a longer
period of time. For example, assume you have an access period of 25 years, a
Regular Income Payment of $433 a month and a Guaranteed Income Benefit of $332
per month. If you extend your access period to 30 years, the Regular Income
Payment decreases to $428 per month (a reduction of 1.15%) and the Guaranteed
Income Benefit is also reduced by 1.15% for a payment of $328.
We may reduce or terminate the Access Period for tax-deferred retirement plans
in order to keep the Regular Income Payments in compliance with Internal
Revenue Code ("IRC") provisions for required minimum distributions. You may not
shorten your Access Period.
Account Value. The initial Account Value is equal to the total of the dollar
value of the fixed and variable options contained in the contract in which you
are invested on the Periodic Income Commencement Date. During the Access
Period, the Account Value will be increased/decreased by any investment
gains/losses including interest credited on the fixed account, and will be
reduced by Regular Income Payments made, any Guaranteed Income Benefit payments
made, and 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 Secondary Life, if applicable) 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. Such payments will not vary during the
year unless there is a withdrawal. When you elect i4LIFE (Reg. TM) Advantage,
you will have to choose the length of the Access Period. This choice will
influence the amount of your Regular Income Payments. Regular Income Payments
will begin within 14 days of the Periodic Income Commencement Date. At this
time, changes to the Access Period can only be made on Periodic Income
Commencement Date anniversaries.
Regular Income Payments for tax-deferred retirement plans will be paid monthly,
and are only recalculated once per year, at the beginning of each calendar
year. An assumed investment return rate of 4% will be available. Regular Income
Payments are not subject to any surrender charges or applicable Interest
Adjustments. For information regarding income tax consequences of Regular
Income Payments, See Federal Tax Matters.
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The amount of the initial Regular Income Payment is determined on the Periodic
Income Commencement Date by dividing the Account Value by 1000 and multiplying
the result by an annuity factor. In the absence of excess withdrawals this
amount will remain constant throughout the calendar year. The annuity factor is
based upon:
o The age and sex (unless unisex rates are required by law) of the annuitant
and Secondary Life, if applicable;
o the length of the Access Period selected;
o the monthly Regular Income Payments;
o the assumed investment return of 4%; 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 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.
Subsequent Regular Income Payments during the Access Period are determined by
dividing the Account Value, on the applicable valuation date (December 31) by
1000 and multiplying this result by an annuity factor revised to reflect the
declining length of the Access Period. You will receive the same payment each
month throughout the year. The Account Value continues to vary with the
performance of the subaccounts selected and the interest credited on the fixed
account. The assumed investment return is the measuring point for 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. For example, a contract owner has an Account Value of $100,000
and an income payment of $400 per month. If the contract owner makes a
withdrawal of $25,000 (resulting in a 25% reduction of Account Value), there
would be a corresponding 25% reduction to the Regular Income Payment. The
Regular Income Payment of $400 would be reduced to $300 [$400 - (25% x $400)].
See i4LIFE (Reg. TM) Advantage - General i4LIFE (Reg. TM) Advantage Provisions
for more information on withdrawals.
For a joint life option, the Secondary Life must be the annuitant's spouse and
must be the primary beneficiary. If either the annuitant or Secondary Life dies
during the Access Period, the surviving life may elect to continue Regular
Income Payments. We may adjust the Access Period length to ensure the regular
monthly income payments conform to the required minimum distribution
requirements of Section 401(a)(9) of the IRC. Regular Income Payments will
continue for the remainder of the Access Period and then, if there is a
surviving life, for the Lifetime Income Period. As an alternative, upon the
death of the annuitant, the Secondary Life may choose to take the death
benefit, and the i4LIFE (Reg. TM) Advantage rider will terminate. The Account
Value less any contingent deferred sales charge may be paid upon the death of
the Secondary Life during the Access Period, if applicable. If there is no
surviving life, then the Regular Income Payments will cease and this rider will
terminate.
For a single life option, if the annuitant dies during the Access Period, a
death benefit will be paid and the Regular Income Payments will cease and this
rider 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. The frequency of Regular Income Payments, the 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 (unless unisex rates are required by law) of the annuitant
and Secondary Life (if living);
o the monthly Regular Income Payments;
o the assumed investment return of 4%; 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). Your Regular Income Payments
are adjusted on an annual basis, and the total of the annual payment is
transferred to Lincoln Life's general account in January to be paid out
monthly. During the Lifetime Income Period monies
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deposited to the general account will receive the then current crediting rate.
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 vary on an annual basis 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.
i4LIFE (Reg. TM) Advantage Death Benefit
i4LIFE (Reg. TM) Advantage Guarantee of Principal Death Benefit. The i4LIFE
(Reg. TM) Advantage Guarantee of Principal death benefit is available for
qualified contracts 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 additional withdrawals (including withdrawals to provide the
Guaranteed Income Benefit).
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 prior to that election. Regular Income Payments are
deducted from the death benefit before any additional withdrawals when
determining the death benefit.
The following example demonstrates the impact of a withdrawal on your death
benefit:
Total Purchase Payments $200,000
Total i4LIFE (Reg. TM) Advantage Regular Income Payments $25,000
Additional Withdrawal $15,000
Death Benefit Value after i4LIFE (Reg. TM) Advantage withdrawal = $200,000 -
$25,000 = $175,000
Death Benefit value after additional withdrawal = $175,000 - $15,000 = $160,000
General Death Benefit Provisions. 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.
