EXHIBIT A (11)
DESCRIPTION OF TRANSFER AND REDEMPTION PROCEDURES FOR MODIFIED SINGLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES ISSUED BY
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION PURSUANT TO RULE 6e-3(T)(b)(12)(iii)
This document sets forth the administrative procedures that will be followed by
American Skandia Life Assurance Corporation ("American Skandia" or the
"Company") in connection with the issuance of its modified single premium
variable life insurance policy or (the "Policy" or "Policies"), the transfer of
assets held thereunder, and the redemption by Owners of their interests in said
Policies. The document also describes the method that American Skandia will use
in adjusting the payments and cash values when a Policy is exchanged for a fixed
benefit insurance policy pursuant to Rule 6e-3(T)(b)(13)(v)(B).
I. PURCHASE AND ISSUANCE OF POLICIES
A. PREMIUMS AND UNDERWRITING STANDARDS
The Policy is a modified single premium variable life insurance policy. The
Policy permits the Owner to pay a single premium. The minimum Premium is
generally $10,000, however, we may accept less under certain circumstances. The
maximum Premium we accept without prior approval by our home office is $500,000.
We will determine the Face Amount using the Premium as the Net Single Premium
for the Insured's age, risk class and gender, where permitted. If the Owner is
seeking a specific Face Amount, the Premium will depend on the Insured's age,
risk class, and gender, where permitted. American Skandia requires the Owner to
submit an Application and may require additional information, including, but not
limited to, some of the Insured's medical records. The Policies will be offered
and sold pursuant to established underwriting standards and in accordance with
state insurance laws, which prohibit unfair discrimination among Owners, but
recognize that premiums must be based upon factors such as age, health or
occupation.
B. APPLICATION AND INITIAL PREMIUM PROCESSING
Upon receipt of a completed Application, American Skandia will follow certain
insurance underwriting (i.e., evaluation of risks) procedures designed to
determine whether the applicant is eligible for simplified standards for
determining insurability. Standard underwriting may involve such verification
procedures as medical examinations and may require that further information be
provided by the proposed Insured before a determination can be made. As part of
our standards, we will not issue a Policy if, as of the Policy Date, the Insured
would be less than Age 20 or older than Age 90. A Policy will not be issued
until underwriting procedures have been completed.
If a premium is submitted with the Application, a temporary insurance agreement
may be issued during the underwriting period if certain requirements are met.
Temporary insurance ends 45 days after the Application is signed, even if the
underwriting period exceeds 45 days. If Temporary Insurance is not issued,
insurance coverage will begin once American Skandia has accepted the Application
and agreed to issue a Policy, subject to submission of the Premium.
C. PREMIUM ALLOCATION
In the application for a Policy, the Owner can allocate the initial premium
using one or more variable investment options and/or a Fixed Allocation. The
Fixed Allocation provides a fixed interest rate guarantee provided by American
Skandia's general account. American Skandia initially invests the portion of
premium allocated to variable investment options in the AST Money Market
Sub-account unless the Owner submits a "return waiver" In Writing before the
Issue Date, where permitted by law. Generally, American Skandia transfers the
Account Value in the AST Money Market Sub-account to the variable investment
options the Owner requested as of the Valuation Date which is on or immediately
after the 15th day after the date we issue a Policy.
II. TRANSFER AMONG INVESTMENT OPTIONS
Each variable investment option is invested in an underlying mutual fund or
portfolio of an underlying mutual fund and are Sub-accounts of the Separate
Account. Each Sub-account invests exclusively in one Portfolio. The Owner may
transfer Account Value between these investment options, however, no transfers
are permitted when the Policy is in its "grace period." The Company retains the
right to impose a limit of not more than 12 transfers per Policy Year, including
transfers involving Fixed Allocations.
Requests for transfers must be In Writing unless American Skandia receives a
prior written authorization from the Owner permitting transfers based on
instructions the Company receives over the phone. A transfer will take effect on
the date the Company's requirements are met and received at the Company's
Office, unless a later date is designated in the request for a transfer.
III. "REDEMPTION" PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. SURRENDER FOR CASH VALUE
An Owner may surrender the Policy after the end of the free-look period as long
as the Insured is alive. If the Policy is surrendered, the Company will pay the
Owner the Cash Value. A surrender request must be In Writing. American Skandia
prices surrenders, as of the date the Company's requirements are met and
received at the Company's Office.
