Filed On 4/22/05 2:25pm ET · SEC Files 333-91182, 811-09763 · Accession Number 1193125-5-82562
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
4/22/05 Lincoln NY Acct N for...Annuities 485BPOS 5/01/05 22:990 1193125
Lincoln New York Account N for Variable Annuities
Document/Exhibit Description Pages Size
1: 485BPOS Lincoln Financial Group 401± 1,750K
2: EX-99.4.N Contract Specifications for Account Value Death 5 29K
Benefit (Cdnycpan 6/05)
3: EX-99.4.O Form of Variable Annunity Rider for Gib 8 50K
(I4la-Nq-Pr-Ny 6/04)
4: EX-99.4.P Form of Variable Annunity Rider for Gib 8 47K
(I4la-Q-Pr-Ny 6/04)
5: EX-99.4.Q Form of Contract Data for Gib - Choiceplus Ii 3 18K
Bonus (Cbny-Cp2bo-Nq-Pr 06/04)
6: EX-99.4.R Form of Contract Data for Gib - Assurance 3 18K
(Cbny-Cpabo-Nq-Pr 06/04)
7: EX-99.4.S Form of Contract Data for Gib - Choiceplus Ii 3 18K
Bonus (Cbny-Cp2bo-Q-Pr 06/04)
8: EX-99.4.T Form of Contract Data for Gib - Assurance 3 17K
(Cbny-Cpabo-Q-Pr 06/04)
9: EX-99.10 Consent of Accounting Firm 1 9K
10: EX-99.8.B.I Miscellaneous Exhibit 58 219K
11: EX-99.8.B.II Miscellaneous Exhibit 19 78K
12: EX-99.8.B.III Miscellaneous Exhibit 36 105K
13: EX-99.8.B.IV Miscellaneous Exhibit 117 348K
14: EX-99.8.B.V Miscellaneous Exhibit 67 259K
15: EX-99.8.B.VI Miscellaneous Exhibit 27 110K
16: EX-99.8.B.VII Miscellaneous Exhibit 46 106K
17: EX-99.8.B.VIII Miscellaneous Exhibit 33 96K
18: EX-99.8.B.IX Miscellaneous Exhibit 23 86K
19: EX-99.8.B.X Miscellaneous Exhibit 31 99K
20: EX-99.8.B.XI Miscellaneous Exhibit 30 111K
21: EX-99.8.B.XII Miscellaneous Exhibit 28 93K
22: EX-99.8.B.XIII Miscellaneous Exhibit 40 117K
As filed with the Securities and Exchange Commission on April 22, 2005
1933 Act Registration No. 333-91182
1940 Act Registration No. 811-09763
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 7 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 44 /X/
Lincoln New York Account N for Variable Annuities
(Exact Name of Registrant)
Lincoln ChoicePlus II Bonus and Lincoln ChoicePlus Assurance (Bonus)
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(Name of Depositor)
100 Madison Street, Suite 1860
Syracuse, New York 13202
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, Including Area Code: (315) 428-8400
Robert O. Sheppard, Esquire
Lincoln Life & Annuity Company of New York
100 Madison Street, Suite 1860
Syracuse, New York 13202
(Name and Address of Agent for Service)
Copy to:
W. Thomas Conner, Esquire
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue NW
Washington, DC 20004
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/x/ on May 1, 2005, pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on _____________________ pursuant to paragraph (a)(1) of Rule 485
Title of Securities being registered:
Interests in a separate account under individual flexible
payment deferred variable annuity contracts.
Lincoln ChoicePlus II Bonus
Lincoln New York Account N
for Variable Annuities
Individual Variable Annuity Contracts
Home Office:
Lincoln Life & Annuity Company of New York
100 Madison Street, Suite 1860
Syracuse, NY 13202
www.LincolnRetirement.com
Servicing Office:
Lincoln Life & Annuity Company of New York
PO Box 7866
Fort Wayne, IN 46802-7866
1-888-868-2583
This prospectus describes the individual flexible premium deferred variable
annuity contract that is issued by Lincoln Life & Annuity Company of New York.
It is primarily for use with nonqualified plans and qualified retirement plans
under Sections 408 (IRAs) and 408A (Roth IRAs) of the tax code. Generally, you
do not pay federal income tax on the contract's growth until it is paid out.
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 and to
provide retirement income that you cannot outlive or for an agreed upon time.
These benefits may be a variable or fixed amount, if available, or a
combination of both. If you die before the annuity commencement date, we will
pay your beneficiary a death benefit. In the alternative, you generally may
choose to receive a death benefit upon the death of the annuitant.
The minimum initial purchase payment for the contract is $10,000 . Additional
purchase payments may be made to the contract and must be at least $100 per
payment ($25 if transmitted electronically), and at least $300 annually.
Except as noted below, you choose whether your contract value accumulates on a
variable or a fixed (guaranteed) basis or both. Your contract may not offer a
fixed account or if permitted by your contract, we may discontinue accepting
purchase payments or transfers into the fixed side of the contract at any time.
If your purchase payments, bonus credits and persistency credits are in the
fixed account, we guarantee your principal and a minimum interest rate. For the
life of your contract or during certain periods, we may impose restrictions on
the fixed account. For contracts issued after September 30, 2003, the only
fixed account available is for dollar cost averaging purposes.
We do offer variable annuity contracts that have lower fees. Expenses for
contracts offering a bonus or persistancy credit may be higher. Because of
this, the amount of the bonus or persistency credits may, over time, be offset
by additional fees and charges.
You should carefully consider whether or not this contract is the best product
for you.
All purchase payments, bonus credits and persistancy credits for benefits on a
variable basis will be placed in Lincoln New York Account N for Variable
Annuities (variable annuity account [VAA]). The VAA is a segregated investment
account of Lincoln New York. You take all the investment risk on the contract
value and the retirement income for amounts placed into one or more of the
contract's variable options. If the subaccounts you select make money, your
contract value goes up; if they lose money, it goes down. How much it goes up
or down depends on the performance of the subaccounts you select. We do not
guarantee how any of the variable options or their funds will perform. Also,
neither the U.S. Government nor any federal agency insures or guarantees your
investment in the contract. The contracts are not bank deposits and are not
endorsed by any bank or government agency.
The available funds are listed below:
AIM Variable Insurance Funds (Series II):
AIM V.I. Growth Fund**
AIM V.I. International Growth Fund**
AIM V.I. Premier Equity Fund**
AllianceBernstein Variable Products Series Fund (Class B):
AllianceBernstein Growth and Income Portfolio
AllianceBernstein Large Cap Growth Portfolio***
(formerly AllianceBernstein Premier Growth)
AllianceBernstein Small/Mid Cap Value Portfolio
(formerly AllianceBernstein Small Cap)
AllianceBernstein Global Technology Portfolio
(formerly AllianceBernstein Technology)
American Century Investments Variable Products (Class II):
American Century Investments VP Inflation Protection Fund
American Funds Insurance SeriesSM (Class 2):
American Funds Global Growth Fund
American Funds Global Small Capitalization Fund
American Funds Growth Fund
American Funds Growth-Income Fund
American Funds International Fund
1
Delaware VIP Trust (Service Class):
Delaware VIP Capital Reserves Series*
Delaware VIP Diversified Income Series
Delaware VIP Emerging Markets Series
Delaware VIP High Yield Series
Delaware VIP REIT Series
Delaware VIP Small Cap Value Series
Delaware VIP Trend Series
Delaware VIP U.S. Growth Series***
Delaware VIP Value Series
(formerly Delaware VIP Large Cap Value)
Fidelity (Reg. TM) Variable Insurance Products (Service Class 2):
Fidelity (Reg. TM) VIP Contrafund Portfolio
Fidelity (Reg. TM) VIP Equity-Income Portfolio***
Fidelity (Reg. TM) VIP Growth Portfolio
Fidelity (Reg. TM) VIP Mid Cap Portfolio*
Fidelity (Reg. TM) VIP Overseas Portfolio
Franklin Templeton Variable Insurance Products Trust (Class 2):
FTVIPT Franklin Small-Mid Cap Growth Securities Fund
(formerly FTVIPT Franklin Small Cap)
FTVIPT Templeton Global Income Securities Fund*
FTVIPT Templeton Growth Securities Fund
Janus Aspen Series (Service Class):
Janus Aspen Balanced Portfolio***
Janus Aspen Mid Cap Growth Portfolio***
Janus Aspen Worldwide Growth Portfolio**
Lincoln Variable Insurance Products Trust (Standard Class):
Lincoln VIP Aggressive Growth Fund
Lincoln VIP Bond Fund
Lincoln VIP Capital Appreciation Fund
Lincoln VIP Global Asset Allocation Fund
Lincoln VIP International Fund
Lincoln VIP Money Market Fund
Lincoln VIP Social Awareness Fund
Lincoln Variable Insurance Products Trust (Service Class):
Lincoln VIP Core Fund*
Lincoln VIP Equity-Income Fund****
Lincoln VIP Growth Fund*
Lincoln VIP Growth and Income Fund*
Lincoln VIP Growth Opportunities Fund*
Lincoln VIP Conservative Profile Fund*
Lincoln VIP Moderate Profile Fund*
Lincoln VIP Moderately Aggressive Profile Fund*
Lincoln VIP Aggressive Profile Fund*
MFS (Reg. TM) Variable Insurance TrustSM (Service Class):
MFS (Reg. TM) VIT Capital Opportunities Series***
MFS (Reg. TM) VIT Emerging Growth Series***
MFS (Reg. TM) VIT Total Return Series
MFS (Reg. TM) VIT Utilities Series
Neuberger Berman Advisers Management Trust:
Neuberger Berman AMT Mid-Cap Growth Portfolio
Neuberger Berman AMT Regency Portfolio
Putnam Variable Trust (Class IB):
Putnam VT Growth & Income Fund**
Putnam VT Health Sciences Fund**
Scudder Investment VIT Funds (Class A):
Scudder VIT EAFE Equity Index Fund***
Scudder VIT Equity 500 Index Fund
Scudder VIT Small Cap Index Fund
* These funds will be available for allocations of purchase payments or
contract value on or around June 6, 2005. Check with your investment
representative regarding availability.
** These funds are not offered in contracts issued on or after May 24, 2004.
*** These funds will not be offered in contracts issued on or after June 6,
2005.
**** This fund is only available for contracts issued on or after June 6, 2005.
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 is
incorporated by reference into this prospectus and is legally part of this
prospectus. For a free copy of the SAI, write: Lincoln Life & Annuity Company
of New York, PO Box 7866, Fort Wayne, IN 46802-7866, or call 1-888-868-2583.
The SAI and other information about Lincoln New York 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, 2005
2
Table of Contents
· Download Table
Item Page
Special terms 4
Expense tables 5
Summary of common questions 9
Lincoln Life & Annuity Company of New York 11
Variable annuity account (VAA) 11
Investments of the variable annuity account 12
Charges and other deductions 18
The contracts 21
Purchase payments 22
Bonus credits 22
Persistency credits 22
Transfers on or before the annuity commencement date 23
Death benefit 25
Lincoln SmartSecuritySM Advantage 28
Surrenders and withdrawals 31
Distribution of the contracts 32
i4LIFE (Reg. TM) Advantage 33
Annuity payouts 36
Fixed side of the contract 37
Federal tax matters 38
Additional information 43
Voting rights 43
Return privilege 43
Other information 43
Legal proceedings 44
Statement of Additional Information
Table of Contents for Lincoln New York Account N for Variable Annuities 45
Appendix A - Condensed financial information A-1
3
Special terms
In this prospectus, the following terms have the indicated meanings:
Account or variable annuity account (VAA) - The segregated investment account,
Account N, into which we set aside and invest the assets for the variable side
of the contract offered in this prospectus.
Accumulation unit - A measure used to calculate contract value for the variable
side of the contract before the annuity commencement 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.
Annuity payout - An amount paid at regular intervals after the annuity
commencement date under one of several options available to the annuitant
and/or any other payee. This amount may be paid on a variable or fixed basis,
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.
Beneficiary - The person you choose to receive any death benefit paid if you
die before the annuity commencement date.
Bonus Credit - The additional amount credited to the contract for each purchase
payment.
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 - 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.
Death benefit - Before the annuity commencement date, the amount payable to
your designated beneficiary if the contractowner dies or, if selected, to the
contractowner if the annuitant dies. See The contracts - Death benefit for a
description of the various death benefit options.
i4LIFE (Reg. TM) Advantage - An income program which combines periodic variable
lifetime income payments with the ability to make withdrawals during a defined
period.
Lincoln New York (we, us, our) - Lincoln Life & Annuity Company of New York
(LNY)
Persistency credit - The additional amount credited to the contract after the
fourteenth contract anniversary.
Purchase payments - Amounts paid into the contract other than bonus credits and
persistency credits.
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.
Valuation date - Each day the New York Stock Exchange (NYSE) is open for
trading.
Valuation period - The period starting at the close of trading (currently 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.
4
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 the fixed account. State premium taxes may
also be deducted.
Contractowner Transaction Expenses:
· Enlarge/Download Table
o Surrender charge (as a percentage of purchase payments surrendered/withdrawn): 8.5%*
o Transfer charge: $ 25**
* 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 waive this charge in certain situations.
See Charges and other deductions-Surrender charge.
** The transfer charge will not be imposed on the first 12 transfers during a
contract year. We reserve the right to charge a $25 fee for the 13th and
each additional transfer during any contract year, excluding automatic
dollar cost averaging, portfolio rebalancing and cross reinvestment
transfers.
The next table describes the fees and expenses that you will pay periodically
during the time that you own the contract, not including fund fees and
expenses.
Annual Account Fee: $30*
Separate Account Annual Expenses (as a percentage of average daily net assets
in the subaccounts):
· Download Table
With Enhanced Guarantee of
Guaranteed Minimum Principal Death
Death Benefit (EGMDB) Benefit (GOP)
----------------------- ----------------
o Mortality and expense risk charge 1.45% 1.35%
o Administrative charge 0.15% 0.15%
---- ----
o Total annual charge for each
subaccount 1.60% 1.50%
* We do not assess the account fee on contracts issued prior to October 1,
2003. The account fee will be waived if your contract value is $50,000 or
more at the end of any particular year. The account fee will be waived
after the fifteenth contract year.
Optional Rider Charges:
· Enlarge/Download Table
Lincoln SmartSecuritySM Lincoln SmartSecuritySM
Advantage - 5 Year Elective Advantage - 1 Year Automatic
Step-Up option Step-Up option
----------------------------- -----------------------------
Guaranteed maximum annual
percentage charge* 0.95% 1.50%
Current annual percentage charge* 0.45% 0.65%
*The annual percentage charge is assessed against the Guaranteed Amount as
adjusted for purchase payments, bonus credits, step-ups and withdrawals. See
Charges and other deductions 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, 2004. More
detail concerning each fund's fees and expenses is contained in the prospectus
for each fund.
· Download Table
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): 0.29% 4.13%
Net Total Annual Fund Operating Expenses
(after contractual waivers/reimbursements*): 0.29% 1.75%
* 21 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 30, 2006.