During the access period, if the single life option has been elected, then upon
the death of the annuitant, the Regular Income Payments will cease and this
rider will terminate. If the joint life option has been elected, then upon the
death of the annuitant, the Secondary Life, if still surviving, as spouse and
primary beneficiary, may terminate the contract and this rider and receive full
payment of the death benefit or elect to continue the contract and this rider
and receive Regular Income Payments for his/her lifetime. Upon the death of the
Secondary Life, the annuitant if still surviving, may continue to receive
Regular Income Payments for the remainder of the access period and for the
Lifetime Income Period or may elect to terminate this rider. If neither the
annuitant nor the Secondary Life is still surviving, the Regular Income
Payments will cease and this rider will terminate.
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
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 IRC
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 Lincoln Life of the death, Regular Income Payments may be
suspended until the death claim is approved. If this rider is continued, upon
approval of the death claim the excess, if any, of the death benefit over the
Account Value will be credited into the contract at that time and a lump sum
payment for the value of any suspended payments, as of the date the death claim
is approved, will be made and the Regular Income Payments will restart.
Otherwise, this rider terminates.
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.
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 will be reduced in the same proportion
as the withdrawal reduces the Account Value. Withdrawals may have tax
consequences. Withdrawals are subject to any applicable surrender charges
except when amounts may be withdrawn free of surrender charges. The Interest
Adjustment may apply.
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The following example demonstrates the impact of a withdrawal on the Regular
Income Payments and the Guaranteed Income Benefit Payments:
i4LIFE (Reg. TM) Advantage Regular Income Payment before Withdrawal $1,200
Guaranteed Income Benefit before Withdrawal $750
Account Value at time of Additional Withdrawal $150,000
Additional Withdrawal $15,000 (a 10% withdrawal)
Reduction in i4LIFE (Reg. TM) Advantage Regular Income Payment for Withdrawal =
$1,200 x 10% = $120
i4LIFE (Reg. TM) Advantage Regular Income Payment after Withdrawal = $1,200 -
$120 = $1,080
Reduction in Guaranteed Income Benefit for Withdrawal = $750 x 10% = $75
Guaranteed Income Benefit after Withdrawal = $750 - $75 = $675
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. Withdrawals are subject to any applicable surrender charges
except when amounts may be withdrawn free of surrender charges.
Termination. 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. Upon termination, we will stop assessing the
charge for i4LIFE (Reg. TM) Advantage and assess the mortality and expense risk
charge and administrative charge associated with the contract without this
feature. Your contract value upon termination will be equal to the Account
Value on the valuation date we terminate i4LIFE (Reg. TM) Advantage.
Availability. The availability of i4LIFE (Reg. TM) Advantage will depend upon
your state's approval of the i4LIFE (Reg. TM) Advantage contract rider. Please
check with your registered representative for availability.
Guaranteed Income Benefit with i4LIFE (Reg. TM) Advantage for Qualified
Contracts
The Guaranteed Income Benefit ensures that your Regular Income Payments will
never be less than a minimum amount, adjusted for withdrawals, regardless of
the actual investment performance of your contract. The Guaranteed Income
Benefit is in effect during both the access period and the Lifetime Income
Period.
The Guaranteed Income Benefit is initially equal to 75% of the initial Regular
Income Payment. If the amount of your i4LIFE (Reg. TM) Advantage Regular Income
Payment (which is based on your i4LIFE (Reg. TM) Advantage Account Value) has
fallen below the Guaranteed Income Benefit, because of poor investment results,
a payment equal to the Guaranteed Income Benefit is the minimum payment you
will receive. 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. This additional amount will be withdrawn 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 the payment of
the Guaranteed Income Benefit, 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. 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 Secondary Life, if applicable, is living.
The Guaranteed Income Benefit has an automatic step-up feature that works as
follows: During the 15-year step-up period, the Guaranteed Income Benefit will
automatically step-up every three years to 75% of the current Regular Income
Payment, if that result is greater than the immediately prior Guaranteed Income
Benefit. The 15-year period will run from the Periodic Income Commencement
Date, or the date of the most recent reset of the 15-year step-up period. Each
3-year step-up occurs on the valuation date of the first Regular Income Payment
in the first calendar year of each 3-year period. . At the end of a 15-year
step-up period, the contractowner may continue with the current Guaranteed
Income Benefit amount at the current fee with no further step-ups or
alternatively elect a new 15-year step-up period by submitting a written
request to the Home Office. If a new 15-year step-up period is elected, the
i4LIFE (Reg. TM) Advantage fee will be the current charge in effect at the time
of the step-up election period. A new step-up period may be elected during the
Access and Lifetime Income periods, but the new step-up period must be elected
at or before the end of the previous step-up period or no new step-up period
may be elected in the future. If you prefer, when you start the Guaranteed
Income Benefit, you can request that Lincoln administer the election of a new
15-year step-up period for you. After Lincoln administers this election, you
have 30 days to notify us if you wish to reverse the election. If a new 15-year
step-up period is elected, the i4LIFE (Reg. TM) Advantage charge may increase
subject to the guaranteed maximum annual percentage charge of 1.50%.
The Guaranteed Income Benefit is reduced by withdrawals (other than Regular
Income Payments or Guaranteed Income Benefit payments) in the same proportion
that the withdrawals reduce the Account Value. See i4LIFE (Reg. TM) Advantage -
General i4LIFE (Reg. TM) Advantage Provisions to see the impact of a withdrawal
on the Regular Income Payments and the Guaranteed Income Benefit.
