EXHIBIT A (11)
DESCRIPTION OF TRANSFER AND REDEMPTION PROCEDURES FOR FLEXIBLE 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 flexible 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 flexible premium variable life insurance policy. The Policy
provides considerable flexibility regarding the timing and amount of premium
payments after the first. No additional premium must be paid unless required to
pay the ongoing monthly charges. However, there is a minimum amount we accept
both for initial and subsequent premiums. There also is a maximum total amount
you can pay. The minimum Premium we generally accept as an initial Premium is
1/4th of the Maximum Annual Assessable Premium. The Maximum Annual Assessable
Premium is the maximum amount of Premium in a Policy Year against which we will
assess any contingent deferred sales charge upon surrender of the Policy. We do
not assess any contingent deferred sales charge upon surrender against any
portion of the Premium you pay during a Policy Year that exceeds the maximum
amount for that Policy Year. We may accept less under certain circumstances,
such as when you authorize periodic withdrawals from an account you may have
with a bank or other financial institution in amounts designed to cumulatively
pay amounts equal to at least half of the MEC Threshold Amount. The MEC
Threshold Amount is the annual level amount of Premium which, if exceeded, would
cause the Policy to become a MEC. The maximum initial Premium we accept equals
the maximum amount that can be paid without increasing the Death Benefit on the
Policy Date. However, if you submit any Premium before we have determined
whether you meet our requirements for issuing a Policy, at such time we will not
accept more than $500,000 without prior Home Office approval.
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 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. 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. As part of our standards, we will not
issue a Policy if, as of the Policy Date, the Insured would be older than Age
80. If our standards are not met and we received a Premium, we will return to
you an amount equal to the Premium. No interest will be paid. A Policy will not
be issued until underwriting procedures have been completed.
We may issue a temporary insurance agreement during the "underwriting period."
The "underwriting period" is the period between the time an application is
submitted for a Policy and the time we either issue the Policy or decide not to
issue one. A temporary insurance agreement may be issued if: (a) the Application
is completed in full; (b) the Insured answers "no" to certain questions on the
Application (these are questions we use as indicators of whether we will issue
temporary insurance); (c) no Insured is under age 20; and (d) a Premium is
submitted with the Application. If we issue a temporary insurance agreement and
the Insured (both Insureds if there are two Insureds) dies during the
underwriting period, the temporary insurance benefit will be payable if all the
conditions of the temporary insurance agreement are satisfied. If the Insured(s)
die(s) during the underwriting period and no temporary insurance agreement was
in effect, no benefit is payable.
C. PREMIUM ALLOCATION
In the application for a Policy, the Owner can allocate the Net 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 the
Net 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. A return waiver is an election by you to
invest as soon as possible in the variable investment options of your choice. If
you submit a "return waiver" and then decide to return your Policy during the
"free-look" period, you may receive back less than the Premium. 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.
However, we will make the transfer as of a later date if your "free-look" period
is longer than 10 days to meet state law requirements.
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. The Company reserves the right to require
that there be at least $500.00 in an investment option after a transfer. If, as
a result of the transfer, there would be less than $500.00 in an investment
option, the Company reserves the right to transfer the remaining Account Value
pro rata to the investment option(s) that were being transferred to.
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 Company allows partial withdrawals while the Insured
is alive, subject to the following limitations: (1) In the first ten Policy
Years, we permit a partial withdrawal if such a withdrawal meets the
requirements for a medically-related waiver, as described in the section
"Medically Related Waiver"; (2) After the tenth Policy Year, an Owner may take
up to the maximum partial withdrawal amount The maximum partial withdrawal at
any time is the amount available such that as a consequence of the partial
withdrawal, the Specified Amount is at least a specified minimum and your Cash
Value is greater than $1,000. The specified minimum for Policies with one
Insured is $50,000. The specified minimum for Policies with two Insureds is
$100,000; and (3) At any time, while the Insured is alive, the Owner may
withdraw amounts that cumulatively do not exceed the total of any Exempt
Premiums less the Exempt Premiums previously withdrawn. No partial withdrawal
may be less than $1,000. Funds taken as a partial withdrawal cannot be put back
into the Policy. The Company charges a $25.00 transaction fee on any partial
withdrawal.
The contingent deferred sales charge is a percentage of the Assessable Premium
paid. It is charged if you surrender the Policy during the first ten (10) Policy
Years, unless the Policy qualifies for a medically-related waiver of these
charges. The percentages that we assess against Assessable Premium upon a
surrender are as follows:
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Policy Year Percentage (%)
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1 10
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2 9
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3 8
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4 7
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5 6
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6 5
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7 4
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8 3
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9 2
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10 1
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11+ 0
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The Assessable Premium equals the total Premiums less the total Exempt Premiums.
Exempt Premiums are the amounts against which we will not charge a contingent
deferred sales charge upon surrender or withdrawal.
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.
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
If, on any Monthly Processing Day, an Owner's Account Value is insufficient to
pay the current monthly deductions, a 61-day "grace period" begins unless the
guaranteed continuation provision is then applicable. If a policy enters the
grace period, the Company will send the Owners a notice of how much must be paid
before the end of the grace period to keep the Policy in force. If that were to
occur and, during the grace period, the Owner does not pay the amount needed to
keep the policy in force, the Policy will end, unless the guaranteed
continuation provision applies. During the first ten Policy Years, the Owner may
qualify for a guaranteed continuation provision if: (1) the total amount of
Premium paid is not less than a specified minimum for each Policy Month times
the number of Policy Months since the Policy Date; and (2) there is no Debt. The
specified minimum for each Policy Month is called the "monthly continuation
amount". This amount is 1/24th of the Maximum Annual Assessable Premium. If the
Owner qualifies for continuation under this provision, the Company guarantees
that the Policy will not enter into a grace period until the 10th Policy
Anniversary. The Death Benefit while the Policy is kept in force by this
provision is the Death Benefit in effect as of the Monthly Processing Day the
grace period otherwise would have begun.
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 that would otherwise apply to a surrender. A medically-related
waiver also is the only context in which we permit a partial withdrawal in the
first ten Policy Years of amounts other than Exempt Premium. No contingent
deferred sales charge or partial withdrawal transaction fee applies to such a
partial withdrawal. American Skandia will consider waiving the contingent
deferred sales 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
during the first ten Policy Years for which we grant 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 Owner can receive loans equal to 90% of current Account Value
less any applicable contingent deferred sales charge. At the time a loan is
taken, the amount then available for a new loan is the maximum otherwise
available less any Debt. The minimum amount an Owner can borrow is $1,000.
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 6% for all
loans, compounded yearly, in arrears.
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.