5
The following table shows the expenses charged by each fund for the year ended
December 31, 2004:
(as a percentage of each fund's average net assets):
· Enlarge/Download Table
Management
Fees (before
any waivers/
reimbursements) +
AIM V.I. Growth Fund (Series II) 0.63 %
AIM V.I. International Growth Fund (Series II) 0.74
AIM V.I. Premier Equity Fund (Series II) 0.61
AllianceBernstein Growth and Income Portfolio (class B) 0.55
AllianceBernstein Large Cap Growth Portfolio (class B) 0.75
AllianceBernstein Small/Mid Cap Value Portfolio (class B) 0.75
AllianceBernstein Global Technology Portfolio (class B) 0.75
American Century Investments VP II Inflation Protection (Class II) 0.50
American Funds Global Growth Fund (class 2) (1) 0.61
American Funds Global Small Capitalization Fund (class 2) (1) 0.77
American Funds Growth Fund (class 2) (1) 0.35
American Funds Growth-Income Fund (class 2) (1) 0.29
American Funds International Fund (class 2) (1) 0.54
Delaware VIP Capital Reserves Series (Service Class) (2) 0.50
Delaware VIP Diversified Income Series(Service Class) (3) 0.65
Delaware VIP Emerging Markets Series(Service Class) (4) 1.25
Delaware VIP High Yield Series (Service class) (2) 0.65
Delaware VIP Value Series (Service class) (5) 0.65
Delaware VIP REIT Series (Service class) (6) 0.74
Delaware VIP Small Cap Value Series (Service class) (6) 0.74
Delaware VIP Trend Series (Service class) (6) 0.74
Delaware VIP U.S. Growth Series (Service class) (2) 0.65
Fidelity (Reg. TM) VIP Contrafund Portfolio (Service class 2) (7) 0.57
Fidelity (Reg. TM) VIP Equity-Income Portfolio (Service class 2) (7) 0.47
Fidelity (Reg. TM) VIP Growth Portfolio (Service class 2) (7) 0.58
Fidelity (Reg. TM) VIP Mid Cap Portfolio (Service class 2) (7) 0.57
Fidelity (Reg. TM) VIP Overseas Portfolio (Service class 2) (7) 0.72
FTVIPT Franklin Small-Mid Cap Growth Securities Fund (class 2) (8) 0.48
FTVIPT Templeton Global Income Securities Fund (class 2) 0.62
FTVIPT Templeton Growth Securities Fund (class 2) 0.79
Janus Aspen Mid Cap Growth Portfolio (Service class) 0.64
Janus Aspen Balanced Portfolio (Service class) 0.55
Janus Aspen Worldwide Growth Portfolio (Service class) 0.60
Lincoln VIP Aggressive Growth Fund (Standard class) 0.74
Lincoln VIP Bond Fund (Standard class) 0.36
Lincoln VIP Capital Appreciation Fund (Standard class) (15) 0.74
Lincoln VIP Core Fund (Service class) (9) 0.69
Lincoln VIP Equity-Income Fund (Service class) (16) 0.73
Lincoln VIP Global Asset Allocation Fund (Standard class) 0.74
Lincoln VIP Growth Fund (Service class) (9) 0.74
Lincoln VIP Growth and Income Fund (Service class) 0.33
Lincoln VIP Growth Opportunities Fund (Service class) (9) 0.99
12b-1 Fees Other Expenses
(before any (before any
waivers/ waivers/
reimbursements) + reimbursements)
AIM V.I. Growth Fund (Series II) 0.25 % 0.28 %
AIM V.I. International Growth Fund (Series II) 0.25 0.40
AIM V.I. Premier Equity Fund (Series II) 0.25 0.30
AllianceBernstein Growth and Income Portfolio (class B) 0.25 0.05
AllianceBernstein Large Cap Growth Portfolio (class B) 0.25 0.06
AllianceBernstein Small/Mid Cap Value Portfolio (class B) 0.25 0.12
AllianceBernstein Global Technology Portfolio (class B) 0.25 0.13
American Century Investments VP II Inflation Protection (Class II) 0.25 0.00
American Funds Global Growth Fund (class 2) (1) 0.25 0.04
American Funds Global Small Capitalization Fund (class 2) (1) 0.25 0.04
American Funds Growth Fund (class 2) (1) 0.25 0.01
American Funds Growth-Income Fund (class 2) (1) 0.25 0.02
American Funds International Fund (class 2) (1) 0.25 0.05
Delaware VIP Capital Reserves Series (Service Class) (2) 0.30 0.12
Delaware VIP Diversified Income Series(Service Class) (3) 0.30 0.33
Delaware VIP Emerging Markets Series(Service Class) (4) 0.30 0.38
Delaware VIP High Yield Series (Service class) (2) 0.30 0.10
Delaware VIP Value Series (Service class) (5) 0.30 0.10
Delaware VIP REIT Series (Service class) (6) 0.30 0.10
Delaware VIP Small Cap Value Series (Service class) (6) 0.30 0.09
Delaware VIP Trend Series (Service class) (6) 0.30 0.10
Delaware VIP U.S. Growth Series (Service class) (2) 0.30 0.11
Fidelity (Reg. TM) VIP Contrafund Portfolio (Service class 2) (7) 0.25 0.11
Fidelity (Reg. TM) VIP Equity-Income Portfolio (Service class 2) (7) 0.25 0.11
Fidelity (Reg. TM) VIP Growth Portfolio (Service class 2) (7) 0.25 0.10
Fidelity (Reg. TM) VIP Mid Cap Portfolio (Service class 2) (7) 0.25 0.14
Fidelity (Reg. TM) VIP Overseas Portfolio (Service class 2) (7) 0.25 0.19
FTVIPT Franklin Small-Mid Cap Growth Securities Fund (class 2) (8) 0.25 0.29
FTVIPT Templeton Global Income Securities Fund (class 2) 0.25 0.16
FTVIPT Templeton Growth Securities Fund (class 2) 0.25 0.07
Janus Aspen Mid Cap Growth Portfolio (Service class) 0.25 0.01
Janus Aspen Balanced Portfolio (Service class) 0.25 0.01
Janus Aspen Worldwide Growth Portfolio (Service class) 0.25 0.03
Lincoln VIP Aggressive Growth Fund (Standard class) 0.00 0.17
Lincoln VIP Bond Fund (Standard class) 0.00 0.06
Lincoln VIP Capital Appreciation Fund (Standard class) (15) 0.00 0.07
Lincoln VIP Core Fund (Service class) (9) 0.25 2.90
Lincoln VIP Equity-Income Fund (Service class) (16) 0.25 0.07
Lincoln VIP Global Asset Allocation Fund (Standard class) 0.00 0.29
Lincoln VIP Growth Fund (Service class) (9) 0.25 2.89
Lincoln VIP Growth and Income Fund (Service class) 0.25 0.04
Lincoln VIP Growth Opportunities Fund (Service class) (9) 0.25 2.89
Total
Total Expenses Contractual
(before any waivers/
waivers/ reimbursements
= reimbursements) (if any)
AIM V.I. Growth Fund (Series II) 1.16 %
AIM V.I. International Growth Fund (Series II) 1.39
AIM V.I. Premier Equity Fund (Series II) 1.16
AllianceBernstein Growth and Income Portfolio (class B) 0.85
AllianceBernstein Large Cap Growth Portfolio (class B) 1.06
AllianceBernstein Small/Mid Cap Value Portfolio (class B) 1.12
AllianceBernstein Global Technology Portfolio (class B) 1.13
American Century Investments VP II Inflation Protection (Class II) 0.75
American Funds Global Growth Fund (class 2) (1) 0.90
American Funds Global Small Capitalization Fund (class 2) (1) 1.06
American Funds Growth Fund (class 2) (1) 0.61
American Funds Growth-Income Fund (class 2) (1) 0.56
American Funds International Fund (class 2) (1) 0.84
Delaware VIP Capital Reserves Series (Service Class) (2) 0.92 -0.05 %
Delaware VIP Diversified Income Series(Service Class) (3) 1.28 -0.23
Delaware VIP Emerging Markets Series(Service Class) (4) 1.93 -0.18
Delaware VIP High Yield Series (Service class) (2) 1.05 -0.05
Delaware VIP Value Series (Service class) (5) 1.05 -0.05
Delaware VIP REIT Series (Service class) (6) 1.14 -0.05
Delaware VIP Small Cap Value Series (Service class) (6) 1.13 -0.05
Delaware VIP Trend Series (Service class) (6) 1.14 -0.05
Delaware VIP U.S. Growth Series (Service class) (2) 1.06 -0.05
Fidelity (Reg. TM) VIP Contrafund Portfolio (Service class 2) (7) 0.93
Fidelity (Reg. TM) VIP Equity-Income Portfolio (Service class 2) (7) 0.83
Fidelity (Reg. TM) VIP Growth Portfolio (Service class 2) (7) 0.93
Fidelity (Reg. TM) VIP Mid Cap Portfolio (Service class 2) (7) 0.96
Fidelity (Reg. TM) VIP Overseas Portfolio (Service class 2) (7) 1.16
FTVIPT Franklin Small-Mid Cap Growth Securities Fund (class 2) (8) 1.02 -0.03
FTVIPT Templeton Global Income Securities Fund (class 2) 1.03
FTVIPT Templeton Growth Securities Fund (class 2) 1.11
Janus Aspen Mid Cap Growth Portfolio (Service class) 0.90
Janus Aspen Balanced Portfolio (Service class) 0.81
Janus Aspen Worldwide Growth Portfolio (Service class) 0.88
Lincoln VIP Aggressive Growth Fund (Standard class) 0.91
Lincoln VIP Bond Fund (Standard class) 0.42
Lincoln VIP Capital Appreciation Fund (Standard class) (15) 0.81 -0.13
Lincoln VIP Core Fund (Service class) (9) 3.84 -2.75
Lincoln VIP Equity-Income Fund (Service class) (16) 1.05 -0.04
Lincoln VIP Global Asset Allocation Fund (Standard class) 1.03
Lincoln VIP Growth Fund (Service class) (9) 3.88 -2.77
Lincoln VIP Growth and Income Fund (Service class) 0.62
Lincoln VIP Growth Opportunities Fund (Service class) (9) 4.13 -2.70
Total Expenses
(after
Contractual
waivers/
reimbursements
s)
AIM V.I. Growth Fund (Series II)
AIM V.I. International Growth Fund (Series II)
AIM V.I. Premier Equity Fund (Series II)
AllianceBernstein Growth and Income Portfolio (class B)
AllianceBernstein Large Cap Growth Portfolio (class B)
AllianceBernstein Small/Mid Cap Value Portfolio (class B)
AllianceBernstein Global Technology Portfolio (class B)
American Century Investments VP II Inflation Protection (Class II)
American Funds Global Growth Fund (class 2) (1)
American Funds Global Small Capitalization Fund (class 2) (1)
American Funds Growth Fund (class 2) (1)
American Funds Growth-Income Fund (class 2) (1)
American Funds International Fund (class 2) (1)
Delaware VIP Capital Reserves Series (Service Class) (2) 0.87 %
Delaware VIP Diversified Income Series(Service Class) (3) 1.05
Delaware VIP Emerging Markets Series(Service Class) (4) 1.75
Delaware VIP High Yield Series (Service class) (2) 1.00
Delaware VIP Value Series (Service class) (5) 1.00
Delaware VIP REIT Series (Service class) (6) 1.09
Delaware VIP Small Cap Value Series (Service class) (6) 1.08
Delaware VIP Trend Series (Service class) (6) 1.09
Delaware VIP U.S. Growth Series (Service class) (2) 1.01
Fidelity (Reg. TM) VIP Contrafund Portfolio (Service class 2) (7)
Fidelity (Reg. TM) VIP Equity-Income Portfolio (Service class 2) (7)
Fidelity (Reg. TM) VIP Growth Portfolio (Service class 2) (7)
Fidelity (Reg. TM) VIP Mid Cap Portfolio (Service class 2) (7)
Fidelity (Reg. TM) VIP Overseas Portfolio (Service class 2) (7)
FTVIPT Franklin Small-Mid Cap Growth Securities Fund (class 2) (8) 0.99
FTVIPT Templeton Global Income Securities Fund (class 2)
FTVIPT Templeton Growth Securities Fund (class 2)
Janus Aspen Mid Cap Growth Portfolio (Service class)
Janus Aspen Balanced Portfolio (Service class)
Janus Aspen Worldwide Growth Portfolio (Service class)
Lincoln VIP Aggressive Growth Fund (Standard class)
Lincoln VIP Bond Fund (Standard class)
Lincoln VIP Capital Appreciation Fund (Standard class) (15) 0.68
Lincoln VIP Core Fund (Service class) (9) 1.09
Lincoln VIP Equity-Income Fund (Service class) (16) 1.01
Lincoln VIP Global Asset Allocation Fund (Standard class)
Lincoln VIP Growth Fund (Service class) (9) 1.11
Lincoln VIP Growth and Income Fund (Service class)
Lincoln VIP Growth Opportunities Fund (Service class) (9) 1.43
6
· Enlarge/Download Table
Management
Fees (before
any waivers/
reimbursements) +
Lincoln VIP International Fund (Standard class) 0.82 %
Lincoln VIP Money Market Fund (Standard class) 0.44
Lincoln VIP Social Awareness Fund (Standard class) 0.35
Lincoln VIP Conservative Profile Fund (Service class) (10) 0.25
Lincoln VIP Moderate Profile Fund (Service class) (10) 0.25
Lincoln VIP Moderately Aggressive Profile Fund (Service class) (10) 0.25
Lincoln VIP Aggressive Profile Fund (Service class) (10) 0.25
MFS (Reg. TM) VIT Capital Opportunities Series (Service class) (11) 12) 0.75
MFS (Reg. TM) VIT Trust Emerging Growth Series (Service class) (12) 0.75
MFS (Reg. TM) VIT Trust Total Return Series (Service class) (12) 0.75
MFS (Reg. TM) VIT Trust Utilities Series (Service class) (12) 0.75
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.84
Neuberger Berman AMT Regency Portfolio 0.85
Putnam VT Growth & Income Fund (class 1B) 0.48
Putnam VT Health Sciences Fund (class 1B) 0.70
Scudder VIT EAFE Equity Index Fund (class A) (13) 0.45
Scudder VIT Equity 500 Index Fund (class A) 0.20
Scudder VIT Small Cap Index Fund (class A) (14) 0.35
12b-1 Fees Other Expenses
(before any (before any
waivers/ waivers/
reimbursements) + reimbursements)
Lincoln VIP International Fund (Standard class) 0.00 % 0.16 %
Lincoln VIP Money Market Fund (Standard class) 0.00 0.09
Lincoln VIP Social Awareness Fund (Standard class) 0.00 0.06
Lincoln VIP Conservative Profile Fund (Service class) (10) 0.25 2.27
Lincoln VIP Moderate Profile Fund (Service class) (10) 0.25 1.55
Lincoln VIP Moderately Aggressive Profile Fund (Service class) (10) 0.25 1.36
Lincoln VIP Aggressive Profile Fund (Service class) (10) 0.25 1.67
MFS (Reg. TM) VIT Capital Opportunities Series (Service class) (11) 12) 0.25 0.13
MFS (Reg. TM) VIT Trust Emerging Growth Series (Service class) (12) 0.25 0.12
MFS (Reg. TM) VIT Trust Total Return Series (Service class) (12) 0.25 0.08
MFS (Reg. TM) VIT Trust Utilities Series (Service class) (12) 0.25 0.14
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.00 0.08
Neuberger Berman AMT Regency Portfolio 0.00 0.19
Putnam VT Growth & Income Fund (class 1B) 0.25 0.06
Putnam VT Health Sciences Fund (class 1B) 0.25 0.15
Scudder VIT EAFE Equity Index Fund (class A) (13) 0.00 0.37
Scudder VIT Equity 500 Index Fund (class A) 0.00 0.09
Scudder VIT Small Cap Index Fund (class A) (14) 0.00 0.13
Total
Total Expenses Contractual
(before any waivers/
waivers/ reimbursements
= reimbursements) (if any)
Lincoln VIP International Fund (Standard class) 0.98 %
Lincoln VIP Money Market Fund (Standard class) 0.53
Lincoln VIP Social Awareness Fund (Standard class) 0.41
Lincoln VIP Conservative Profile Fund (Service class) (10) 2.77 -1.53 %
Lincoln VIP Moderate Profile Fund (Service class) (10) 2.05 -0.74
Lincoln VIP Moderately Aggressive Profile Fund (Service class) (10) 1.86 -0.47
Lincoln VIP Aggressive Profile Fund (Service class) (10) 2.17 -0.73
MFS (Reg. TM) VIT Capital Opportunities Series (Service class) (11) 12) 1.13
MFS (Reg. TM) VIT Trust Emerging Growth Series (Service class) (12) 1.12
MFS (Reg. TM) VIT Trust Total Return Series (Service class) (12) 1.08
MFS (Reg. TM) VIT Trust Utilities Series (Service class) (12) 1.14
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.92
Neuberger Berman AMT Regency Portfolio 1.04
Putnam VT Growth & Income Fund (class 1B) 0.79
Putnam VT Health Sciences Fund (class 1B) 1.10
Scudder VIT EAFE Equity Index Fund (class A) (13) 0.82 -0.17
Scudder VIT Equity 500 Index Fund (class A) 0.29
Scudder VIT Small Cap Index Fund (class A) (14) 0.48 -0.03
Total Expenses
(after
Contractual
waivers/
reimbursements
s)
Lincoln VIP International Fund (Standard class)
Lincoln VIP Money Market Fund (Standard class)
Lincoln VIP Social Awareness Fund (Standard class)
Lincoln VIP Conservative Profile Fund (Service class) (10) 1.24 %
Lincoln VIP Moderate Profile Fund (Service class) (10) 1.31
Lincoln VIP Moderately Aggressive Profile Fund (Service class) (10) 1.39
Lincoln VIP Aggressive Profile Fund (Service class) (10) 1.44
MFS (Reg. TM) VIT Capital Opportunities Series (Service class) (11) 12)
MFS (Reg. TM) VIT Trust Emerging Growth Series (Service class) (12)
MFS (Reg. TM) VIT Trust Total Return Series (Service class) (12)
MFS (Reg. TM) VIT Trust Utilities Series (Service class) (12)
Neuberger Berman AMT Mid-Cap Growth Portfolio
Neuberger Berman AMT Regency Portfolio
Putnam VT Growth & Income Fund (class 1B)
Putnam VT Health Sciences Fund (class 1B)
Scudder VIT EAFE Equity Index Fund (class A) (13) 0.65
Scudder VIT Equity 500 Index Fund (class A)
Scudder VIT Small Cap Index Fund (class A) (14) 0.45
(1) The Series' investment adviser began voluntarily waiving 5% of its
management fees on September 1, 2004. Beginning April 1, 2005, this waiver
increased to 10% and will continue at this level until further review.