If you choose to lengthen your Access Period, (which must be increased by a
minimum of 5 years up to the maximum available) thereby reducing your Regular
Income Payment, your Guaranteed Income Benefit will also be reduced. The
Guaranteed Income Benefit will be reduced in proportion to the reduction in the
Regular Income Payment. You may not shorten your Access Period.
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4LATER (Reg. TM) Advantage (for Non-Qualified Contracts or IRAs only)
4LATER (Reg. TM) Advantage provides protection against market loss for your
i4LIFE (Reg. TM) Advantage Regular Income Payments. 4LATER (Reg. TM) Advantage
includes the calculation of an Income Base (described below), prior to the time
Regular Income Payments begin, which is then used to establish a minimum payout
floor for the Regular Income Payments. The minimum payout floor called the
4LATER (Reg. TM) Advantage Guaranteed Income Benefit ensures that once you
elect i4LIFE (Reg. TM) Advantage, you will always receive a payout amount at
least equal to the Guaranteed Income Benefit, regardless of market performance.
Election of this rider may limit how much you can invest in certain
subaccounts. See the Contracts - Investment Requirements - Option 1. 4LATER
(Reg. TM) Advantage is available for non-qualified contracts and IRAs only.
This rider is no longer available for sale as of July 16, 2012, or when 4LATER
(Reg. TM) Advantage Protected Funds is available in your state.
4LATER (Reg. TM) Advantage Prior to i4LIFE (Reg. TM) Advantage
The following discussion covers the operation of 4LATER (Reg. TM) Advantage
during the accumulation phase of your annuity. This is prior to the time i4LIFE
(Reg. TM) Advantage Regular Income Payments begin.
Income Base. The Income Base is a value established when you purchase 4LATER
(Reg. TM) Advantage and will only be used to calculate the 4LATER (Reg. TM)
Advantage Guaranteed Income Benefit at a later date. The Income Base is not
available for withdrawals or as a death benefit. If you elect 4LATER (Reg. TM)
Advantage at the time you purchase the contract, the Income Base initially
equals the purchase payments. If you elect 4LATER (Reg. TM) Advantage after we
issue the contract, the Income Base will initially equal the contract value on
the 4LATER (Reg. TM) Advantage rider effective date. 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 automatically increase the Income Base by the amount of the purchase
payments. 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.
As described below, during the accumulation period, the Income Base will be
automatically enhanced by 15% (adjusted for additional purchase payments and
withdrawals as described in the Future Income Base section below) at the end of
each Waiting Period. In addition, after the Initial Waiting Period, you may
elect to reset your Income Base to the current contract value if your contract
value has grown beyond the 15% enhancement. You may elect this reset on your
own or you may choose to have Lincoln Life automatically reset the Income Base
for you at the end of each Waiting Period. These reset options are discussed
below. Then, when you are ready to elect i4LIFE (Reg. TM) Advantage and
establish the 4LATER (Reg. TM) Advantage Guaranteed Income Benefit, the Income
Base is used in the 4LATER (Reg. TM) Advantage Guaranteed Income Benefit
calculation.
Waiting Period. The Waiting Period is each consecutive 3-year period which
begins on the 4LATER (Reg. TM) Advantage rider effective date, or on the date
of any reset of the Income Base to the contract value. At the end of each
completed Waiting Period, the Income Base is increased by 15% (as adjusted for
purchase payments and withdrawals) to equal the Future Income Base as discussed
below. The Waiting Period is also the amount of time that must pass before the
Income Base can be reset to the current contract value. A new Waiting Period
begins after each reset and must be completed before the next 15% enhancement
or another reset occurs.
Future Income Base. 4LATER (Reg. TM) Advantage provides a 15% automatic
enhancement to the Income Base after a 3-year Waiting Period. This enhancement
will continue every 3 years until i4LIFE (Reg. TM) Advantage is elected, you
terminate 4LATER (Reg. TM) Advantage or you reach the Maximum Income Base. See
Maximum Income Base. During the Waiting Period, the Future Income Base is
established to provide the value of this 15% enhancement on the Income Base.
After each 3-year Waiting Period is satisfied, the Income Base is increased to
equal the value of the Future Income Base. The 4LATER (Reg. TM) Advantage
charge will then be assessed on this newly adjusted Income Base, but the
percentage charge will not change.
Any purchase payment made after the 4LATER (Reg. TM) Advantage rider Effective
Date, but within 90 days of the contract effective date, will increase the
Future Income Base by the amount of the purchase payment plus 15% of that
purchase payment.
Example:
Initial Purchase Purchase payment....................... $100,000
Purchase Purchase payment 60 days later................. $ 10,000
--------
Income Base............................................. $110,000
Future Income Base (during the 1st Waiting Period)...... $126,500 ($110,000 x 115%)
Income Base (after 1st Waiting Period).................. $126,500
New Future Income Base (during 2nd Waiting Period)...... $145,475 ($126,500 x 115%)
Any purchase payments made after the 4LATER (Reg. TM) Advantage rider Effective
Date and more than 90 days after the contract effective date will increase the
Future Income Base by the amount of the purchase payment plus 15% of that
purchase payment on a pro-rata basis for the number of full years remaining in
the current Waiting Period.
Example:
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Income Base................................................ $100,000
Purchase Purchase Payment in Year 2........................ $ 10,000
--------
New Income Base............................................ $110,000
Future Income Base (during 1st Waiting Period-Year 2)...... $125,500 ($100,000 x 115%) + ($10,000 x 100%) +
(10,000 x 15% x 1/3)
Income Base (after 1st Waiting Period)..................... $125,500
New Future Income Base (during 2nd Waiting Period)......... $144,325 (125,500 x 115%)
Withdrawals reduce the Future Income Base in the same proportion as the amount
withdrawn reduces the contract value on the valuation date of the withdrawal.