B. PARTIAL WITHDRAWALS
Partial withdrawals are allowed while the Insured is alive, except where
permitted by law. A partial withdrawal may not be taken until after the end of
the "free-look" period. The maximum partial withdrawal amount at any time is
equal to 90% of the current Account Value less any applicable contingent
deferred sales charge and contingent deferred tax charge. Funds taken as a
partial withdrawal cannot be put back into the Policy.
A partial withdrawal reduces the Account Value by an amount equal to the amount
of the partial withdrawal. Unless instructed differently, Account Value is taken
from the variable investment options and the Fixed Allocations in the same
proportion as Account Value in the investment options on the Valuation Date such
Account Value is taken.
A partial withdrawal reduces the Death Benefit. It also reduces the Guaranteed
Minimum Death Benefit in the same proportion as the Account Value is reduced by
the partial withdrawal. The Death Benefit is reduced because the Account Value,
which is used in calculating the Death Benefit, has been reduced.
The Company charges any applicable contingent deferred sales charge and
contingent deferred tax charge on the portion of any partial withdrawal that is
not treated as a "free withdrawal" or for which we waive such charges under the
medically-related waiver provision. We take these charges pro-rata from the
investment options from which we take the Account Value as a result of the
partial withdrawal. In any Policy Year the maximum amount you can take as a free
withdrawal is the greater of Growth or 10% of the Premium.
The contingent deferred sales charge is a percentage of any amount being
surrendered or withdrawn: (a) during the first nine (9) Policy Years; and (b)
that, according to our rules, is a withdrawal of Premium, not a withdrawal of
Growth, according to the following schedule:
Policy Year Percentage
1 7.75
2 7.50
3 7.25
4 6.50
5 5.75
6 5.00
7 4.25
8 3.50
9 2.75
10+ 0.00
C. DEATH BENEFIT CLAIMS
As long as the Policy remains in force, American Skandia will usually pay the
Death Proceeds to the named Beneficiary, unless the Policy is contested. The
Death Proceeds are based on the Death Benefit as of the date the Company
receives all requirements for paying a death claim and are satisfied that the
death claim can be paid. These requirements include, but are not limited to,
receipt of a valid death certificate and information necessary to make payments
to each Beneficiary. Payment of the Death Proceeds may be postponed as permitted
pursuant to the relevant provisions of the Investment Company Act of 1940.
The Death Proceeds equal the Death Benefit under the Policy less any Debt plus
any interest amount required by law. The Death Benefit will be priced as of the
date American Skandia's requirements are met and received at their Office. The
Death Proceeds are paid as a lump sum or in accordance with payment options
described in the Policy or any other payment option selected by the Beneficiary
and agreed to by American Skandia. Generally, the Beneficiary can choose a lump
sum or one of the settlement options. However, the Owner may choose the method
of payment if such instruction is received and agreed to by American Skandia In
Writing before the Insured's death.
D. POLICY GRACE PERIOD AND REINSTATEMENT
There is no minimum Cash Value if the Owner has not taken a loan (i.e. no Debt).
American Skandia will inform the Owner if the Policy's Cash Value equals or is
less than zero on a Monthly Processing Date. Such Monthly Processing Date is the
beginning of the grace period which lasts 61 days. At that time American Skandia
will inform the Owner of the additional amount to pay to reestablish any Cash
Value. No payment is required. However, if no additional payment is made, the
Policy remains in force with the Death Benefit equal to the Guaranteed Minimum
Death Benefit as of the beginning of the grace period.
If there is any Debt on the Policy, there must always be enough Cash Value so
that after deduction of any charges on a Monthly Processing Date, the Cash Value
is more than zero. If the Cash Value would be zero or less after we deduct
charges, American Skandia will send the Owner a notice providing a 61-day "grace
period" to send American Skandia a required amount. If this amount is not paid
by the end of the grace period, the Policy ends without value.
Regardless of any outstanding Debt, an Owner cannot take a partial withdrawal in
excess of an amount that would cause the Policy's Cash Value to be equal to or
less than zero.
If the Policy lapses, the Owner may apply for reinstatement of the Policy.
American Skandia must receive such application In Writing at the Company's
Office within three years of the date the lapse occurred as measured from the
end of the grace period. In order to reinstate the Policy, the Owner must pay a
reinstatement amount, including any applicable charges and any Debt and the
Company may require satisfactory evidence of insurability.