Total annual fund operating expenses do not reflect this waiver. The
effect of the waiver on total operating expenses can be found in the
Financial Highlights table in the Series' Prospectus and in the audited
financial statements in the Series' annual report.
(2) For the period May 1, 2002 through April 30, 2005, the adviser
contractually waived its management fee and/or reimbursed the Series for
expenses to the extent that total expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) would not exceed
0.80%. Effective May 1, 2005 through April 30, 2006, the adviser has
contractually agreed to waive its management fee and/or reimburse the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees)
will not exceed 0.80%. The Service Class shares are subject to an annual
12b-1 fee of not more than 0.30%. Effective May 1, 2005 through April 30,
2006, Delaware Distributors, L.P. has contracted to limit the Service
Class shares 12b-1 fee to no more than 0.25%.
(3) For the period May 1, 2002 through April 30, 2005, the adviser
contractually waived its management fee and/or reimbursed the Series for
expenses to the extent that total expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) would not exceed
0.98%. Effective May 1, 2005 through April 30, 2006, the adviser has
contractually agreed to waive its management fee and/or reimburse the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees)
will not exceed 0.80%. The Service Class shares are subject to an annual
12b-1 fee of not more than 0.30%. Effective May 1, 2005 through April 30,
2006, Delaware Distributors, L.P. has contracted to limit the Service
Class shares 12b-1 fee to no more than 0.25%.
(4) For the period May 1, 2002 through April 30, 2005, the adviser
contractually waived its management fee and/or reimbursed the Series for
expenses to the extent that total expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) would not exceed
1.50%. Effective May 1, 2005 through April 30, 2006, the adviser has
contractually agreed to waive its management fee and/or reimburse the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees)
will not exceed 1.50%. The Service Class shares are subject to an annual
12b-1 fee of not more than 0.30%. Effective May 1, 2005 through April 30,
2006, Delaware Distributors, L.P. has contracted to limit the Service
Class shares 12b-1 fee to no more than 0.25%.
(5) For the period May 1, 2002 through April 30, 2005, the adviser
contractually waived its management fee and/or reimbursed the Series for
expenses to the extent that total expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) would not exceed
0.80%. Without such an arrangement, the total operating expense for the
Series would have been 0.75% for the fiscal year 2004 (excluding 12b-1
fees). Effective May 1, 2005 through April 30, 2006, the adviser has
contractually agreed to waive its management fee and/or reimburse the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees)
will not exceed 0.80%. DMC has voluntarily elected to waive its management
fee for this Series to 0.60% indefinitely. The Service Class shares are
subject to an annual 12b-1 fee of not more than 0.30%. Effective May 1,
2005 through April 30, 2006, Delaware Distributors, L.P. has contracted to
limit the Service Class shares 12b-1 fee to no more than 0.25%.
(6) For the period May 1, 2002 through April 30, 2005, the adviser
contractually waived its management fee and/or reimbursed the Series for
expenses to the extent that total expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) would not exceed
0.95%. Effective May 1, 2005 through April 30, 2006, the adviser has
contractually agreed to waive its management fee and/or reimburse the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees)
will not exceed 0.95%. The Service Class shares are subject to an annual
12b-1 fee of not more than 0.30%. Effective May 1, 2005 through April 30,
2006, Delaware Distributors, L.P. has contracted to limit the Service
Class shares 12b-1 fee to no more than 0.25%.
(7) A portion of the brokerage commissions that the fund pays may be reimbursed
and used to reduce the fund's expenses. In addition, through
7
arrangements with a fund's custodian, credits realized as a result of
uninvested cash balances are used to reduce the fund's custodian expenses.
Including these reductions, the total class operating expenses would have
been 0.91% Contrafund, 0.82% for Equity-Income, 0.93% Mid Cap, and 1.12%
Overseas.
(8) The manager had agreed in advance to reduce its fee to reflect reduced
services resulting from the Fund's investment in a Franklin Templeton
money fund for cash management. This arrangement will continue for as long
as the Fund invests in the Money Fund.
(9) The "other expenses" are based on estimated expenses for the current fiscal
year. Lincoln Life has contractually agreed to reimburse the fund to the
extent that the Total Annual Operating Expenses exceed 1.09% Core, 1.11%
Growth and 1.43% Growth Opportunities. The Agreement will continue at
least through September 1, 2006 , and renew automatically for one-year
terms unless Lincoln Life provides written notice of termination to the
fund.
(10) The Other Expenses are based on estimates for the current fiscal year.
Other Expenses reflects the expenses of the underlying funds invested in
by the Lincoln Profile Funds (Conservative 0.69%; Moderate 0.76%;
Moderately Aggressive 0.84%; Aggressive 0.89%) as well as the expenses of
the particular Profile Fund (Conservative 1.58%; Moderate 0.79%;
Moderately Aggressive 0.52%; Aggressive 0.78%) Lincoln Life has
contractually agreed to reimburse each Profile Fund to the extent that
the Total Expenses (excluding underlying fund fees and expenses) exceed
0.55%. The Agreement will continue at least through September 1, 2006 and
renew automatically for one-year terms unless Lincoln Life provides
written notice of termination to the fund. Underlying fund fees and
expenses are incurred indirectly by each Profile fund as a result of
investment in shares of one or more underlying funds. These expenses are
estimated based on the target allocation among the underlying funds and
are provided to show you an estimate of the expenses attributable to each
Profile Fund. Each Profile Fund's expense ratio will vary based on the
actual allocation to the underlying funds.
(11) MFS has contractually agreed, subject to reimbursement to bear the series'
expenses such that "Other Expenses" (after taking into account the
expense offset and brokerage arrangements described in Footnote 12), do
not exceed 0.15% annually.This expense limitation arrangement excludes
management fees, taxes extraordinary expenses, brokerage and transaction
costs and expenses associated with the series' investing activities. This
contractual fee arrangement will continue until at least April 30, 2006,
unless the Board of Trustees which oversees the fund consents to any
earlier revision or termination of this arrangement.
(12) Each series has a voluntary expense offset arrangement that reduces the
series' custodian fee based upon the amount of cash maintained by the
series with its custodian and dividend disbursing agent. Each series may
enter into other such arrangements and directed brokerage arrangements,
which would also have the effect of reducing the series' expenses. This
arrangement can be discontinued at anytime. "Other Expenses" do not take
into account these fee reductions, and are therefore higher than the
actual expenses of the series. Had these fee reductions been taken into
account, "Total Expenses" would be lower for each series and would equal
1.11% Emerging Growth, 1.13% Utilities and 1.07% for Total Return. There
were no fee reductions for the Capital Opportunities Series.
(13) Pursuant to their respective agreements with Scudder VIT Funds, the
manager, the underwriter and the accounting agent have contractually
agreed for the one year period commencing on May 1, 2005 to limit their
respective fees and to reimburse other expenses to the extent necessary
to limit total expenses to 0.65%.
(14) Pursuant to their respective agreements with Scudder VIT Funds, the
manager, the underwriter and the accounting agent have contractually
agreed for the one year period commencing on May 1, 2005 to limit their
respective fees and to reimburse other expenses to the extent necessary
to limit total expenses to 0.45%.
(15) Effective May 1, 2005, the adviser has contractually agreed to waive the
following portion of its advisory fee for the Fund: 0.15% of the first
$100,000,000 of average daily net assets of the Fund; 0.10% of the next
$150,000,000 of average daily net assets of the Fund; 0.15% of the next
$250,000,000 of average daily net assets of the Fund; 0.10% of the next
$250,000,000 of average daily net assets of the Fund; 0.15% of the next
$750,000,000 of the average daily net assets of the Fund; and 0.20% of
the excess over $1,500,000,000 of average daily net assets of the Fund.
If the fee waiver had been in effect in 2004, it would have resulted in a
reduction of 0.13% of the management fee. The fee waiver will continue at
least through April 30, 2006, and renew automatically for one-year terms
unless the adviser provides written notice of termination to the Fund.
(16) Effective May 1, 2005, the adviser has contractually agreed to waive the
following portion of its advisory fee for the Fund: 0.0% on the first
$250,000,000 of average daily net assets of the Fund; 0.05% on the next
$500,000,000 of average daily net assets of the Fund; and 0.10% on the
excess over $750,000,000 of average daily net assets of the Fund. If the
fee waiver had been in effect in 2004, it would have resulted in a
reduction of 0.04% of the management fee. This waiver will continue at
least through April 30, 2006, and renew automatically for one-year terms
unless the adviser provides writtten notice of termination to the Fund.
For information concerning compensation paid for the sale of the contracts, see
Distribution of the contracts.
8
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 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 SmartSecuritySM Advantage - 1 Year Step-up option are
in effect. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
1) If you surrender your contract at the end of the applicable time period:
· Download Table
1 year 3 years 5 years 10 years
----------- --------- --------- ---------
$1,448 $2,701 $3,747 $6,189
2) If you annuitize or do not surrender your contract at the end of the
applicable time period:
· Download Table
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
$638 $1,901 $3,147 $6,189
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. The examples do not reflect bonus credits or
persistency credits. Different fees and expenses not reflected in the examples
may be imposed during a period in which regular income or annuity payouts are
made. See The contracts - i4LIFE (Reg. TM) Advantage and Annuity payouts. These
examples should not be considered a representation of past or future expenses.
Actual expenses may be more or less than those shown.
Summary of common questions
What kind of contract am I buying? It is an individual variable or fixed and/or
interest adjusted, if applicable, annuity contract between you and Lincoln New
York. This prospectus primarily describes the variable side of the contract.
See The contracts.
What is the variable annuity account (VAA)? It is a separate account we
established under New York 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 my investment choices? Based upon your instruction for purchase
payments, the VAA applies your purchase payments, bonus credits and persistancy
credits to buy shares in one or more of the investment options. See Investments
of the variable annuity account - Description of the funds.
Who invests my money? Several different investment advisers manage the
investment options. See Investments of the variable annuity account -
Description of the funds.
How does the contract work? If we approve your application, we will send you a
contract. When you make purchase payments during the accumulation phase, you
receive bonus credits and 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 received and
the value of each annuity unit on payout days. See The contracts.
What charges do I pay under the contract? If you withdraw purchase payments,
you pay a surrender charge from 0% to 8.5% of the surrendered or withdrawn
purchase payment, depending upon how long those payments have been invested in
the contract. We may waive surrender charges in certain situations. See Charges
and other deductions-Surrender charge.
We reserve the right to charge a $25 fee for the 13th and each additional
transfer during any contract year, excluding automatic dollar cost averaging,
portfolio rebalancing and cross-reinvestment transfers. The transfer charge
will not be imposed on the first 12 transfers during the contract year.
We will deduct any applicable premium tax from purchase payments or contract
value at the time the tax is incurred or at another time we choose.
We charge an account fee of $30 on any contract anniversary if the contract
value is less than $50,000. This account fee will be waived after the fifteenth
contract year. See Charges and other deductions.
9
We apply a charge to the daily net asset value of the VAA and those charges
are:
· Download Table
With Enhanced Guarantee of
Guaranteed Minimum Principal Death
Death Benefit (EGMDB) Benefit (GOP)
----------------------- ----------------
o Mortality and expense risk charge 1.45% 1.35%
o Administrative charge 0.15% 0.15%
---- ----
o Total annual charge for each
subaccount 1.60% 1.50%
Additional optional rider:
· Enlarge/Download Table
Lincoln SmartSecuritySM Lincoln SmartSecuritySM
Advantage - 5 Year Elective Advantage - 1 Year Automatic
Step-up Option Step-up Option
----------------------------- -----------------------------
o Guaranteed maximum annual
percentage charge 0.95% 1.50%
o Current annual percentage charge 0.45% 0.65%
See Charges and other deductions.
The funds' investment management fees, expenses and expense limitations, if
applicable, are more fully described in the prospectuses for the funds.
The surrender, withdrawal or transfer of value from a fixed account guaranteed
period may be subject to the interest adjustment, if applicable. See Fixed side
of the contract.
Charges may also be imposed during the regular income or annuity payout period,
including i4LIFE (Reg. TM) Advantage, if elected. See The contracts and Annuity
payouts.
For information about the compensation we pay for sales of contracts, see The
contracts - Distribution of the contracts.
What purchase payments do I make, and how often? Subject to the minimum and
maximum payment amounts, your payments are completely flexible. See The
contracts - Purchase payments.
What is a bonus credit and a persistency credit? When purchase payments are
made, we will credit an additional amount to the contract, known as a bonus
credit. The amount of the bonus credit is calculated as a percentage of the
purchase payments. The bonus credit percentage will vary based on the owner's
cumulative purchase payments, as defined in this prospectus. All bonus credits
become part of the contract value at the same time as the corresponding
purchase payments. Bonus credits are not considered to be purchase payments.
See The contracts - Bonus credits.
A persistency credit of 0.05% of contract value less purchase payments that
have been in the contract less than fourteen years will be credited on a
quarterly basis after the fourteenth anniversary. See The contracts -
Persistency credits.
We offer a variety of variable annuity contracts. Other annuity contracts that
we offer have no provision for bonus credits but may have lower mortality and
expense risk charges and/or lower surrender charges. During the surrender
charge period, the amount of bonus credit may be more than offset by higher
surrender charges associated with the bonus credit. After the fourteenth
contract anniversary, the persistency credits are designed to fully or
partially offset these additional bonus charges. We encourage you to talk with
your financial adviser and determine which annuity contract is most appropriate
for you.
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 is i4LIFE (Reg. TM) Advantage? i4LIFE (Reg. TM) Advantage is an income
program 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, based on the i4LIFE (Reg.
TM) Advantage death benefit you choose and whether or not the Guaranteed Income
Benefit is in effect.
What happens if I die before I annuitize? Your beneficiary will receive death
benefit proceeds based upon the death benefit you select. Your beneficiary has
options as to how the death benefit is paid. In the alternative, you may choose
to receive a death benefit on the death of the annuitant. See The contracts -
Death benefit.
May I transfer contract value between variable options and between the variable
and fixed sides of the contract? Yes, subject to 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
10
the contract at any time. See The contracts - Transfers on or before the
annuity commencement date and Transfers after the annuity commencement date.
What is the Lincoln SmartSecuritySM Advantage? This benefit, which may be
available for purchase at an additional charge, provides a Guaranteed Amount
equal to the initial purchase payment and its corresponding bonus credits (or
contract value at the time of election) as adjusted. You may access this
benefit through periodic withdrawals. There are two options available to reset
the Guaranteed Amount to the current contract value. See The contracts -
Lincoln SmartSecuritySM Advantage.
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 of the date you first receive the contract. You need to return the
contract, postage prepaid, to our Servicing office. You assume the risk of any
market drop on purchase payments you allocate to the variable side of the
contract. We will not refund any bonus credits credited to your contract value
if you elect to cancel your contract; however, we will assume the risk of
investment loss on the bonus credits. See Return privilege.
Where may I find more information about accumulation unit values? The Appendix
to this prospectus provides more information about accumulation unit values.
Investment results
At times, the VAA may compare its investment results to various unmanaged
indices or other variable annuities in reports to shareholders, sales
literature and advertisements. The results will be calculated on a total return
basis for various periods, with or without contingent deferred sales charges.
Results calculated without contingent deferred sales charges will be higher..
Total returns include the reinvestment of all distributions, which are
reflected in changes in unit value. The money market subaccount's yield is
based upon investment performance over a 7-day period, which is then
annualized.
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.
Financial statements
The financial statements of the VAA and for us 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 1-888-868-2583.
Lincoln Life & Annuity Company of New York
Lincoln New York is a New York-domiciled life insurance company founded on June
6, 1996. Lincoln New York is a subsidiary of The Lincoln National Life
Insurance Company (Lincoln Life). Lincoln Life 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 New York is obligated to pay all
amounts promised to policy owners under the policies.
Variable annuity account (VAA)
On March 11, 1999, the VAA was established as an insurance company separate
account under New York 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 SEC does not supervise the VAA or Lincoln New York. 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 New York. 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.