During any subsequent Waiting Periods, if you elect to reset the Income Base to
the contract value, the Future Income Base will equal 115% of the contract
value on the date of the reset and a new Waiting Period will begin. See Resets
of the Income Base to the current contract value below.
In all situations, the Future Income Base is subject to the Maximum Income Base
described below. The Future Income Base is never available to the contractowner
to establish a 4LATER (Reg. TM) Advantage Guaranteed Income Benefit, but is the
value the Income Base will become at the end of the Waiting Period.
Maximum Income Base. The Maximum Income Base is equal to 200% of the Income
Base on the 4LATER (Reg. TM) Advantage rider effective date. The Maximum Income
Base will be increased by 200% of any additional purchase payments. In all
circumstances, the Maximum Income Base can never exceed $10,000,000.
After a reset to the current contract value, the Maximum Income Base will equal
200% of the contract value on the valuation date of the reset not to exceed
$10,000,000.
Each withdrawal will reduce the Maximum Income Base in the same proportion as
the amount withdrawn reduces the contract value on the valuation date of the
withdrawal.
Example:
Income Base................................. $100,000 Maximum Income Base................... $200,000
Purchase Purchase Payment in Year 2......... $ 10,000 Increase to Maximum Income Base....... $ 20,000
New Income Base............................. $110,000 New Maximum Income Base............... $220,000
Future Income Base after Purchase Purchase
Payment.................................... $125,500 Maximum Income Base................... $220,000
Income Base (after 1st Waiting Period)...... $125,500
Future Income Base (during 2nd Waiting
Period).................................... $144,325 Maximum Income Base................... $220,000
Contract Value in Year 4.................... $112,000
Withdrawal of 10%........................... $ 11,200
After Withdrawal (10% adjustment)
Contract Value.............................. $100,800
Income Base................................. $112,950
Future Income Base.......................... $129,892 Maximum Income Base................... $198,000
Resets of the Income Base to the current contract value ("Resets"). You may
elect to reset the Income Base to the current contract value at any time after
the initial Waiting Period following: (a) the 4LATER (Reg. TM) Advantage rider
effective date or (b) any prior reset of the Income Base. Resets are subject to
a maximum of $10,000,000 and the annuitant must be under age 81. You might
consider resetting the Income Base if your contract value has increased above
the Income Base (including the 15% automatic Enhancements) and you want to
lock-in this increased amount to use when setting the Guaranteed Income
Benefit. If the Income Base is reset to the contract value, the 15% automatic
Enhancement will not apply until the end of the next Waiting Period.
This reset may be elected by sending a written request to our HomeOffice or by
specifying at the time of purchase that you would like us to administer this
reset election for you. If you want us to administer this reset for you, at the
end of each 3-year Waiting Period, if the contract value is higher than the
Income Base (after the Income Base has been reset to the Future Income Base),
we will implement this election and the Income Base will be equal to the
contract value on that date. We will notify you that a reset has occurred. This
will continue until you elect i4LIFE (Reg. TM) Advantage, the annuitant reaches
age 81, or you reach the Maximum Income Base. If we administer this reset
election for you, you have 30 days after the election to notify us if you wish
to reverse this election and have your Income Base increased to the Future
Income Base instead. You may wish to reverse this election if you are not
interested in the increased charge. If the contract value is less than the
Income Base on any reset date, we will not administer this reset. We will not
attempt to administer another reset until the end of the next 3-year Waiting
Period; however, you have the option to request a reset during this period by
sending a written request to our HomeOffice.
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At the time of each reset (whether you elect the reset or we administer the
reset for you), the annual charge will change to the current charge in effect
at the time of the reset, not to exceed the guaranteed maximum charge. At the
time of reset, a new Waiting Period will begin. Subsequent resets may be
elected at the end of each new Waiting Period. The reset will be effective on
the next valuation date after notice of the reset is approved by us.
We reserve the right to restrict resets to Benefit Year anniversaries. The
Benefit Year is the 12-month period starting with the 4LATER (Reg. TM)
Advantage rider effective date and starting with each anniversary of the 4LATER
(Reg. TM) Advantage rider effective date after that. If the contractowner
elects to reset the Income Base, the Benefit Year will begin on the effective
date of the reset and each anniversary of the effective date of the reset after
that.
4LATER (Reg. TM) Advantage Guaranteed Income Benefit
When you are ready to elect i4LIFE (Reg. TM) Advantage Regular Income Payments,
the greater of the Income Base accumulated under the 4LATER (Reg. TM) Advantage
or the contract value will be used to calculate the 4LATER (Reg. TM) Advantage
Guaranteed Income Benefit. The 4LATER (Reg. TM) Advantage Guaranteed Income
Benefit is a minimum payout floor for your i4LIFE (Reg. TM) Advantage Regular
Income Payments.
The Guaranteed Income Benefit will be determined by dividing the greater of the
Income Base or contract value on the Periodic Income Commencement Date, by 1000
and multiplying the result by the rate per $1000 from the Guaranteed Income
Benefit Table in your 4LATER (Reg. TM) Advantage rider. If the contract value
is used to establish the 4LATER (Reg. TM) Advantage Guaranteed Income Benefit,
this rate provides a Guaranteed Income Benefit not less than 75% of the initial
i4LIFE (Reg. TM) Advantage Regular Income Payment (which is also based on the
contract value). If the Income Base is used to establish the Guaranteed Income
Benefit (because it is larger than the contract value), the resulting
Guaranteed Income Benefit will be more than 75% of the initial i4LIFE (Reg. TM)
Advantage Regular Income Payment.