E. MEDICALLY-RELATED WAIVER
A medically-related waiver is the Company's waiver of the contingent deferred
sales charge and the contingent deferred tax charge that would otherwise apply
to a partial withdrawal or surrender. American Skandia will consider waiving the
contingent deferred sales charge and contingent deferred tax charge, where
allowed by law, if the Company receives all of their requirements. These
requirements include, but are not limited to, satisfactory proof In Writing that
the Insured (the last surviving Insured if there is more than one Insured) has
continuously been confined to a long-term care facility, such as a nursing home
or a hospital, as defined in the Policy, and that such confinement started after
the Issue Date. A partial withdrawal under a medically-related waiver has the
same impact on the remaining benefits that results from any other partial
withdrawal.
F. ACCELERATED DEATH BENEFIT
The Company may pre-pay a portion of the Death Proceeds to the Insured in the
form of an accelerated death benefit. The maximum the Company will pay, before
any reductions, is the lesser of 50% of the Required Death Benefit or $250,000.
The actual amount is reduced by a 12-month interest rate discount (currently
6.0%) and a pro-rata portion of any Debt. The Company will only make payment if
we receive all our requirements, including but not limited to, proof
satisfactory to us In Writing that the Insured (the last surviving Insured if
there are two Insureds) became terminally ill, as defined in your Policy: (a) at
least 30 days after the Issue Date; or (b) as a result of an accident that
occurred after the Issue Date. Any such payment reduces the Account Value, the
Premium, the Guaranteed Minimum Death Benefit and any Debt in the same ratio as
the Required Death Benefit is reduced as of the Valuation Period such a payment
is made.
G. POLICY LOANS
An Owner may obtain a cash loan from American Skandia using Account Value as
collateral. The aggregate amount of all loans (including the currently applied
for loan) may not exceed 90% of the current Account Value less an applicable
Contingent Deferred Sales Charge and Contingent Deferred Tax Charge.
When a loan is taken, Account Value equal to the loan amount, is moved to the
Loan Account. Unless American Skandia is instructed differently, Account Value
is moved from the variable investment options and the Fixed Allocations in the
same proportion as Account Value is invested in the investment options on the
Valuation Date such Account value is moved. The Loan Account is a mechanism used
to ensure that any outstanding Debt remains fully secured by the Account Value.
Interest will accrue on the Debt at an annual rate of 6% per year, compounded
yearly, in arrears. Each Policy Anniversary Year that the loan is not repaid, an
amount equal to any unpaid interest is added to the Debt. The Debt and the
Account Value in the Loan Account are equalized each Policy Anniversary. The
amounts allocated to the Loan Account will bear interest at a rate of 4% per
year for "standard loans" and 6% for "preferred loans", compounded yearly, in
arrears. The portion of any outstanding loans supported by Account Value drawn
from Growth is treated as a preferred loan. The portion of any outstanding loans
supported by Account Value drawn from other than Growth is treated as a standard
loan.
The Owner is not required to repay the loan while the Insured is alive, except
when an amount is due to keep the Policy in force or upon reinstatement. The
amount of Debt is reduced by the amount of any loan repayment. Any standard loan
will be repaid before any preferred loan. A loan repayment is allocated to the
variable and fixed investment options pro-rata based on the Account Value in
each investment option as of the Valuation Period the loan repayment is
received.
The impact of a loan on the Account Value may be positive or negative. If the
Account value transferred to the Loan Account earns more than that earned in the
investment options, the loan will have a positive impact on the Account Value
and on the Required Death Benefit. If the Account value transferred to the Loan
Account earns less that that earned in the investment options, the loan will
have a negative impact on the Account Value and on the Required Death Benefit.
H. MISSTATEMENT
The Company will adjust the amount of the Death Proceeds to conform to the facts
if the age or gender of an Insured is incorrectly stated.
I. EXCHANGE FOR FIXED LIFE INSURANCE POLICY
Once the Policy is issued, it may be exchanged for a non-variable life insurance
policy on the life of the insured by allocating all of the Account Value to the
Fixed Allocation, which provides a guaranteed fixed interest rate supported by
American Skandia's general account. Such non-variable policy will be provided
without any evidence of insurability. American Skandia will not issue a new
contract. However, the Account Value will be limited to the fixed allocation.
The non-variable life insurance policy will have an amount at risk which is
equal to or less than the amount at risk on the date the Owner requests the
exchange. Additional premiums may be required at a later date. The Company
reserves the right to make available a new policy issued by itself or an
affiliated company.