11
The VAA is used to support other annuity contracts offered by us in addition to
the contracts described in this prospectus. The other annuity contracts
supported by the VAA generally invest in the same funds as the contracts
described in this prospectus. These other annuity contracts may have different
charges that could affect the performance of their subaccounts, and they offer
different benefits.
Investments of the variable annuity account
You decide the subaccount(s) to which you allocate purchase payments. Bonus
credits are allocated to the subaccounts at the same time and at the same
percentage as the purchase payments being made. There is a separate subaccount
which corresponds to each class of each fund. You may change your allocation
without penalty or charges. Shares of the funds will be sold at net asset value
with no initial sales charge to the VAA in order to fund the contracts. The
funds are required to redeem fund shares at net asset value upon our request.
Investment Advisers
As compensation for its services to the fund, the investment adviser receives a
fee from the fund which is accrued daily and paid monthly. This fee is based on
the net assets of each fund, as defined in the prospectus for the fund.
Administrative, Marketing and Support Service Fees
With respect to a fund, including affiliated funds, the adviser and/or
distributor, or an affiliate thereof, may compensate us (or an affiliate) for
administrative, distribution, or other services. It is anticipated that such
compensation 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 compensate us significantly
more than other funds and the amount we receive may be substantial. These
percentages currently range up to 0.36%, and as of the date of this prospectus,
we were receiving compensation from each fund family. We (or our affiliates)
may profit from these fees or use these fees to defray the costs of
distributing the contract. 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 affilitiates
amounts to participate in sales meetings.
The AIM, AllianceBernstein, American Century, American Funds, Delaware,
Fidelity, Franklin Templeton, Janus, Lincoln, MFS, and Putnam Funds offered as
part of this contract make payments to us under their distribution plans (12b-1
plans) in consideration of services provided and expenses incurred by us in
distributing Fund shares. The payment rates range from 0% 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 return on your investment. 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 compensate us for providing administrative,
marketing, and/or support services that would otherwise be provided by the
fund, the fund's investment advisor, or its distributor. 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.
The Scudder VIT EAFE Index Fund (Scudder Fund) will be closing in July, 2005.
Between now and July 19,2005, you may transfer your contract value from the
Scudder Fund to any of the other available subaccounts in your contract. If you
have not transferred your contract value to a different subaccount by July 19,
2005, we will transfer any remaining contract value in the Scudder Fund
Subaccount to the Lincoln VIP Money Market Subaccount. After that time, you may
transfer your contract value from the Lincoln VIP Money Market Subaccount to
any of the other available investment options. There is no charge for a
transfer made pursuant to the closing of the Scudder Fund and this transfer
will not count against the number of transfers you are allowed under your
contract, if the transfer is made within 30 days after the closing of the
Scudder Fund.
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
12
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.
Following are brief summaries of the fund description. More detailed
information may be obtained from the current prospectus for the fund which
accompanies this booklet. You should read each fund prospectus carefully before
investing. Please be advised that there is no assurance that any of the funds
will achieve their stated objectives.
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FUND NAME FUND DESCRIPTION MANAGER
AIM V.I. Growth Fund Capital appreciation AIM Advisors, Inc.
AIM V.I. International Long-term growth AIM Advisors, Inc.
Growth Fund
AIM V.I. Premier Equity Long-term growth AIM Advisors, Inc.
Fund
AllianceBernstein Growth and income Alliance Capital
Growth and Income Management, L.P.
Portfolio
AllianceBernstein Large Capital appreciation Alliance Capital
Cap Growth Portfolio Management, L.P.
AllianceBernstein Long-term growth Alliance Capital
Small/Mid Cap Value Management, L.P.
Portfolio
AllianceBernstein Global Maximum capital appreciation Alliance Capital
Technology Portfolio Management, L.P.
American Century Inflation protection American Century
Investments VP
Inflation Protection
Fund
American Funds Global Long-term growth Capital Research and
Growth Fund Management Company
American Funds Global Long-term growth Capital Research and
Small Capitalization Management Company
Fund
American Funds Growth Long-term growth Capital Research and
Fund Management Company
American Funds Growth and income Capital Research and
Growth-Income Fund Management Company
American Funds Long-term growth Capital Research and
International Fund Management Company
Delaware VIP Capital Current income Delaware Management
Reserves Series Company
Delaware VIP Total return Delaware Management
Diversified Income Company
Series
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FUND NAME FUND DESCRIPTION MANAGER
Delaware VIP Emerging Capital appreciation Delaware Management
Markets Series Company Sub-advised
by Mondrian
Investment Partners
Limited
Delaware VIP High Yield Capital appreciation Delaware Management
Series Company
Delaware VIP REIT Total return Delaware Management
Series Company
Delaware VIP Small Cap Capital appreciation Delaware Management
Value Series Company
Delaware VIP Trend Capital appreciation Delaware Management
Series Company
Delaware VIP U.S. Capital appreciation Delaware Management
Growth Series Company
Delaware VIP Value Long-term capital appreciation Delaware Management
Series Company
Fidelity (Reg. TM) VIP Long-term capital appreciation Fidelity Management
Contrafund (Reg. TM) Portfolio and Research Company
Fidelity (Reg. TM) VIP Reasonable income Fidelity Management
Equity-Income Portfolio and Research Company
Fidelity (Reg. TM) VIP Growth Capital appreciation Fidelity Management
Portfolio and Research Company
Fidelity (Reg. TM) VIP Mid Cap Long-term growth Fidelity Management
Portfolio and Research Company
Fidelity (Reg. TM) VIP Overseas Long-term growth Fidelity Management
Portfolio and Research Company
FTVIPT Templeton Total return Templeton Global
Global Income Advisors Limited
Securities Fund
FTVIPT Franklin Long-term growth Franklin Advisers, Inc.
Small-Mid Cap Growth
Securities Fund
FTVIPT Templeton Long-term growth Templeton Global
Growth Securities Fund Advisors Limited
Janus Aspen Balanced Long-term growth and current income Janus Capital
Portfolio Management LLC
Janus Aspen Mid Cap Long-term growth Janus Capital
Growth Portfolio Management LLC
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FUND NAME FUND DESCRIPTION MANAGER
Janus Aspen Worldwide Long-term growth Janus Capital
Growth Portfolio Management LLC
Lincoln VIP Aggressive Maximum capital appreciation Delaware Management
Growth Fund Company Sub-advised
by T. Rowe Price
Associates, Inc.
Lincoln VIP Bond Fund Current income Delaware Management
Company
Lincoln VIP Capital Long-term growth Delaware Management
Appreciation Fund Company Sub-advised
by Janus Capital
Management LLC
Lincoln VIP Core Fund Capital appreciation Delaware Management
Company Sub-advised
by Salomon Brothers
Asset Management Inc.,
a wholly-owned
subsidiary of Citigroup
Inc.
Lincoln VIP Income Delaware Management
Equity-Income Fund Company Sub-advised
by Fidelity Management
& Research Company
(FMR)
Lincoln VIP Global Total return Delaware Management
Asset Allocation Fund Company Sub-advised
by UBS Global Asset
Management
Lincoln VIP Growth Long-term growth Delaware Management
Fund Company Sub-advised
by Mercury Advisors, a
division of Merrill Lynch
Investment Managers
Lincoln VIP Growth & Capital appreciation Delaware Management
Income Fund Company
Lincoln VIP Growth Long-term growth Delaware Management
Opportunities Fund Company Sub-advised
by Mercury Advisors, a
division of Merrill Lynch
Investment Managers
Lincoln VIP Capital appreciation Delaware Management
International Fund Company Sub-advised
by Mondrian
Investment Partners
Limited
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FUND NAME FUND DESCRIPTION MANAGER
Lincoln VIP Money Preservation of capital Delaware Management
Market Fund Company
Lincoln VIP Social Capital appreciation Delaware Management
Awareness Fund Company
Lincoln VIP Current income Delaware Management
Conservative Profile Company Sub-advised
Fund by Wilshire Associates
Inc.
Lincoln VIP Moderate Total return Delaware Management
Profile Fund Company Sub-advised
by Wilshire Associates
Inc.
Lincoln VIP Moderately Growth and income Delaware Management
Aggressive Profile Fund Company Sub-advised
by Wilshire Associates
Inc.
Lincoln VIP Aggressive Capital appreciation Delaware Management
Profile Fund Company Sub-advised
by Wilshire Associates
Inc.
MFS (Reg. TM) VIT Capital Capital appreciation Massachusetts Financial
Opportunities Series Services Company
MFS (Reg. TM) VIT Emerging Long-term growth Massachusetts Financial
Growth Series Services Company
MFS (Reg. TM) VIT Total Return Income and growth Massachusetts Financial
Series Services Company
MFS (Reg. TM) VIT Utilities Growth and income Massachusetts Financial
Series Services Company
Neuberger Berman AMT Capital appreciation Neuberger Berman
Mid-Cap Growth Management, Inc.
Portfolio
Neuberger Berman AMT Long-term growth Neuberger Berman
Regency Portfolio Management, Inc.
Putnam VT Growth & Growth and income Putnam Investment
Income Fund Management, LLC
Putnam VT Health Capital appreciation Putnam Investment
Sciences Fund Management, LLC
Scudder VIT EAFE Capital appreciation Deutsche Asset
Equity Index Fund Management Inc.
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FUND NAME FUND DESCRIPTION MANAGER
Scudder VIT Equity 500 Capital appreciation Deutsche Asset
Index Fund Management Inc.
Sub-advised by
Northern Trust
Investments, Inc.
Scudder VIT Small Cap Capital appreciation Deutsche Asset
Index Fund Management Inc.
Sub-advised by
Northern Trust
Investments, Inc.
Fund shares
We will purchase shares of the funds at net asset value and direct them to the
appropriate subaccounts of the VAA. We will redeem sufficient shares of the
appropriate funds to pay annuity payouts, death benefits, surrender/withdrawal
proceeds or for other purposes described in the contract. If you want to
transfer all or part of your investment from one subaccount to another, we may
redeem shares held in the first and purchase shares of the other. Redeemed
shares are retired, but they may be reissued later.
Shares of the funds are not sold directly to the general public. They are sold
to us, and may be sold to other insurance companies, for investment of the
assets of the subaccounts established by those insurance companies to fund
variable annuity and variable life insurance contracts.
When a fund sells any of its shares both to variable annuity and to variable
life insurance separate accounts, it is said to engage in mixed funding. When a
fund sells any of its shares to separate accounts of unaffiliated life
insurance companies, it is said to engage in shared funding.
The funds currently engage in mixed and shared funding. Therefore, due to
differences in redemption rates or tax treatment, or other considerations, the
interest of various contractowners participating in a fund could conflict. Each
of the fund's Board of Directors will monitor for the existence of any material
conflicts, and determine what action, if any, should be taken. The funds do not
foresee any disadvantage to contractowners arising out of mixed or shared
funding. If such a conflict were to occur, one of the separate accounts might
withdraw its investment in a fund. This might force a fund to sell portfolio
securities at disadvantageous prices. See the prospectuses for the funds.
Reinvestment of dividends and capital gain distributions
All dividends and capital gain distributions of the funds are automatically
reinvested in shares of the distributing funds at their net asset value on the
date of distribution. Dividends are not paid out to contractowners as
additional units, but are reflected as changes in unit values.
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.
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.
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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, cross-reinvestment, portfolio rebalancing, and
automatic withdrawal services - See Additional services and the SAI for
more information on these programs);
o maintaining records;
o administering annuity payouts;
o furnishing accounting and valuation services (including the calculation and
monitoring of daily subaccount values);
o reconciling and depositing cash receipts;
o providing contract confirmations;
o providing toll-free inquiry services; and
o furnishing telephone and electronic fund transfer services.
The risks we assume include:
o the risk that annuitants receiving annuity 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, if the i4LIFE (Reg. TM) Advantage with the Guaranteed Income
Benefit is in effect, the required regular income payments will exceed the
account value; and
o the risk that our costs in providing the services will exceed our revenues
from contract charges (which we cannot change).
The amount of a charge may not necessarily correspond to the costs associated
with providing the services or benefits indicated by the description of the
charge. For example, the contingent deferred sales 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. A portion of the mortality and expense risk and
administrative charge and a portion of the surrender charges are assessed to
fully or partially recoup bonus credits paid into the contract by us when
purchase payments are made. 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.
Deductions from the VAA
We apply to the average daily net asset value of the subaccounts a charge which
is equal to an annual rate of:
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With Enhanced Guarantee of
Guaranteed Minimum Principal Death
Death Benefit (EGMDB) Benefit (GOP)
----------------------- ----------------
o Mortality and expense risk charge 1.45% 1.35%
o Administrative charge 0.15% 0.15%
---- ----
o Total annual charge for each
subaccount 1.60% 1.50%
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Surrender charge
A surrender charge applies (except as described below) to surrenders and
withdrawals of purchase payments that have been invested for the periods
indicated as follows:
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0
Surrender charge as a percentage of the 8.50%
surrendered or withdrawn purchase
payments
Number of contract anniversaries since
purchase payment was invested
-------------------------------------------------------------------
1 2 3 4 5 6 7
Surrender charge as a percentage of the 8.50% 8% 7% 6% 5% 4% 3%
surrendered or withdrawn purchase
payments
Number of
contract
anniversaries
since
purchase
payment was
invested
--------------
8 9+
Surrender charge as a percentage of the 2% 0%
surrendered or withdrawn purchase
payments
A surrender charge does not apply to:
o A surrender or withdrawal of a purchase payment beyond the ninth 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 the greater of 10% of the current
contract value or 10% of the total purchase payments (this does not apply
upon surrender of the contract);
o When the surviving spouse assumes ownership of the contract as a result of
the death of the original owner;
o A surrender of the contract as a result of the death of the contractowner,
joint owner or annuitant;
o Purchase payments when 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 payments made under i4LIFE (Reg. TM) Advantage or periodic
payments made under any annuity payout option made available by us;
o A surrender or withdrawal of any purchase payments, if such purchase
payments were received more than 12 months prior to the onset of a
permanent and total disability of the contractowner as defined in Section
22(e)(3) of the tax code and the disability occurred after the effective
date of the contract and before the 65th birthday of the contractowner;
o A surrender or withdrawal of any purchase payments if such purchase payments
were received more than 12 months prior to the admittance of the
contractowner to an accredited nursing home or equivalent health care
facility, where the admittance into such facility occurs after the
effective date of the contract and the owner has been confined for at least
90 consecutive days;
o A surrender or withdrawal of any purchase payments if such purchase payments
were received more than 12 months prior to the diagnosis date of a terminal
illness that is after the date of the contract and results in a life
expectancy of less than one year as determined by a qualified professional
medical practitioner;
o A surrender or annuitization of bonus credits and persistency credits;
o Withdrawals up to the Annual Withdrawal Limit under the Lincoln
SmartSecuritySM Advantage, subject to certain conditions.
For purposes of calculating the surrender charge on withdrawals, we assume
that:
The free amount will be withdrawn from purchase payments on a "first in-first
out (FIFO)" basis. Prior to the ninth anniversary of the contract, any amount
withdrawn above the free amount during a contract year will be withdrawn in the
following order:
1. from purchase payments (on a FIFO basis) until exhausted; then
2. from earnings until exhausted; then
3. from bonus credits.
On or after the ninth anniversary of the contract, any amount withdrawn above
the free amount during a contract year will be withdrawn in the following
order:
1. from purchase payments (on a FIFO basis)to which a surrender charge no
longer applies until exhausted; then
2. from earnings and persistency credits until exhausted; then
3. from bonus credits attributable to purchase payments to which a surrender
charge no longer applies until exhausted; then
4. from purchase payments (on a FIFO basis) to which a surrender charge still
applies until exhausted; then
5. from bonus credits attributable to purchase payments to which a surrender
charge still applies.
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. The
surrender charge is calculated separately for each purchase payment. The
surrender charges associated with surrender or withdrawal are paid to us to
compensate us for the loss we experience on contract distribution costs when
contractowners surrender or withdraw before distribution costs have been
recovered.
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If the contractowner is a corporation or other non-individual (non-natural
person), the annuitant or joint annuitant will be considered the contractowner
or joint owner for purposes of determining when a surrender charge does not
apply.
Account fee
During the accumulation period, we will deduct $30 from the contract value on
each contract anniversary to compensate us for the administrative services
provided to you; this $30 account fee will also be deducted from the contract
value upon surrender. This fee will be waived after the fifteenth contract
year. The account fee will be waived for any contract with a contract value
that is equal to or greater than $50,000 on the contract anniversary. We do not
assess the account fee on contracts issued prior to October 1, 2003.