If the amount of your i4LIFE (Reg. TM) Advantage Regular Income Payment (which
is based on your i4LIFE (Reg. TM) Advantage Account Value) has fallen below the
4LATER (Reg. TM) Advantage Guaranteed Income Benefit, because of poor
investment results, a payment equal to the 4LATER (Reg. TM) Advantage
Guaranteed Income Benefit is the minimum payment you will receive. If the
4LATER (Reg. TM) Advantage Guaranteed Income Benefit is paid, it will be paid
with the same frequency as your i4LIFE (Reg. TM) Advantage Regular Income
Payment. If your Regular Income Payment is less than the 4LATER (Reg. TM)
Advantage Guaranteed Income Benefit, we will reduce your i4LIFE (Reg. TM)
Advantage Account Value by the Regular Income Payment plus an additional amount
equal to the difference between your Regular Income Payment and the 4LATER
(Reg. TM) Advantage Guaranteed Income Benefit. This withdrawal from your
Account Value will be made from the subaccounts and the fixed account on a
pro-rata basis according to your investment allocations.
The following example illustrates how poor investment performance, which
results in a Guaranteed Income Benefit payment, affects the i4LIFE (Reg. TM)
Account Value:
4LATER (Reg. TM) Guaranteed Income Benefit.......................... $ 5,692
i4LIFE (Reg. TM) Regular Income Payment............................. $ 5,280
i4LIFE (Reg. TM) Account Value before payment....................... $ 80,000
Regular Income Payment.............................................. $ (5,280)
Additional payment for 4LATER (Reg. TM) Guaranteed Income Benefit... $ (412)
--------
i4LIFE (Reg. TM) Account Value after payment........................ $ 74,308
If your Account Value reaches zero as a result of withdrawals to provide the
4LATER (Reg. TM) Advantage Guaranteed Income Benefit, we will continue to pay
you an amount equal to the 4LATER (Reg. TM) Advantage Guaranteed Income
Benefit.
When your Account Value reaches zero, your i4LIFE (Reg. TM) Advantage Access
Period will end and the i4LIFE (Reg. TM) Advantage Lifetime Income Period will
begin. Additional amounts withdrawn from the Account Value to provide the
4LATER (Reg. TM) Advantage Guaranteed Income Benefit may terminate your Access
Period earlier than originally scheduled and will reduce your death benefit.
See i4LIFE (Reg. TM) Advantage Death Benefits. After the Access Period ends, we
will continue to pay the 4LATER (Reg. TM) Advantage Guaranteed Income Benefit
for as long as the annuitant (or for nonqualified contracts, the secondary
life, if applicable) is living (i.e., the i4LIFE (Reg. TM) Advantage Lifetime
Income Period). If your Account Value equals zero, no death benefit will be
paid.
If the market performance in your contract is sufficient to provide Regular
Income Payments at a level that exceeds the 4LATER (Reg. TM) Advantage
Guaranteed Income Benefit, the 4LATER (Reg. TM) Advantage Guaranteed Income
Benefit will never come into effect.
The 4LATER (Reg. TM) Advantage Guaranteed Income Benefit will automatically
step-up every three years to 75% of the then current Regular Income Payment, if
that result is greater than the immediately prior 4LATER (Reg. TM) Advantage
Guaranteed Income Benefit. The step-up will occur on every third Periodic
Income Commencement Date anniversary for 15 years. At the end of a 15-year
step-up period, the contractowner may elect a new 15-year step-up period by
submitting a written request to the HomeOffice. If you prefer, when you start
the Guaranteed Income Benefit, you can request that we administer this election
for you. At the time of a reset of the 15 year period, the charge for the
4LATER (Reg. TM) Advantage Guaranteed Income Benefit will become the current
charge up to the guaranteed maximum charge. After we administer this election,
you have 30 days to notify us if you wish to reverse the election (because you
do not wish to incur the additional cost).
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Under 4LATER (Reg. TM) Advantage, additional purchase payments cannot be made
to your contract after the Periodic Income Commencement Date. The 4LATER (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. You may want to discuss the impact of additional withdrawals
with your financial adviser.
Impacts to i4LIFE (Reg. TM) Advantage Regular Income Payments. At the time you
elect i4LIFE (Reg. TM) Advantage, you also select the Access Period. See i4LIFE
(Reg. TM) Advantage - Access Period. Generally, shorter Access Periods will
produce a higher initial i4LIFE (Reg. TM) Advantage Regular Income Payment and
higher Guaranteed Income Benefit payments than longer Access Periods. The
minimum Access Period required with the 4LATER (Reg. TM) Advantage Guaranteed
Income Benefit is currently the longer of 15 years or the difference between
your current age (nearest birthday) and age 85. We reserve the right to
increase this minimum prior to the election of 4LATER (Reg. TM) Advantage,
subject to the terms in your rider. (Note: i4LIFE (Reg. TM) Advantage can have
a shorter Access Period if a Guaranteed Income Benefit is not provided.)
If you choose to lengthen your Access Period at a later date, thereby
recalculating and reducing your Regular Income Payment, your 4LATER (Reg. TM)
Advantage Guaranteed Income Benefit will also be recalculated and reduced. The
4LATER (Reg. TM) Advantage Guaranteed Income Benefit will be adjusted in
proportion to the reduction in the Regular Income Payment. If you choose to
shorten your Access Period, the 4LATER (Reg. TM) Advantage rider will
terminate.