Transfer fee
We reserve the right to charge a $25 fee for the 13th and each additional
transfer during any contract year, excluding automatic dollar cost averaging,
portfolio rebalancing and cross-reinvestment transfers. The transfer charge
will not be imposed on the first 12 transfers during the contract year.
Rider charges
A fee or expense may also be deducted in connection with any benefits added to
the contract by rider or endorsement.
Lincoln SmartSecuritySM Advantage Charge. During the accumulation period, there
is a charge for the Lincoln SmartSecuritySM Advantage, if elected. The Rider
charge is currently equal to an annual rate of 0.45% (0.1125% quarterly) if the
Lincoln SmartSecuritySM Advantage - 5 Year Elective Step-up option is selected
or 0.65% (0.1625% quarterly) for the Lincoln SmartSecuritySM Advantage - 1
Year Automatic Step-up option and is applied to the Guaranteed Amount as
adjusted. 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 on
the valuation date the Rider charge is assessed. The charge will not apply to
any portion of the Guaranteed Amount in the dollar cost averaging fixed
account. The amount we deduct will increase or decrease as the Guaranteed
Amount increases or decreases, because the charge is based on the Guaranteed
Amount. If you purchase the Rider in the future, the percentage charge will be
the current charge in effect at that time up to the maximum 0.95% or 1.50%
depending on the option selected.
Under the Lincoln SmartSecuritySM Advantage - 1 Year Automatic Step-up option,
the annual Rider percentage charge will not change upon each automatic step-up
of the Guaranteed Amount for the 10-year period.
Under both options, if you elect to step-up the Guaranteed Amount, a pro-rata
deduction of the Rider charge based on the Guaranteed Amount immediately prior
to the step-up will be made on the valuation date of the step-up. This
deduction covers the cost of the Rider from the time of the previous deduction
to the date of the step-up. After a contractowner's step-up, we will deduct the
Rider charge for the stepped-up Guaranteed Amount on a quarterly basis,
beginning on the valuation date on or next following the three-month
anniversary of the step-up. At the time of the elected step-up, the Rider
percentage charge will change to the current charge in effect at that time (if
the current charge has changed), but it will never exceed the guaranteed
maximum annual percentage charge for the 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 SmartSecuritySM 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
SmartSecuritySM Advantage - 1 Year Automatic Step-up option, after the fifth
Benefit Year anniversary following the last automatic step-up opportunity, the
rider charge may be waived.
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 and bonus credits 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.
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 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 taxes
generally depend upon the law of your state of residence. The tax ranges from
zero to 3.5%. Currently, there is no premium tax levied for New York residents.
20
Other charges and deductions
The surrender, withdrawal or transfer of value from a fixed account guaranteed
period may be subject to the interest adjustment if applicable. See Fixed side
of the contract. Charges may also be imposed during the regular income and
annuity payout period. See i4LIFE (Reg. TM) Advantage and Annuity payouts.
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.
Additional information
The charges described previously may be reduced or eliminated for any
particular contract. However, these reductions may be available only to the
extent that we anticipate lower distribution and/or administrative expenses, or
that we perform fewer sales or administrative services than those originally
contemplated in establishing the level of those charges, or when required by
law. Lower distribution and administrative expenses may be the result of
economies associated with
o the use of mass enrollment procedures,
o the performance of administrative or sales functions by the employer,
o the use by an employer of automated techniques in submitting deposits or
information related to deposits on behalf of its employees, or
o any other circumstances which reduce distribution or administrative
expenses.
The exact amount of charges and fees applicable to a particular contract will
be stated in that contract.
The contracts
Purchase of contracts
If you wish to purchase a contract, you must apply for it through a sales
representative authorized by us. The completed application is sent to us and we
decide whether to accept or reject it. If the application is accepted, a
contract is prepared and executed by our legally authorized officers. The
contract is then sent to you through your sales representative. See
Distribution of the contracts.
When a completed application and all other information necessary for processing
a purchase order is received at our Servicing office, an initial purchase
payment and its corresponding bonus credits will be priced no later than two
business days after we receive the order. If you submit your application and/or
initial purchase payment to your agent (other than through Lincoln Financial
Advisors Corporation), we will not begin processing your purchase order until
we receive the application and initial purchase payment from your agent's
broker-dealer. While attempting to finish an incomplete application, we may
hold the initial purchase payment for no more than five business days unless we
receive your consent to our retaining the payment until the application is
completed. If the incomplete application cannot be completed within those five
days and we have not received your consent, you will be informed of the
reasons, and the purchase payment will be returned immediately. Once the
application is complete, we will allocate your initial purchase payment and its
corresponding bonus credits within two business days.
Who can invest
To apply for a contract, you must be of legal age in a state where the
contracts may be lawfully sold and also be eligible to participate in any of
the qualified and nonqualified plans for which the contracts are designed. At
the time of issue, the contractowner, joint owner and annuitant must be under
age 86. 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.
If you are purchasing the contract through a tax-favored arrangement, including
traditional IRAs and Roth IRAs, you should consider carefully the costs and
benefits of the contract (including annuity income benefits) before purchasing
the contract, since the tax-favored arrangement itself provides tax-sheltered
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
and/or a new surrender charge period may be imposed with the purchase of, or
transfer into, this 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.
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Purchase payments
Purchase payments are payable to us at a frequency and in an amount selected by
you in the application. The minimum initial purchase payment is $10,000. The
minimum annual amount for additional purchase payments is $300. The minimum
payment to the contract at any one time must be at least $100 ($25 if
transmitted electronically). Purchase payments in total may not exceed $2
million without our approval. If you stop making purchase payments, the
contract will remain in force as a paid-up contract. However, we may terminate
the contract as allowed by New York's non-forfeiture law for individual
deferred annuities. 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. We reserve the right to
limit purchase payments made to the contract.
Bonus credits
For each purchase payment made into the contract, we will credit the contract
with a bonus credit. The amount of the bonus credit will be added to the value
of the contract at the same time and allocated in the same percentage as the
purchase payment. The amount of the bonus credit is calculated as a percentage
of the purchase payment made. The bonus credit percentage is based on the
owner's cumulative purchase payments at the time each purchase payment is made
according to the following scale:
· Download Table
Cumulative Purchase Payments Bonus Credit %
-------------------------------- ---------------
Less than $100,000............ 3.0%
$100,000-$999,999............. 4.0%
$1,000,000 or greater......... 5.0%
Your cumulative purchase payments at the time of a purchase payment are equal
to the sum of (1) all prior purchase payments made to your contract; plus (2)
the current purchase payment made to your contract; minus (3) all prior
withdrawals of purchase payments from your contract.
If you make an additional purchase payment prior to the first anniversary of
the contract date and that purchase payment increases the owner's cumulative
purchase payments to a level that qualifies for a higher bonus credit
percentage, then we will contribute an additional bonus credit into your
contract at the time the subsequent purchase payment is made (it will not be
contributed retroactively). The additional bonus credit is determined by
multiplying the sum of the prior purchase payments by the additional bonus
credit percentage (the difference between the percentage applicable to the
subsequent purchase payment and the percentage applicable to prior purchase
payments). This additional bonus credit is not available after the first
anniversary of the contract date.
We offer a variety of variable annuity contracts. During the surrender charge
period, the amount of the bonus credit may be more than offset by higher
surrender charges associated with the bonus credit. Similar products that do
not offer bonus credits and have lower fees and charges may provide larger cash
surrender values than this contract, depending on the level of the bonus
credits in this contract and the performance of the owner's chosen subaccounts.
We encourage you to talk with your financial adviser and determine which
annuity contract is most appropriate for you.
Persistency credits
Contractowners will receive a persistency credit on a quarterly basis after the
fourteenth contract anniversary. The amount of the persistency credit is
calculated by multiplying the contract value, less any purchase payments that
have not been invested in the contract for at least fourteen years, by 0.05%.
This persistency credit will be allocated to the variable subaccounts and the
fixed subaccounts in proportion to the contract value in each variable
subaccount and fixed subaccount at the time the persistency credit is paid into
the contract.
There is no additional charge to receive this persistency credit, and in no
case will the persistency credit be less than zero.
Valuation date
Accumulation and annuity units will be valued once daily at the close of
trading (normally, 4:00 p.m., New York time) on each day the New York Stock
Exchange is open (valuation date). On any date other than a valuation date, the
accumulation unit value and the annuity unit value will not change.
Allocation of purchase payments
Purchase payments allocated to the variable account are placed into the VAA's
subaccounts, each of which invests in shares of the class of its corresponding
fund, according to your instructions. You may also allocate purchase payments
in the fixed subaccount, if available. Corresponding bonus credits will be
allocated to the subaccount(s) and or the fixed side of the contract in the
same proportion in which you allocated purchase payments.
The minimum amount of any purchase payment which can be put into any one
subaccount is $20. The minimum amount of any purchase payment which can be put
into a fixed account guaranteed period is $2,000, subject to state approval.
Upon allocation to a subaccount, purchase payments and bonus credits are
converted into accumulation units. The number of accumulation units credited is
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determined by dividing the amount allocated to each subaccount by the value of
an accumulation unit for that subaccount on the valuation date on which the
purchase payment is received at our Servicing office if received before 4:00
p.m., New York time. If the purchase payment is received 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 agent (other than
through Lincoln Financial Advisors Corporation), we will not begin processing
the purchase payment until we receive it from your agent's broker-dealer. 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 and bonus credits 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 and bonus credits are allocated to the VAA. The accumulation unit
value for each subaccount was or will be established at the inception of the
subaccount. It may increase or decrease from valuation period to valuation
period. Accumulation unit values are affected by investment performance of the
funds, fund expenses, and the contract charges. The accumulation unit value for
a subaccount for a later valuation period is determined as follows:
1. The total value of the fund shares held in the subaccount is calculated by
multiplying the number of fund shares owned by the subaccount at the
beginning of the valuation period by the net asset value per share of the
fund at the end of the valuation period, and adding any dividend or other
distribution of the fund if an ex-dividend date occurs during the valuation
period; minus
2. The liabilities of the subaccount at the end of the valuation period; these
liabilities include daily charges imposed on the subaccount, and may
include a charge or credit with respect to any taxes paid or reserved for
by us that we determine result from the operations of the VAA; and
3. The result is divided by the number of subaccount units outstanding at the
beginning of the valuation period.
The daily charges imposed on a subaccount for any valuation period are equal to
the daily mortality and expense risk charge and the daily administrative charge
multiplied by the number of calendar days in the valuation period. Contracts
with different features have different daily charges, and therefore, will have
different corresponding accumulation unit values on any given day. In certain
circumstances, and when permitted by law, it may be prudent for us to use a
different standard industry method for this calculation, called the Net
Investment Factor method. We will achieve substantially the same result using
either method.
Transfers on or before the annuity commencement date
After the first 30 days from the effective date of your contract, you may
transfer all or a portion of your investment from one subaccount to another. A
transfer involves the surrender of accumulation units in one subaccount and the
purchase of accumulation units in the other subaccount. A transfer will be done
using the respective accumulation unit values determined at the end of the
valuation date on which the transfer request is received. Currently, there is
no charge to you for a transfer. However, we reserve the right to impose a $25
fee for transfers after the first 12 times during a contract year. Transfers
are limited to twelve (12) (within and/or between the variable and fixed
subaccounts) per contract year unless otherwise authorized by Lincoln New York.
Lincoln New York reserves the right to require a 30 day minimum time period
between each transfer. Transfers made as a part of an automatic transfer
program will not be counted against these twelve transfers.
The minimum amount which may be transferred between subaccounts is $300 (or the
entire amount in the subaccount, if less than $300). If the transfer from a
subaccount would leave you with less than $300 in the subaccount, we may
transfer the total balance of the subaccount.
A transfer request may be made to our Servicing office 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 Servicing office.
Requests for transfers will be processed on the valuation date that they are
received when they are received at our Servicing office before the end of the
valuation date (normally 4:00 p.m. New York time). If we receive a transfer
request at or after 4:00p.m., New York time, we will process the request using
the accumulation unit value computed on the next valuation date.
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If your contract offers a fixed account, you also may transfer all or any part
of the contract value from the subaccount(s) to the fixed side of the contract,
except during periods when (if permitted by your contract) we have discontinued
accepting transfers into the fixed side of the contract. The minimum amount
which can be transferred to a fixed account is $2,000 or the total amount in
the subaccount if less than $2,000. However, if a transfer from a subaccount
would leave you with less than $300 in the subaccount, we may transfer the
total amount to the fixed side of the contract.
You may also transfer part of the contract value from a fixed account to the
various subaccount(s) subject to the following restrictions:
o the sum of the percentages of fixed value transferred is limited to 25% of
the value of that fixed account in any twelve month period; and
o the minimum amount which can be transferred is $300 or the amount in the
fixed account.
Transfers of all or a portion of a fixed account (other than automatic transfer
programs and i4LIFE (Reg. TM) Advantage transfers) may be subject to interest
adjustments, if applicable.
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. 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.
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 via overnight mail service
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, standard 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
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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. We also
reserve the right to implement and administer redemption fees imposed by one or
more of the funds in the future.
To the extent permitted by applicable law, we reserve the right to defer or
reject a transfer request at any time that we are unable to purchase or redeem
shares of any of the funds available through the VAA, including any refusal or
restriction on purchases or redemptions of the fund shares as a result of the
funds' own policies and procedures on market timing activities. If a fund
refuses to accept a transfer request we have already processed, we will reverse
the transaction within 1 or 2 business days. We will notify you in writing if
we have reversed, restricted or refused any of your transfer requests. You
should read the prospectuses of the funds for more details on 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.
Additional services
These are the additional services available to you under your contract:
dollar-cost averaging (DCA), automatic withdrawal service (AWS),
cross-reinvestment service and portfolio rebalancing. Currently, there is no
charge for these services. However, we reserve the right to impose one. In
order to take advantage of one of these services, you will need to complete the
appropriate election form that is available from our Servicing office. For
further detailed information on these services, please see Additional services
in the SAI.
Dollar-cost averaging allows you to transfer amounts from the DCA fixed
account, if available, or certain variable subaccounts into the variable
subaccounts on a monthly basis. We reserve the right to discontinue 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.
The cross-reinvestment 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.
Portfolio rebalancing is an option that restores to a pre-determined level the
percentage of contract value allocated to each variable account subaccount. The
rebalancing may take place monthly, quarterly, semi-annually or annually.
Only one of the three additional services (DCA, cross reinvestment and
portfolio rebalancing) may be used at one time. For example, you cannot have
DCA and cross reinvestment running simultaneously.
Death benefit
The chart below provides a brief overview of how the death benefit proceeds
will be distributed, if death occurs prior to the annuity commencement date.
Refer to your contract for the specific provisions applicable upon death.
· Enlarge/Download Table
UPON DEATH OF: AND...
contractowner There is a surviving joint owner
contractowner There is no surviving joint owner
contractowner There is no surviving joint owner
and the beneficiary predeceases the
contractowner
UPON DEATH OF: AND... DEATH BENEFIT PROCEEDS PASS TO:
contractowner The annuitant is living or deceased joint owner
contractowner The annuitant is living or deceased designated beneficiary
contractowner The annuitant is living or deceased contractowner's estate
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· Enlarge/Download Table
UPON DEATH OF: AND...
annuitant The contractowner is living
annuitant The contractowner is living
annuitant** The contractowner is a trust or other
non-natural person
UPON DEATH OF: AND... DEATH BENEFIT PROCEEDS PASS TO:
annuitant There is no contingent annuitant The youngest contractowner
becomes the contingent annuitant
and the contract continues. The
contractowner may waive* this
continuation and receive the death
benefit proceeds.
annuitant The contingent annuitant is living contingent annuitant becomes the
annuitant and the contract continues
annuitant** No contingent annuitant allowed designated beneficiary
with non-natural contractowner
* Notification from the contractowner to select the death benefit proceeds
must be received within 75 days of the death of the annuitant.
** Death of annuitant is treated like death of the contractowner.
If the contractowner (or a joint owner) or annuitant dies prior to the annuity
commencement date, a death benefit may be payable. You can choose the death
benefit. Only one death benefit may be in effect at any one time and this
election terminates if you elect i4LIFE (Reg. TM) Advantage or any
annuitization option. Generally, the more expensive the death benefit the
greater the protection.
You should consider the following provisions carefully when designating the
beneficiary, annuitant, any contingent annuitant and any joint owner, as well
as before changing any of these parties. The identity of these parties under
the contract may significantly affect the amount and timing of the death
benefit or other amount paid upon a contractowner's or annuitant's death.
You may designate a beneficiary during your lifetime and change the beneficiary
by filing a written request with our Servicing office. Each change of
beneficiary revokes any previous designation. We reserve the right to request
that you send us the contract for endorsement of a change of beneficiary.