When you make your 4LATER (Reg. TM) Advantage Guaranteed Income Benefit and
i4LIFE (Reg. TM) Advantage elections, you must also choose an assumed
investment return of 4% to calculate your i4LIFE (Reg. TM) Advantage Regular
Income Payments. Once you have elected 4LATER (Reg. TM) Advantage, the assumed
investment return rate will not change; however, we may change the required
assumed investment return rate in the future for new purchasers only.
The following is an example of what happens when you extend the Access Period:
Assume:
i4LIFE (Reg. TM) Advantage remaining Access Period = 10 years
Current i4LIFE (Reg. TM) Advantage Regular Income Payment = $6,375
Current 4LATER (Reg. TM) Advantage Guaranteed Income Benefit = $5,692
Extend Access Period 5 years:
i4LIFE (Reg. TM) Advantage Regular Income Payment after extension = $5,355
Reduction in i4LIFE (Reg. TM) Advantage Regular Income Payment = $5,355 -
$6,375 = 84%
Reduction in 4LATER (Reg. TM) Advantage Guaranteed Income Benefit = $5,692 x
84% = $4,781
General Provisions of 4LATER (Reg. TM) Advantage
Eligibility. To purchase 4LATER (Reg. TM) Advantage, all contractowners and the
annuitant must be age 80 or younger. Contractowners of qualified contracts
should be younger than age 77 to receive the full benefit of 4LATER (Reg. TM)
Advantage, since i4LIFE (Reg. TM) Advantage must be elected by age 80. If you
plan to elect i4LIFE (Reg. TM) Advantage within three years of the issue date
of 4LATER (Reg. TM) Advantage, you will not receive the benefit of the Future
Income Base.
4LATER (Reg. TM) Advantage Rider Effective Date. If 4LATER (Reg. TM) Advantage
is elected at contract issue, then it will be effective on the contract's
effective date. If 4LATER (Reg. TM) Advantage is elected after the contract is
issued (by sending a written request to our HomeOffice), then it will be
effective on the next valuation date following approval by us.
Termination. After the later of the third anniversary of the 4LATER (Reg. TM)
Advantage rider Effective Date or the most recent Reset, the 4LATER (Reg. TM)
Advantage rider may be terminated upon written notice to us. Prior to the
Periodic Income Commencement Date, 4LATER (Reg. TM) Advantage will
automatically terminate upon any of the following events:
o termination of the contract to which this 4LATER (Reg. TM) Advantage rider
is attached;
o the change of or the death of the annuitant (except if the surviving spouse
assumes ownership of the contract and the role of the annuitant upon death
of the contractowner); or
o the change of contractowner (except if the surviving spouse assumes
ownership of the contract and the role of annuitant upon the death of the
contractowner); 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).
After the Periodic Income Commencement Date, the 4LATER (Reg. TM) Advantage
rider 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.
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 4LATER (Reg. TM) Advantage
Guaranteed Income Benefit and not the i4LIFE (Reg. TM) Advantage election,
unless otherwise specified.
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If you terminate 4LATER (Reg. TM) Advantage prior to the Periodic Income
Commencement Date, you must wait one year before you can re-elect 4LATER (Reg.
TM) Advantage or purchase the Lincoln SmartSecurity (Reg. TM) Advantage or
Lincoln Lifetime IncomeSM Advantage 2.0. If you terminate the 4LATER (Reg. TM)
Advantage rider on or after the Periodic Income Commencement Date, you cannot
re-elect it. You may be able to elect the i4LIFE (Reg. TM) Advantage Guaranteed
Income Benefit, if available, after one year. The i4LIFE (Reg. TM) Advantage
Guaranteed Income Benefit will be based on the Account Value at the time of the
election. The election of one of these benefits, if available, will be treated
as a new purchase, subject to the terms and charges in effect at the time of
election.
Availability. The availability of 4LATER (Reg. TM) Advantage will depend upon
your state's approval of the 4LATER (Reg. TM) Advantage rider. You cannot elect
4LATER (Reg. TM) Advantage after an annuity payout option has been elected,
including i4LIFE (Reg. TM) Advantage or Income4Life (Reg. TM) Solution and it
cannot be elected on contracts that currently have Lincoln SmartSecurity (Reg.
TM) Advantage, Lincoln Lifetime IncomeSM Advantage 2.0 or Lincoln Lifetime
IncomeSM Advantage.
Contractowners who drop Lincoln SmartSecurity (Reg. TM) Advantage or Lincoln
Lifetime IncomeSM Advantage and elect 4LATER (Reg. TM) Advantage will not carry
their Guaranteed Amount over into the new 4LATER (Reg. TM) Advantage.
Contractowners who drop Lincoln Lifetime IncomeSM Advantage 2.0 will not carry
their Income Base over into the new 4LATER (Reg. TM) Advantage. The 4LATER
(Reg. TM) Advantage Income Base will be established based on the
contractowner's contract value on the effective date of 4LATER (Reg. TM)
Advantage. Contractowners who drop Lincoln SmartSecurity (Reg. TM) Advantage,
Lincoln Lifetime IncomeSM Advantage 2.0 or Lincoln Lifetime IncomeSM Advantage
will have to wait one year before they can elect 4LATER (Reg. TM) Advantage.
See The Contracts - Lincoln SmartSecurity (Reg. TM) Advantage, Lincoln Lifetime
IncomeSM Advantage 2.0 or Lincoln Lifetime IncomeSM Advantage.
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. If we
surrender your contract, we will not assess any surrender or other charge.
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.
We may defer payments from the fixed side of the contract 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.
Reinvestment Privilege
You may elect to make a reinvestment purchase with any part of the proceeds of
a surrender/withdrawal, and we will recredit that portion of the
surrender/withdrawal charges attributable to the amount returned.
This election must be made by your written authorization to us and received in
our office within 30 days of the date of the surrender/
withdrawal, and the repurchase must be of a contract covered by this
prospectus. 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 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. You should consult a
tax adviser before you request a surrender/withdrawal or subsequent
reinvestment purchase.
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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).
Annuity Payouts
When you apply for a contract, you may select any Annuity Commencement Date
permitted by law. (Please note the following exception: Contracts issued under
qualified employee pension and profit-sharing trusts [described in Section
401(a) and tax exempt under Section 501(a) of the tax code] and qualified
annuity plans [described in Section 403(a) of the tax code], including H.R. 10
trusts and plans covering self-employed individuals and their employees,
provide for annuity payouts to start at the date and under the option specified
in the plan.)
The contract provides that all or part of the contract value may be used to
purchase an 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.
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 Maximum Annual Withdrawal Amount
Annuity Payout option, the Guaranteed Annual Income Amount Annuity Payout
Option or the Guaranteed 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 he or she 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 Guaranteed 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.
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. This option provides 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.
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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 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. The mortality and expense risk charge of 1.002% 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.
Lincoln SmartIncomeSM Inflation (for Non-Qualified Contracts or IRAs only). 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 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
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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.
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:
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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
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:
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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.
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
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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:
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:
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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
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:
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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
General information
The annuity commencement date is usually on or before the annuitant's 85th
birthday; however you may change the annuity commencement date, change the
annuity option, or change the allocation of the allocations among the
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. If proceeds become
available to a beneficiary in a lump sum, the beneficiary may choose any
annuity payout option.
Unless you select another option, the contract automatically provides for a
life with a 10 year guaranteed period annuity (on a fixed, variable or
combination fixed and variable basis, in proportion to the account allocation
at the time of annuitization), except when a joint life payout is required by
law. Under any option providing for guaranteed payouts, the number of payouts
which remain unpaid at the date of the annuitant's death (or surviving
annuitant's death in the case of a joint life annuity) will be paid to your
beneficiary as payouts become due after we are in receipt of all of the
following:
o proof, satisfactory to us, of the death;
o written authorization for payment;
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;
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.
We assume an investment return of 5% per year, as applied to the applicable
mortality table. The amount of each payout after the initial payout will depend
upon how the underlying fund(s) and series perform, relative to the 5% assumed
rate. If the actual net investment rate (annualized) exceeds 5%, the annuity
payout will increase at a rate proportional to the amount of such excess.
Conversely, if the actual rate is less than 5% annuity payments will decrease.
There is a more complete explanation of this calculation in the SAI.
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 selling agreements
with Lincoln Financial Advisors Corporation and/or Lincoln Financial Securities
Corporation (collectively "LFN"), also affiliates of ours. The Principal
Underwriter has also entered into selling agreements with broker-dealers that
are unaffiliated with us ("Selling Firms"). While the Principal Underwriter has
the legal authority to make payments to broker-dealers which have entered into
selling agreements, 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
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our contracts. The Principal Underwriter may also offer "non-cash
compensation", as defined under FINRA's rules, which includes among other
things, merchandise, gifts and prizes, office space and equipment, seminars and
travel expenses. You may ask your registered representative how he/she will
personally be compensated, in whole or in part, for the sale of the contract to
you or for any alternative proposal that may have been presented to you. You
may wish to take such compensation payments into account when considering and
evaluating any recommendation made to you in connection with the purchase of a
contract. The following paragraphs describe how payments are made by us and the
Principal Underwriter to various parties.
Compensation Paid to LFN. The maximum commission we pay to LFN is 9.00% of
purchase payments, plus up to 0.1256% quarterly based on contract value. LFN
may elect to receive a lower commission when a purchase payment is made along
with an earlier quarterly payment based on contract value for so long as the
contract remains in effect. Upon annuitization, the maximum commission we pay
to LFN is 4.60% of annuitized value and/or ongoing annual compensation of up to
0.75% of annuity value or statutory reserves.
We also pay for the operating and other expenses of LFN, including the
following sales expenses: sales representative training allowances;
compensation and bonuses for LFN's management team; advertising expenses; and
all other expenses of distributing the contracts. LFN pays its sales
representatives a portion of the commissions received for their sales of
contracts. LFN sales representatives and their managers are also eligible for
various cash benefits, such as bonuses, insurance benefits and financing
arrangements. In addition, LFN sales representatives who meet certain
productivity, persistency and length of service standards and/or their managers
may be eligible for additional compensation. Sales of the contracts may help
LFN sales representatives and/or their managers qualify for such benefits. LFN
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.
Compensation Paid to Unaffiliated Selling Firms. We pay commissions to all
Selling Firms. The maximum commission we pay to Selling Firms, other than LFN,
is 5.85% of purchase payments, plus up to 0.1256% quarterly based on contract
value. Some Selling Firms may elect to receive a lower commission when a
purchase payment is made along with an earlier quarterly payment based on
contract value for so long as the contract remains in effect. Upon
annuitization, the maximum commission paid to Selling Firms is 4.25% of
annuitized value and/or ongoing annual compensation of up to 0.75% of annuity
value or statutory reserves. Lincoln Financial Distributors, Inc., our
affiliate, is a broker-dealer and acts as wholesaler of the contracts and
performs certain marketing and other functions in support of the distribution
and servicing of the contracts.