Upon the death of the contractowner, a death benefit will be paid to the
beneficiary. Upon the death of a joint owner, the death benefit will be paid to
the surviving joint owner. If the contractowner is a corporation or other
non-individual (non-natural person), the death of the annuitant will be treated
as death of the contractowner.
If an annuitant who is not the contractowner or joint owner dies, then the
contingent annuitant, if named, becomes the annuitant and no death benefit is
payable on the death of the annuitant. If no contingent annuitant is named, the
contractowner (or younger of joint owners) becomes the annuitant.
Alternatively, a death benefit may be paid to the contractowner (and joint
owner, if applicable, in equal shares). Notification of the election of this
death benefit must be received by us within 75 days of the death of the
annuitant. The contract terminates when any death benefit is paid due to the
death of the annuitant.
Only the contract value as of the valuation date we approve the payment of the
death claim is available as a death benefit if a contractowner, joint owner or
annuitant was changed subsequent to the effective date of this contract unless
the change occurred because of the death of a prior contractowner, joint owner
or annuitant.
Guarantee of Principal Death Benefit. If you do not select a death benefit, the
Guarantee of Principal Death Benefit will apply to your contract. If the
Guarantee of Principal Death Benefit is in effect, the death benefit will be
equal to the greater of:
o The current contract value as of the valuation date we approve the payment
of the claim; or
o The sum of all purchase payments decreased by withdrawals in the same
proportion that withdrawals reduced the contract value.
In a declining market, withdrawals deducted in the same proportion that
withdrawals reduce the contract value may have a magnified effect on the
reduction of the death benefit payable.
All references to withdrawals include deductions for applicable charges and
premium taxes, if any.
Enhanced Guaranteed Minimum Death Benefit (EGMDB).
If the Enhanced Guaranteed Minimum Death Benefit (EGMDB) is in effect, the
death benefit paid will be the greatest of:
o the contract value as of the valuation date the death benefit is approved by
us for payment;
o the sum of all purchase payments decreased by withdrawals in the same
proportion that withdrawals reduced the contract value; or
o the highest contract value which the contract attains on any contract
anniversary (including the inception date) (determined before the
allocation of any purchase payments on that contract anniversary) prior to
the 81st birthday of the deceased and prior to the death of the
contractowner, joint owner or annuitant for whom the death claim is
approved for payment. The highest contract value is increased by purchase
payments and is decreased by withdrawals subsequent to that anniversary
date in the same proportion that withdrawals reduced the contract value.
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In a declining market, withdrawals deducted in the same proportion that
withdrawals reduce the contract value may have a magnified effect on the
reduction of the death benefit payable. All references to withdrawals include
deductions for applicable charges and premium taxes, if any.
The EGMDB is not available under contracts issued to a contractowner, or joint
owner or annuitant, who is age 80 or older at the time of issuance.
Contractowners whose contracts contain the Guarantee of Principal death benefit
may add the EGMDB at a later date if the contractowner, joint owner and
annuitant are under age 80. 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, only the highest
contract value on the effective date when the benefit is added to the contract
or any contract anniversary after that effective date will be used.
For contracts purchased after October 1, 2003, the contractowner may
discontinue the EGMDB at any time by completing the Enhanced Guaranteed Minimum
Death Benefit Discontinuance form and sending it to our Servicing office. The
benefit will be discontinued as of the valuation date we receive the request,
and the Guarantee of Principal Death Benefit will apply. We will deduct the
charge for the Guarantee of Principal Death Benefit as of that date. See
Charges and other deductions.
General death benefit information
Only one of these death benefit elections may be in effect at any one time and
these elections terminate if you elect i4LIFE (Reg. TM) Advantage.
If there are joint owners, upon the death of the first contractowner, we will
pay a death benefit to the surviving joint owner. The surviving joint owner
will be treated as the primary, designated beneficiary. Any other beneficiary
designation on record at the time of death will be treated as a contingent
beneficiary. If the surviving joint owner is the spouse of the deceased joint
owner, he/she may continue the contract as sole contractowner. Upon the death
of the spouse who continues the contract, we will pay a death benefit to the
designated beneficiary(s).
If the beneficiary is the spouse of the contractowner, then the spouse may
elect to continue the contract as the new contractowner. Should the surviving
spouse elect to continue the contract, a portion of the death benefit may be
credited to the contract. Any portion of the death benefit that would have been
payable (if the contract had not been continued) that exceeds the current
contract value on the date the surviving spouse elects to continue will be
added to the contract value. If the contract is continued in this way the death
benefit in effect at the time the beneficiary elected to continue the contract
will remain as the death benefit.
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.
Unless otherwise provided in the beneficiary designation, one of the following
procedures will take place on the death of a beneficiary:
o If any beneficiary dies before the contractowner, that beneficiary's
interest will go to any other beneficiaries named, according to their
respective interests; and/or
o If no beneficiary survives the contractowner, the proceeds will be paid to
the contractowner's estate.
If the beneficiary is a minor, court documents appointing the
guardian/custodian may be required.
Unless the contractowner has already selected a settlement option, the
beneficiary may choose the method of payment of the death benefit. The death
benefit payable to the beneficiary or joint owner must be distributed within
five years of the contractowner's date of death unless the beneficiary begins
receiving within one year of the contractowner's death the distribution in the
form of a life annuity or an annuity for a designated period not extending
beyond the beneficiary's life expectancy.
Upon the death of the annuitant, Federal tax law requires that an annuity
election be made no later than 60 days after we have approved the death claim
for payment.
If the death benefit becomes payable, the recipient may elect to receive
payment either in the form of a lump sum settlement or an annuity payout. If a
lump sum settlement is elected, the proceeds will be mailed within seven days
of approval by us of the claim subject to the laws, regulations and tax code
governing payment of death benefits. This payment may be postponed as permitted
by the Investment Company Act of 1940.
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Lincoln SmartSecuritySM Advantage
The Lincoln SmartSecuritySM Advantage is available for purchase with
nonqualified and qualified (IRAs and Roth IRAs) annuity contracts. This benefit
provides a Guaranteed Amount equal to the initial purchase payment and its
corresponding bonus credits (or contract value if elected after contract issue)
adjusted for purchase payments and bonus credits, step-ups and withdrawals in
accordance with the provisions set forth below. You may access this benefit
through periodic withdrawals. Two different options are available to step-up
the Guaranteed Amount to a higher level (the contract value at the time of the
step-up). You must choose one of these two options:
Lincoln SmartSecuritySM Advantage - 5 Year Elective Step-up (default) or
Lincoln SmartSecuritySM Advantage - 1 Year Automatic Step-up
when you purchase the benefit, and the version of the Rider you receive is
based on the option you choose. Under the Lincoln SmartSecuritySM Advantage -
5 Year Elective Step-up, the contractowner has the option to step-up the
Guaranteed Amount after five years. With the Lincoln SmartSecuritySM 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
until the 10th anniversary. After that time, the contractowner will have the
opportunity to step-up the Guaranteed Amount and begin a new 10-year period of
automatic step-ups. These options are discussed below in detail. All purchasers
of the Lincoln SmartSecuritySM Advantage - 1 Year Automatic Step-up option and
qualified annuity purchasers of the Lincoln SmartSecuritySM Advantage - 5 Year
Elective Step-up option must be under age 81.
There is no guarantee that the Lincoln SmartSecuritySM Advantage will be
available for new purchasers in the future as we reserve the right to
discontinue this benefit at any time.
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 Servicing office), the Rider
will be effective on the next valuation date following approval by us. You
cannot elect the Rider on or after the annuity commencement date (or after the
purchase of i4LIFE (Reg. TM) Advantage).
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 step-ups), 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 initial Guaranteed Amount varies based on when 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 and its
corresponding bonus credits. 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
SmartSecuritySM Advantage - 5 Year Elective Step-up option and $10,000,000 for
Lincoln SmartSecuritySM Advantage - 1 Year Automatic Step-up option. This
maximum takes into consideration all Lincoln New York contracts owned by you
(or on which you are the annuitant if the contract is owned by a trust or other
non-natural owner).
Additional purchase payments and bonus credits automatically increase the
Guaranteed Amount (not to exceed the maximum); however, we may restrict
purchase payments in the future. We will notify you if we restrict additional
purchase payments. 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 decreases as withdrawals are made.
Step-ups of the Guaranteed Amount. Under the Lincoln SmartSecuritySM 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
the Lincoln SmartSecuritySM 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 tenth 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 charges and other deductions), the Rider charge and
Account Fee plus any purchase payments and bonus credits made on that date is
greater than the Guaranteed Amount immediately preceding the valuation date.
After the tenth Benefit Year anniversary, you may elect (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.
This step-up will initiate automatic step-ups as described above for another
ten years.
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Under both options, a contractowner elected step-up may cause a change in the
percentage charge for this benefit. See Charges and other deductions. Purchase
payments and bonus credits or 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.
Withdrawals. You will have access to your Guaranteed Amount through periodic
withdrawals up to the Maximum Annual Withdrawal limit each Benefit Year until
the Guaranteed Amount equals zero.
On the effective date of the Rider, the Maximum Annual Withdrawal limit is:
o 7% of the Guaranteed Amount under the Lincoln SmartSecuritySM Advantage -
5 Year Elective Step-up option and
o 5% of the Guaranteed Amount under the Lincoln SmartSecuritySM Advantage - 1
Year Automatic Step-up option.
The Maximum Annual Withdrawal limit is increased by 7% or 5% (depending on your
option) of any additional purchase payments and bonus credits. Step-ups of the
Guaranteed Amount (both automatic step-ups and step-ups elected by you) will
step-up the Maximum Annual Withdrawal limit to the greater of:
a. the Maximum Annual Withdrawal limit 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
limit, 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 limit will remain the same.
Withdrawals within the Maximum Annual Withdrawal limit are not subject to
surrender charges or the interest adjustment, if applicable. If the Lincoln
SmartSecuritySM Advantage - 1 Year Automatic Step-up option is in effect,
withdrawals from IRA contracts will be treated as within the Maximum Annual
Withdrawal limit (even if they exceed the 5% Maximum Annual Withdrawal limit)
only if the withdrawals are taken in the form of systematic monthly or
quarterly installments of the amount needed to satisfy the required minimum
distribution rules under Internal Revenue Code Section 401(a)(9) for this
contract value only, as determined by Lincoln. 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 limit:
1. The Guaranteed Amount is reduced to the lesser of:
o the contract value immediately following the withdrawal, or
o the Guaranteed Amount immediately prior to the withdrawal, less the amount
of the withdrawal.
2. The Maximum Annual Withdrawal limit will be the least of:
o the Maximum Annual Withdrawal limit 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 limit); or
o 7% or 5% (depending on your option) of the contract value immediately
following the withdrawal; or
o the new Guaranteed Amount.
In a declining market, withdrawals that exceed the Maximum Annual Withdrawal
limit may substantially deplete or eliminate your Guaranteed Amount and reduce
your Maximum Annual Withdrawal limit.
Under the Lincoln SmartSecuritySM Advantage - 5 Year Elective Step-up option
for IRA contracts, the annual amount available for withdrawal within the
Maximum Annual Withdrawal limit may not be sufficient to satisfy your required
minimum distributions. This is particularly true for individuals over age 84.
Therefore, you may have to make withdrawals that exceed the Maximum Annual
Withdrawal limit. Withdrawals over the Maximum Annual Withdrawal limit may
quickly and substantially decrease your Guaranteed Amount and Maximum Annual
Withdrawal limit, 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.
You may use one of the following methods to request a withdrawal: submit an
individual request at the time of the withdrawal, establish an automatic
withdrawal service or select the Guaranteed Amount Annuity Payment Option. The
Guaranteed Amount Annuity Payment Option is a fixed annuitization in which the
contractowner will receive the Guaranteed Amount in annual annuity payments
equal to the current 7% or 5% (depending on your option) Maximum Annual
Withdrawal limit. Payment frequencies other than annual may be available.
Payments will continue until the Guaranteed Amount equals zero and your
contract terminates. This may result in a partial, final payment. We do not
assess a charge for this annuity payment option and, once chosen, this payment
option may not be
29
changed. 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.
The tax consequences of withdrawals and annuity payouts are discussed in
Federal tax matters.
All withdrawals you make, whether or not within the Maximum Annual Withdrawal
limit, 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.
Death Benefit. There is no provision for a lump sum payout of the Guaranteed
Amount upon death of the contractowners or annuitant. 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.
If the surviving spouse of the deceased contractowner continues the contract,
all terms and conditions of the Rider, including the remaining automatic
step-ups under the Lincoln SmartSecuritySM Advantage - 1 Year Automatic
Step-up option, will apply to the new contractowner. Under the Lincoln
SmartSecuritySM 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 beneficiary elects to receive the death benefit in installments (thereby
keeping the contract in force), the beneficiary may continue the Lincoln
SmartSecuritySM Advantage if desired. Automatic step-ups under the Lincoln
SmartSecuritySM 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 limit, thereby reducing the benefit of this Rider. If
there are multiple beneficiaries, each beneficiary will be entitled to continue
a share of the Lincoln SmartSecuritySM Advantage equal to his or her share of
the death benefit.
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 of the Guaranteed Amount, the Rider may be terminated. This Rider 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);or
o upon the last payment of the Guaranteed Amount.
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
either option.
i4LIFE (Reg. TM) Advantage Option. Contractowners with an active Lincoln
SmartSecuritySM Advantage in force are guaranteed the option to purchase i4LIFE
(Reg. TM) Advantage (with or without 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. See i4LIFE (Reg. TM) Advantage.
Availability. This Rider is available for contracts issued after October 1,
2003. In addition, the Lincoln SmartSecuritySM Advantage - 1 Year Automatic
Step-up option may not be available for contracts sold through certain
broker/dealers.
Ownership
The owner on the date of issue will be the person or entity designated in the
contract specifications. If no owner is designated, the annuitant(s) will be
the owner. The owner may name a joint owner.
As contractowner, you have all rights under the contract. According to New York
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. We assume no
responsibility for the validity or effect of any assignment. Consult your tax
adviser about the tax consequences of an assignment.
Joint ownership
If a contract has joint owners, the joint owners shall be treated as having
equal undivided interests in the contract. Either owner, independently of the
other, may exercise any ownership rights in this contract. Not more than two
owners (an owner and joint owner) may be named and contingent owners are not
permitted.
30
Annuitant
The following rules apply prior to the annuity commencement date. You may name
only one annuitant [unless you are a tax-exempt entity, then you can name two
joint annuitants]. You (if the contractowner is a natural person) have the
right to change the annuitant at any time by notifying us of the change. The
new annuitant must be under age 86 as of the effective date of the change. This
change may cause a reduction in the death benefit on the death of the
annuitant. See The contracts - Death benefit. A contingent annuitant may be
named or changed by notifying us in writing. On or after the annuity
commencement date, the annuitant or joint annuitants may not be changed and
contingent annuitant designations are no longer applicable.
Surrenders and withdrawals
Before the annuity commencement date, we will allow the surrender of the
contract or a withdrawal of the contract value upon your written request,
subject to the rules discussed below. Surrender or withdrawal rights after the
annuity commencement date depend on the annuity payout option selected.
The amount available upon surrender/withdrawal is the contract value less any
applicable charges, fees, and taxes at the end of the valuation period during
which the written request for surrender/withdrawal is received at the Servicing
office. If we receive a surrender or withdrawal request at or after 4:00 p.m.,
New York time, we will process the request using the accumulation unit value
computed on the next valuation date. The minimum amount which can be withdrawn
is $300. Unless a request for withdrawal specifies otherwise, withdrawals will
be made from all subaccounts within the VAA and from the fixed account in the
same proportion that the amount of withdrawal bears to the total contract
value. Surrenders and withdrawals from the fixed account may be subject to the
interest adjustment. See Fixed side of the contract. Unless prohibited,
surrender/withdrawal payments will be mailed within seven days after we receive
a valid written request at the Servicing 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 whether these charges are deducted from the
amount you request to be 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.
The tax consequences of a surrender/withdrawal are discussed later in this
booklet. See Federal tax matters - Taxation of withdrawals and surrenders.
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
($2,000 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 three (3) full, consecutive
contract years; and
o the paid up annuity benefit at maturity 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 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.
Payment of contract proceeds from the fixed account may be delayed for up to
six months.
Due to federal laws designed to counter terrorism and prevent money laundering
by criminals, we may be required to reject a purchase payment and/ or deny
payment of a request for transfers, withdrawals, surrenders, or death benefits,
until instructions are received from the appropriate regulator. We also may be
required to provide additional information about a contractowner's account to
government regulators.