LFD may pay certain Selling Firms or their affiliates additional amounts for,
among other things: (1) "preferred product" treatment of the contracts in their
marketing programs, which may include marketing services and increased access
to sales representatives; (2) sales promotions relating to the contracts; (3)
costs associated with sales conferences and educational seminars for their
sales representatives; (4) other sales expenses incurred by them; and (5)
inclusion in the financial products the Selling Firm offers.
Lincoln Life may provide loans to broker-dealers or their affiliates to help
finance marketing and distribution of the contracts, and those loans may be
forgiven if aggregate sales goals are met. In addition, we may provide staffing
or other administrative support and services to broker-dealers who distribute
the contracts. LFD, as wholesaler, may make bonus payments to certain Selling
Firms based on aggregate sales of our variable insurance contracts (including
the contracts) or persistency standards.
These additional types of compensation are not offered to all Selling Firms.
The terms of any particular agreement governing compensation may vary among
Selling Firms and the amounts may be significant. The prospect of receiving, or
the receipt of, additional compensation may provide Selling Firms and/or their
registered representatives with an incentive to favor sales of the contracts
over other variable annuity contracts (or other investments) with respect to
which a Selling Firm does not receive additional compensation, or lower levels
of additional compensation. You may wish to take such payment arrangements into
account when considering and evaluating any recommendation relating to the
contracts. Additional information relating to compensation paid in 2012 is
contained in the SAI.
Compensation Paid to Other Parties. Depending on the particular selling
arrangements, there may be others whom LFD compensates for the distribution
activities. For example, LFD may compensate certain "wholesalers", who control
access to certain selling offices, for access to those offices or for
referrals, and that compensation may be separate from the compensation paid for
sales of the contracts. LFD may compensate marketing organizations,
associations, brokers or consultants which provide marketing assistance and
other services to broker-dealers who distribute the contracts, and which may be
affiliated with those broker-dealers. 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.
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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. 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.
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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 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).
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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. 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
We do not offer certain types of qualified plans for all of our annuity
products. Check with your representative concerning qualified plan availability
for this product.
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.
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If your contract was issued pursuant to a 403(b) plan, we now are generally
required to confirm, with your 403(b) plan sponsor or otherwise, that
contributions (purchase payments), as well as surrenders, loans or transfers
you request, comply with applicable tax requirements and to decline purchase
payments or requests that are not in compliance. We will defer crediting
purchase payments we receive or processing payments you request until all
information required under the tax law has been received. By directing purchase
payments to the contract or requesting a surrender, loan or transfer, you
consent to the sharing of confidential information about you, the 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.
Also, for 403(b) contracts issued on or after January 1, 2009, amounts
attributable to employer contributions are subject to restrictions on
withdrawals specified in your employer's 403(b) plan, in order to comply with
new tax regulations (previously, only amounts attributable to your salary
reduction contributions were subject to withdrawal restrictions). Amounts
transferred to a 403(b) contract from other 403(b) contracts or accounts must
generally be subject to the same restrictions on withdrawals applicable under
the prior contract or account.
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.
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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 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.
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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 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 2340, Fort Wayne, IN 46801-2340. A
contract canceled under this provision will be void. With respect to the fixed
side of a contract, we will return purchase payments. With respect to the VAA,
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 account charge and any premium taxes which had been deducted. No
surrender charge will apply. A purchaser who participates in the VAA is subject
to the risk of a market loss 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, in the
manner specified above, except that we will return only the purchase
payment(s). IRA purchasers will receive purchase payments only.
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.
Restrictions Under the Texas Optional Retirement Program
Title 8, Section 830.105 of the Texas Government Code, consistent with prior
interpretations of the Attorney General of the State of Texas, permits
Participants in the Texas Optional Retirement Program (ORP) to redeem their
interest in a variable annuity contract issued under the ORP only upon:
o Termination of employment in all institutions of higher education as defined
in Texas law;
o Retirement; or
o Death.
Accordingly, a Participant in the ORP will be required to obtain a certificate
of termination from their employer before accounts can be redeemed.
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.
You have the option of receiving contract-related information (such as
prospectuses, quarterly statements, semi-annual and annual reports) from Us
electronically, 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
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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.LincolnRetirement.com, select service
centers and continue on through the Internet Service Center.
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.
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Contents of the Statement of Additional Information (SAI)
for Lincoln National Variable Annuity Account C
Item
Special Terms
Services
Principal Underwriter
Purchase of Securities Being Offered
Annuity Payouts
Examples of Regular Income Payment
Calculations
Determination of Accumulation and Annuity Unit
Value
Capital Markets
Advertising & Ratings
Additional Services
Other Information
Financial Statements
For a free copy of the SAI complete the form below.
Statement of Additional Information Request Card
Individual Variable Annuity Contracts
Lincoln National Variable Annuity Account C
.
Please send me a free copy of the current Statement of Additional Information
for Lincoln National Variable Annuity
Account C.
(Please Print)
Name: -------------------------------------------------------------------------
Address: ----------------------------------------------------------------------
City --------------------------------------------------- State ---------
Zip ---------
Mail to: The Lincoln National Life Insurance Co., P.O. Box 2340, Fort Wayne, IN
46801-2340
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