Reinvestment privilege
You may elect to make a reinvestment purchase with any part of the proceeds of
a surrender/withdrawal, (including previously credited bonus credits), and we
will recredit that portion of the surrender/withdrawal charges attributable to
the amount returned.
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This election must be made by your written authorization to us and received in
our Servicing office within 30 days of the date of the surrender/withdrawal,
and the repurchase must be of a contract covered by this prospectus. In the
case of a qualified retirement plan, a representation must be made that the
proceeds being used to make the purchase have retained their tax-favored status
under an arrangement for which the contracts offered by this prospectus are
designed. The number of accumulation units which will be credited when the
proceeds are reinvested will be based on the value of the accumulation unit(s)
on the next valuation date. This computation will occur following receipt of
the proceeds and request for reinvestment at the Servicing office. You may
utilize the reinvestment privilege only once. No bonus credits will apply when
a reinvestment purchase occurs. For tax reporting purposes, we will treat a
surrender/withdrawal and a subsequent reinvestment purchase as separate
transactions (and a Form 1099 may be issued, if applicable). You should consult
a tax adviser before you request a surrender/withdrawal or subsequent
reinvestment purchase.
Amendment of contract
We reserve the right to amend the contract to meet the requirements of the 1940
Act or other applicable federal or state laws or regulations. You will be
notified in writing of any changes, modifications or waivers. Any changes are
subject to prior approval of your state's insurance department (if required).
Distribution of the contracts
Lincoln Financial Advisors Corporation ("LFA"), an affiliate of ours, serves as
principal underwriter for the contracts. LFA is registered as a broker-dealer
with the SEC under the Securities Exchange Act of 1934, and is a member of
NASD, Inc. We offer the contracts through LFA and LFA also pays commissions to
our sales representatives ("Lincoln Sales Representatives"), who are also
associated with LFA. We and LFA also may enter into selling agreements with and
pay commissions to other broker-dealers ("Selling Firms") for the sale of the
contracts.
Compensation Paid to LFA. LFA, in addition to acting as principal underwriter,
is also a member of the selling group. In its role as a member of the selling
group, the maximum commission paid to LFA for the sale of contracts is 6.50% of
purchase payments. LFA 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 LFA is 6.50% of annuitized value and/or ongoing annual
compensation of up to 1.00% of annuity value or statutory reserves. LFA also
receives from Lincoln Life payment for the operating expenses of LFA, including
the following sales expenses: sales representative training allowances;
compensation and bonuses for LFA's management team; advertising expenses; and
all other expenses of distributing the contracts. LFA pays its sales
representatives who are also Lincoln Sales Representatives a portion of the
commissions received for their sales of contracts. Lincoln Sales
Representatives and their managers are also eligible for various cash benefits,
such as bonuses, insurance benefits and financing arrangements, and non-cash
compensation items that we may provide jointly with LFA. Non-cash compensation
items may include conferences, seminars, trips, entertainment, merchandise and
other similar items. In addition, Lincoln 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 Lincoln Sales Representatives and their managers qualify for such
benefits. Lincoln 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 paid to Selling Firms, other than LFA, is
6.50% of purchase payments. 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 6.50% of
annuitized value and/or ongoing annual compensation of up to 1.00% 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.
We may pay certain Selling Firms additional amounts for: (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; (5) and inclusion in the financial products
the Selling Firm offers. We 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 payments are not offered
to all Selling Firms, and the terms of any particular agreement governing the
payments may vary among Selling Firms.
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
sales 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
32
any recommendation relating to the contracts. Additional information relating
to compensation paid in 2004 is contained in the Statement of Additional
Information (SAI).
A portion of these payments may be passed on by the Selling Firms to their
sales representatives in accordance with their internal compensation programs.
These programs may also include other types of cash and non-cash compensation
and other benefits.
Commissions and other incentives or payments described above are not charged
directly to contract owners or the VAA. We intend to recoup commissions and
other sales expenses through fees and charges deducted under the contracts.
Contractowner questions
The obligations to purchasers under the contracts are those of Lincoln New
York. This prospectus provides a general description of the contract. Questions
about your contract should be directed to us at 1-888-868-2583.
i4LIFE (Reg. TM) Advantage
The i4LIFE (Reg. TM) Advantage (the Variable Annuity Income Rider in your
contract) is a payout option that provides you with variable, periodic regular
income payments. This option is available on non-qualified annuities and IRAs
(including Roth IRAs but excluding SEP and SARSEP markets). This option, when
available in your state, is subject to a charge, (imposed only during the
i4LIFE (Reg. TM) Advantage payout phase) computed daily of the net asset value
of the Account Value in the VAA. The annual rate of the charge is 1.85% for the
i4LIFE (Reg. TM) Advantage Account Value death benefit for IRA and
non-qualified annuity contracts and 2.05% for the i4LIFE (Reg. TM) Advantage
EGMDB which is available only with non-qualified annuity contracts. This charge
consists of an administrative charge of 0.15% and the balance is a mortality
and expense risk charge. If i4LIFE (Reg. TM) Advantage is elected at issue of
the contract, i4LIFE (Reg. TM) Advantage and the charge will begin on the
contract's effective date. Otherwise, i4LIFE (Reg. TM) Advantage and the charge
will begin no more than fourteen days prior to the date the initial regular
income payment is due. At the time you elect i4LIFE (Reg. TM) Advantage, you
also choose monthly, quarterly, or annual regular income payments, as well as
the month that the initial regular income payment is due. Regular income
payments must begin within one year of the date you elect i4LIFE (Reg. TM)
Advantage.
i4LIFE (Reg. TM) Advantage is available for contracts with a contract value of
at least $50,000 and may be elected after the contract has been in effect for
at least 12 months and prior to the annuity commencement date by sending a
written request to our Servicing office. There is no guarantee that i4LIFE
(Reg. TM) Advantage will be available to elect in the future as we reserve the
right to discontinue this option at any time (unless you had previously
purchased the Lincoln SmartSecuritySM Advantage, if available. See The
contracts - Lincoln SmartSecuritySM Advantage). The annuitant may not be
changed after i4LIFE (Reg. TM) Advantage is elected.
i4LIFE (Reg. TM) Advantage for IRA annuity contracts is only available if the
annuitant is 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.
Additional purchase payments will not be accepted once i4LIFE (Reg. TM)
Advantage becomes effective for a non-qualified annuity contract.
If i4LIFE (Reg. TM) Advantage is selected, the applicable transfer provisions
among subaccounts and the fixed account will continue to be those specified in
your annuity contract for transfers on or before the annuity commencement date.
However, once the i4LIFE (Reg. TM) Advantage begins, any automatic withdrawal
service will terminate. See The contracts.
Once i4LIFE (Reg. TM) Advantage begins, any prior death benefit election will
terminate and the i4LIFE (Reg. TM) Advantage Account Value death benefit will
be provided for IRA annuity contracts and either the i4LIFE (Reg. TM) Advantage
Account Value death benefit or the EGMDB will be provided for non-qualified
annuity contracts. Both death benefit options are discussed below. 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.
For information regarding income tax consequences of regular income payments
and withdrawals, please refer to Federal tax matters - Qualified retirement
plans for a discussion of the tax consequences of distributions from qualified
retirement plans for IRAs and to Federal tax matters - Taxation of withdrawals
and surrenders for information regarding withdrawals from non-qualified
contracts.
Regular Income. i4LIFE (Reg. TM) Advantage provides for variable, periodic
regular income payments during a defined period of time (the Access Period, as
defined below), and after the Access Period for as long as an annuitant (or
additional measuring life, hereinafter referred to as "secondary life") is
living. We determine the initial regular income payment based in part on the
assumed investment return you choose. Assumed investment returns of 3%, 4% or
5% may be available. See Annuity payouts - Variable annuity payouts for a more
detailed explanation. Subsequent regular income payments will be adjusted
periodically for non-qualified contracts (once a year for IRA contracts) with
the performance of the subaccounts selected and the interest credited on the
fixed account. For example, if net investment performance for the year is 3%
higher (annualized) than the assumed return, the regular income payment for the
next year will increase by approximately 3%. Conversely, if actual net
investment performance is 3% lower than the assumed return, the regular income
payment will decrease by approximately 3%. In most states you may also elect to
have regular income payments from non-qualified contracts recalculated only
once each year, resulting in level regular income payments between
recalculation dates. Regular income payments are not subject to any surrender
charges or applicable interest adjustments. See Charges and other deductions.
33
Access Period. At the time you elect i4LIFE (Reg. TM) Advantage, you also
select the Access Period, which begins no more than fourteen days prior to the
date the initial income payment is due. 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). 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. If you do,
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 change 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.
Account Value. The initial Account Value is the contract value on the valuation
date i4LIFE (Reg. TM) Advantage is effective, less any applicable premium
taxes. 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 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 Account Value will be
reduced to zero. Regular income payments will continue for as long as the
annuitant or the 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).
Withdrawals. You may request a withdrawal at any time during the Access Period.
We reduce the Account Value by the amount of the withdrawal, and all subsequent
regular income payments will be reduced proportionately. Withdrawals may have
tax consequences. Withdrawals are subject to any applicable surrender charges
except when amounts may be withdrawn free of surrender charges. See Charges and
other deductions. The interest adjustment may apply.
Surrender. At any time during the Access Period, you may surrender the contract
by withdrawing the surrender value. If the contract is surrendered, the
contract terminates and no further regular income payments will be made. The
interest adjustment may apply.
Death Benefit for IRA Annuity Contracts. During the Access Period, i4LIFE (Reg.
TM) Advantage provides the i4LIFE (Reg. TM) Advantage Account Value death
benefit. This death benefit is equal to the Account Value as of the valuation
date on which we approve the payment of the death claim. This is the only death
benefit option available for IRA annuity contracts. The charge under this death
benefit is equal to an annual rate of 1.85% of the net asset value of the
Account Value in the VAA.
If you die during the Access Period, the i4LIFE (Reg. TM) Advantage will
terminate. Your beneficiary may start a new i4LIFE (Reg. TM) Advantage program.
If your spouse's life was also used to determine the regular income payments
and the spouse dies, the regular income payments may be recalculated.
Following the Access Period, there is no death benefit.
Death Benefit for Non-Qualified Annuity Contracts. During the Access Period,
i4LIFE (Reg. TM) Advantage provides two death benefit options for non-qualified
annuity contracts:
o i4LIFE (Reg. TM) Advantage Account Value death benefit; and
o i4LIFE (Reg. TM) Advantage EGMDB.
The i4LIFE (Reg. TM) Advantage Account Value death benefit is the Account Value
as of the valuation date on which we approve the payment of the death claim.
The charge under this death benefit is equal to an annual rate of 1.85% of the
net asset value of the Account Value in the VAA. You may not change this death
benefit once it is elected.
The i4LIFE (Reg. TM) Advantage EGMDB is the greatest of:
o the Account Value as of the valuation date on which we approve the payment
of the claim; or
o The sum of all purchase payments less the sum of all regular income
payments, and withdrawals. Regular income payments and withdrawals are
deducted in the same proportion that regular income payments and
withdrawals reduce the Account Value;
o the highest Account Value or contract value which the contract attains on
any contract anniversary date (including the inception date) (determined
before the allocation of any purchase payments on that contract
anniversary) prior to the 81st birthday of the deceased. The highest
Account Value or contract value is increased by purchase payments and is
decreased by regular income payments and withdrawals subsequent to the
anniversary date on which the highest Account Value or contract value is
obtained. Regular income payments and withdrawals are deducted in the same
proportion that regular income payments and withdrawals, reduce the Account
Value.
Only the highest Account Value achieved on a contract anniversary following the
election of i4LIFE (Reg. TM) Advantage will be considered if you did not elect
(or you discontinued) the EGMDB option prior to electing i4LIFE (Reg. TM)
Advantage. If you elected the EGMDB after the effective date of the contract,
only the highest Account Value or contract value after that death benefit
election will be used.
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In a declining market, withdrawals deducted in the same proportion that
withdrawals reduce the Account Value may have a magnified effect on the
reduction of the death benefit payable. All references to withdrawals include
deductions for applicable charges and premium taxes, if any.
Upon the death of any contractowner or joint owner who was not a contractowner
on the effective date of the i4LIFE (Reg. TM) Advantage EGMDB death benefit,
the death benefit will be equal to the Account Value as of the date we approve
the death claim for payment (unless the change occurred because of the death of
a contractowner or joint owner). If any contractowner or joint owner is changed
due to a death and the new contractowner or joint owner is age 81 or older when
added to the contract, then the death benefit for this new contractowner or
joint owner will be equal to the Account Value as of the date we approve the
death claim subsequent to the new contractowner's death.
The charge under this death benefit is equal to an annual rate of 2.05% of the
net asset value of the Account Value in the VAA.
During the Access Period, 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 Servicing office, and we will begin
deducting the lower mortality and expense risk and administrative charge at
that time. Once the change is effective, you may not elect to return to the
i4LIFE (Reg. TM) Advantage EGMDB.
For both death benefit options, following the Access Period, there is no death
benefit.
Guaranteed Income Benefit.
The Guaranteed Income Benefit option will be available if you elect i4LIFE
(Reg. TM) Advantage. The annual charge is 2.35% of the net asset value of the
Account Value in the VAA for the i4LIFE (Reg. TM) Advantage Account Value death
benefit. For non-qualified annuity contracts the annual charge is 2.55% if the
i4LIFE (Reg. TM) Advantage EGMDB is elected. The Guaranteed Income Benefit must
be elected at the time i4LIFE (Reg. TM) Advantage is elected and will begin at
the time i4LIFE (Reg. TM) Advantage begins. Once the Guaranteed Income Benefit
is elected, additional purchase payments cannot be made to the contract. Check
with your investment representative regarding the availability of this benefit.
If the Guaranteed Income Benefit is in effect, your regular income payments
will never be less than a guaranteed minimum amount, regardless of the actual
investment performance of your contract. The Guaranteed Income Benefit is
initially equal to 75% of the initial regular income payment. Contractowners
who purchased the Lincoln SmartSecuritySM Advantage can use the remaining
Guaranteed Amount (if greater than the contract value) at the time the
Guaranteed Income Benefit is determined, to increase the Guaranteed Income
Benefit. 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].
The Guaranteed Income Benefit is reduced by withdrawals (other than regular
income payments) in the same proportion that the withdrawals reduce the Account
Value. Additional withdrawals from Account Value will also reduce your death
benefit. You may want to discuss the impact of additional withdrawals with your
financial adviser.
A payment equal to the Guaranteed Income Benefit is the minimum payment you
will receive. If your regular income payment would otherwise be less than the
Guaranteed Income Benefit because of poor net investment results, the Account
Value will be reduced by the additional amount needed so that you receive at
least the Guaranteed Income Benefit. If your Account Value reaches zero, your
Access Period will end. Reducing the Account Value to provide the Guaranteed
Income Benefit may terminate your Access Period earlier than originally
scheduled, and will reduce the value of your death benefit. After the Access
Period ends, we will continue to pay the Guaranteed Income Benefit for as long
as the annuitant and the secondary life, if applicable, is living. Depending on
market performance, it is possible that the Guaranteed Income Benefit will
never come into effect.
If you select this Guaranteed Income Benefit, certain restrictions apply to
your contract:
o A 4% assumed investment return (AIR) will be used to calculate the regular
income payments.
o You must choose an Access Period of at least 15 years.
There is no guarantee that this Guaranteed Income Benefit option will be
available to elect in the future, as we reserve the right to discontinue this
option for new elections at any time (unless the Lincoln SmartSecuritySM
Advantage was previously elected).
The Guaranteed Income Benefit option may be terminated by the contractowner
upon notice to us. Termination will be effective upon the next annual
anniversary of the valuation date on which the first regular income payment was
calculated, and your annual charge will be reduced to 1.85% of the net asset
value of the Account Value in the VAA if the i4LIFE (Reg. TM) Advantage Account
Value death benefit is selected or 2.05% of the net asset value if the i4LIFE
(Reg. TM) Advantage EGMDB death benefit is selected. If you change the Access
Period and/or the frequency of the regular income payment under i4LIFE (Reg.
TM) Advantage, the Guaranteed Income Benefit will terminate. If the Guaranteed
Income Benefit is terminated by the contractowner, it can be re-elected after
twelve (12) months, if the i4LIFE (Reg. TM) Advantage is restarted. The
Guaranteed Income Benefit option also terminates upon the death of the
annuitant (last death of the annuitant or secondary life) or termination of
i4LIFE (Reg. TM) Advantage. If we change your Access Period to comply with
Internal Revenue Code provisions for required minimum distributions, this will
not terminate or adjust the Guaranteed Income Benefit.
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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. Your death benefit will be the lowest death benefit available in your
contract during the accumulation period. Upon termination, we will stop
assessing the charge for the i4LIFE (Reg. TM) Advantage and begin assessing the
mortality and expense risk charge and administrative charge associated with
this new death benefit. Your contract value upon termination will be the
Account Value on the valuation date we terminate i4LIFE (Reg. TM) Advantage.
For non-qualified annuity contracts, you may not terminate i4LIFE (Reg. TM)
Advantage once you have elected it.
Annuity payouts
When you apply for a contract, you may select any annuity commencement date
permitted by law, which is usually on or before the contractowner's 90th
birthday.
The contract provides optional forms of payouts of annuities (annuity options),
each of which is payable on a variable basis, a fixed basis or a combination of
both as you specify. The contract provides that all or part of the contract
value may be used to purchase an annuity payout option.
You may elect annuity payouts in monthly, quarterly, semiannual or annual
installments. If the payouts from any subaccount would be or become less than
$50, we have the right to reduce their frequency until the payouts are at least
$50 each. Following are explanations of the annuity options available.
Annuity options
Life Annuity. This option offers a periodic payout during the lifetime of the
annuitant and ends with the last payout before the death of the annuitant. This
option offers the highest periodic payout since there is no guarantee of a
minimum number of payouts or provision for a death benefit for beneficiaries.
However, there is the risk under this option that the recipient would receive
no payouts if the annuitant dies before the date set for the first payout; only
one payout if death occurs before the second scheduled payout, and so on.
Life Annuity with Payouts Guaranteed for Designated Period. This option
guarantees periodic payouts during a designated period, usually 10 or 20 years,
and then continues throughout the lifetime of the annuitant. The designated
period is selected by the contractowner.
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 Servicing office.
Life Annuity with Cash Refund. Fixed annuity benefit payments that will be made
for the lifetime of the annuitant with the guarantee that upon death, should
(a) the total dollar amount applied to purchase this option be greater than (b)
the fixed annuity benefit payment multiplied by the number of annuity benefit
payments paid prior to death, then a refund payment equal to the dollar amount
of (a) minus (b) will be made.
Under the annuity options listed above, you may not make withdrawals. Other
options, with or without withdrawal features, may be made available by us. You
may pre-select an annuity payout option as a method of paying the death benefit
to a beneficiary. If you do, the beneficiary cannot change this payout option.
You may change or revoke in writing to our Servicing 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
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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 1.25% and the charge for administrative services of 0.15% 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.
Variable annuity payouts
Variable annuity payouts will be determined using:
o The contract value on the annuity commencement date, less applicable premium
taxes;
o The annuity tables contained in the contract;
o The annuity option selected; and
o The investment performance of the fund(s) selected.
To determine the amount of payouts, we make this calculation:
1. Determine the dollar amount of the first periodic payout; then
2. Credit the contract with a fixed number of annuity units equal to the first
periodic payout divided by the annuity unit value; and
3. Calculate the value of the annuity units each period thereafter.
Annuity payouts assume an investment return of 3%, 4% or 5% per year, as
applied to the applicable mortality table. Some of these assumed interest rates
may not be available in your state; therefore, please check with your
investment representative. You may choose your assumed interest rate at the
time you elect a variable annuity payout on the administrative form provided by
us. The higher the assumed interest rate you choose, the higher your initial
annuity payment will be. The amount of each payout after the initial payout
will depend upon how the underlying fund(s) perform, relative to the assumed
rate. If the actual net investment rate (annualized) exceeds the assumed rate,
the payment will increase at a rate proportional to the amount of such excess.
Conversely, if the actual rate is less than the assumed rate, annuity payments
will decrease. The higher the assumed interest rate, the less likely future
annuity payments are to increase, or the payments will increase more slowly
than if a lower assumed rate was used. There is a more complete explanation of
this calculation in the SAI.
General Information
Any previously selected death benefit in effect before the annuity commencement
date will no longer be available on and after the annuity commencement date.
You may change the annuity commencement date, change the annuity option or
change the allocation of the investment among subaccounts up to 30 days before
the scheduled annuity commencement date, upon written notice to the Servicing
office. You must give us at least 30 days notice before the date on which you
want payouts to begin. Annuity payouts cannot commence within 12 months of the
effective date of the contract.
Unless you select another option, the contract automatically provides for a
life annuity with annuity payouts guaranteed for 10 years (on a fixed, variable
or combination fixed and variable basis, in proportion to the account
allocations at the time of annuitization) except when a joint life payout is
required by law. Under any option providing for guaranteed period payouts, the
number of payouts which remain unpaid at the date of the annuitant's death (or
surviving annuitant's death in case of joint life annuity) will be paid to you
or your beneficiary as payouts become due after we are in receipt of:
o proof, satisfactory to us, of the death;
o written authorization for payment; and
o all claim forms, fully completed.
Fixed side of the contract
Purchase payments, bonus credits, persistency credits and contract value
allocated to the fixed side of the contract become part of our general account,
and do not participate in the investment experience of the VAA. The general
account is subject to regulation and supervision by the New York 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
and have not registered the general account as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests in it are
regulated under the 1933 Act or the 1940 Act. We have been advised that the
staff of the SEC has not made a review of the disclosures which are included in
this prospectus which relate to our general account and to the fixed account
under the contract. These disclosures, however, may be subject to certain
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses. This prospectus is generally
intended to serve as a disclosure document only for aspects of the contract
involving the VAA, and therefore contains only selected information regarding
the fixed side of the contract. Complete details regarding the fixed side of
the contract are in the contract.
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We guarantee an effective interest rate of not less than 1.50% per year on
amounts held in a fixed account. Your contract may not offer a fixed account or
if permitted by your contract, we may discontinue accepting purchase payments
or transfers into the fixed side of the contract at any time.
ANY INTEREST IN EXCESS OF 1.50% (OR THE GUARANTEED MINIMUM INTEREST RATE STATED
IN YOUR CONTRACT) WILL BE DECLARED IN ADVANCE AT OUR SOLE DISCRETION.
CONTRACTOWNERS BEAR THE RISK THAT NO INTEREST IN EXCESS OF THE MINIMUM INTEREST
RATE WILL BE DECLARED.
Guaranteed periods
The portion of the fixed account which accepts allocations for a guaranteed
period at a guaranteed interest rate is called a fixed subaccount. There is a
fixed subaccount for each particular guaranteed period.
You may allocate purchase payments to one or more fixed subaccounts with
guaranteed periods of 1 to 10 years. We may add guaranteed periods or
discontinue accepting purchase payments into one or more guaranteed periods at
any time. The minimum amount of any purchase payment that can be allocated to a
fixed subaccount is $2,000. Each purchase payment and its corresponding bonus
credits allocated to a fixed subaccount will start its own guaranteed period
and will earn a guaranteed interest rate. The duration of the guaranteed period
affects the guaranteed interest rate of the fixed subaccount. A fixed
subaccount guarantee period ends on the date after the number of calendar years
in the fixed subaccount's guaranteed period. Interest will be credited daily at
a guaranteed rate that is equal to the effective annual rate determined on the
first day of the fixed subaccount guaranteed period. Amounts surrendered,
transferred or withdrawn from a fixed subaccount prior to the end of the
guaranteed period will be subject to the interest adjustment if applicable.
Each guaranteed period purchase payment and its corresponding bonus credits
will be treated separately for purposes of determining any applicable interest
adjustment. Any amount withdrawn from a fixed subaccount may be subject to any
applicable surrender charges, account fees and premium taxes.
We will notify the contractowner in writing at least 45 but not more than 75
days prior to the expiration date for any guaranteed period amount. A new fixed
subaccount guaranteed period of the same duration as the previous fixed
subaccount guaranteed period will begin automatically at the end of the
previous guaranteed period, unless we receive, prior to the end of a guaranteed
period, a written election by the contractowner. The written election may
request the transfer of the guaranteed period amount to a different fixed
subaccount or to a variable subaccount from among those being offered by us.
Transfers of any guaranteed period amount which become effective upon the date
of expiration of the applicable guaranteed period are not subject to the
limitation of twelve transfers per contract year or the additional fixed
account transfer restrictions.
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 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 tax code. We may
not offer nonqualified annuities for all of our annuity products.
Tax deferral on earnings
The Federal income tax law generally does not tax 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 tax law 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 tax 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
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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 decendent;
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
Federal income tax law limits your right to choose particular investments for
the contract. Because the IRS has not issued 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 to try to prevent the tax
law from considering you as the owner of the assets of the VAA.
Loss of interest deduction
After June 8, 1997, if a contract is issued to a taxpayer that is not an
individual, or if a contract is held for the benefit of an entity, the entity
will lose a portion of its deduction for otherwise deductible interest
expenses.
Age at which annuity payouts begin
Federal income tax rules do 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 tax law will not treat the
contract as an annuity for Federal income tax purposes. 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 for Federal income tax
purposes and that the tax law will not tax any increase in your contract value
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.
Taxation of annuity payouts
The tax 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 have 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 in the same manner as a withdrawal during the deferral period.
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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 tax law 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 tax 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 tax law),
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).
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 tax
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 tax 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, 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
Lincoln SmartSecuritySM Advantage. 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 charge and Lincoln
SmartSecuritySM Advantage charge, 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 tax 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.
40
Types of qualified contracts and terms of contracts
Qualified plans 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 403(b) plans (public school system and tax-exempt organization annuity
plans)
o 401(a) plans (qualified corporate employee pension and profit-sharing plans)
o 403(a) plans (qualified 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)
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 tax law 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.
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 Under most qualified plans, such as a traditional IRA, the owner must begin
receiving payments from the contract in certain minimum amounts by a
certain age, typically age 701/2. Other qualified plans may allow the
participant to take required distributions upon the later of reaching age
701/2 or retirement.
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 has issued new regulations concerning required minimum distributions.
The regulations may impact the distribution method you have chosen and the
amount of your distributions. Under new regulations, the presence of an
enhanced death benefit, Lincoln SmartSecuritySM Advantage, or other benefit 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.
41
Federal penalty taxes payable on distributions
The tax code may impose a 10% penalty tax on a distribution from a qualified
contract that must be included in income. The tax 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 tax law),
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.
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. 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 existing Federal income tax laws, we do not 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.
Therefore, we do not impose a charge for Federal income taxes. If Federal
income tax law changes and we must 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 tax 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.
42
Additional information
Voting rights
As required by law, we will vote the fund shares held in the VAA at meetings of
the shareholders of the funds. The voting will be done according to the
instructions of contractowners who have interests in any subaccounts which
invest in classes of the funds. If the 1940 Act or any regulation under it
should be amended or if present interpretations should change, and if as a
result we determine that we are permitted to vote the fund shares in our own
right, we may elect to do so.
The number of votes which you have the right to cast will be determined by
applying your percentage interest in a subaccount to the total number of votes
attributable to the subaccount. In determining the number of votes, fractional
shares will be recognized.
Fund shares of a class held in a subaccount for which no timely instructions
are received will be voted by us in proportion to the voting instructions which
are received for all contracts participating in that subaccount. 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, each person having a voting interest
in a subaccount will receive proxy voting material, reports and other materials
relating to the funds. Since the funds engage in shared funding, other persons
or entities besides Lincoln New York 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 Servicing
office at PO Box 7866, 1300 S. Clinton Street, Fort Wayne, IN 46802-7866. A
contract canceled under this provision will be void. Except as explained in the
following paragraph, we will return the contract value as of the valuation date
on which we receive the cancellation request, plus any premium taxes plus
mortality and expense risk charges and administrative charges proportionately
attributable to the bonus credits, less any bonus credits paid into the
contract by us. In addition, if the contract value on the date of cancellation
is less than the sum of purchase payments minus withdrawals, we will also
return both the investment loss and fund management fees, each in an amount
that is proportionately attributable to the bonus credits. No surrender charges
or interest adjustment will apply. A purchaser who participates in the VAA is
subject to the risk of a market loss on the contract value, excluding the bonus
credits during the free-look period.
IRA purchasers will receive purchase payments only.
State regulation
As a life insurance company organized and operated under New York law, we are
subject to provisions governing life insurers and to regulation by the New York
Superintendent of Insurance. Our books and accounts are subject to review and
examination by the New York Insurance Department at all times. A full
examination of our operations is conducted by that Department at least every
five years.
Records and reports
As presently required by the 1940 Act and applicable regulations, we are
responsible for maintaining all records and accounts relating to the VAA. We
have entered into an agreement with the Delaware Management Holdings, Inc. and
Delaware Service Company, Inc., 2005 Market Street, Philadelphia, PA 19203, to
provide accounting services to the VAA. We will mail to you, at your last known
address of record at the Servicing office, at least semi-annually after the
first contract year, reports containing information required by that Act or any
other applicable law or regulation. Administrative services necessary for the
operations of the VAA and the contracts are currently provided by Lincoln Life.
However, neither the assets of Lincoln Life nor the assets of LNC support the
obligation of Lincoln New York under the contracts.
Other information
A Registration Statement has been filed with the SEC, under the Securities Act
of 1933 as amended, for the contracts being offered here. This prospectus does
not contain all the information in the Registration Statement, its amendments
and exhibits. Please refer to the Registration Statement for further
information about the VAA, Lincoln New York and the contracts offered.
Statements in this prospectus about the content of contracts and other legal
instruments are summaries. For the complete text of those contracts and
instruments, please refer to those documents as filed with the SEC.
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.LincolnRetirement.com, select service centers and continue
on through the Internet Service Center.
43
Legal proceedings
Lincoln New York is involved in various pending or threatened legal proceedings
arising from the conduct of business. In some instances, these 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 these proceedings ultimately will be resolved without
materially affecting the financial position of Lincoln New York, the VAA or the
Principal Underwriter.
44
Statement of Additional Information
Table of Contents for Lincoln New York Account N for Variable Annuities
· Download Table
Item Page
Special terms B-2
Services B-2
Principal underwriter B-2
Purchase of securities being offered B-2
Interest Adjustment Example B-2
Annuity payouts B-4
Determination of accumulation and annuity unit
value B-6
Advertising and sales literature B-6
Additional services B-7
Other information B-9
Financial statements B-9
For a free copy of the SAI complete the form below.
Statement of Additional Information Request Card
Lincoln ChoicePlus II Bonus
Lincoln New York Account N for Variable Annuities
Please send me a free copy of the current Statement of Additional Information
for Lincoln New York Variable Annuity Account N (Lincoln ChoicePlus II Bonus).
(Please Print)
Name: -------------------------------------------------------------------------
Address: ----------------------------------------------------------------------
City --------------------------------------------------- State ---------
Zip ---------
Mail to Lincoln Life & Annuity Company of New York, PO Box 7866, Fort Wayne,
Indiana 46801-7866.
45
(This page intentionally left blank)
46
Appendix A - Condensed financial information
Accumulation unit values
The following information relating to accumulation unit values and number of
accumulation units for the Lincoln New York ChoicePlus II Bonus subaccounts for
the following periods ended December 31, come from the VAA's financial
statements. It should be read along with the VAA's financial statements and
notes which are all included in the SAI. Because the Delaware VIP Capital
Reserves Series, Templeton Global Income Securities Fund, Fidelity VIP Mid Cap
Portfolio, Lincoln VIP Core Fund, Lincoln VIP Equity-Income, Lincoln VIP Growth
Fund, Lincoln VIP Growth and Income Fund, Lincoln VIP Growth Opportunities
Fund, Lincoln VIP Conservative Profile Fund, Lincoln VIP Moderate Profile Fund,
Lincoln VIP Moderately Aggressive Profile Fund and Lincoln VIP Aggressive
Profile Fund subaccounts were not in existence as of December 31, 2004,
accumulation unit values and accumulation units are not provided for these
subaccounts.
· Enlarge/Download Table
2002 2003
---------- ----------------------
With With With
EGMDB GOP EGMDB
---------- ------ ----------
AIM V.I. Growth Fund Accumulation unit value
o Beginning of period ................................................... $10.943 N/A $10.342
o End of period ......................................................... 10.342 N/A 13.322
Number of accumulation units
o End of period (000's omitted) ......................................... 2 N/A 3
-------------------------------------------------------------------------- ------- ------ -------
AIM V.I. International Growth Fund Accumulation unit value
o Beginning of period ................................................... $10.479 N/A $10.532
o End of period ......................................................... 10.532 N/A 13.331
Number of accumulation units
o End of period (000's omitted) ......................................... 2 N/A 2
-------------------------------------------------------------------------- ------- ------ -------
AIM V.I. Premier Equity Fund Accumulation unit value
o Beginning of period ................................................... $10.764 N/A $10.371
o End of period ......................................................... 10.371 N/A 12.740
Number of accumulation units
o End of period (000's omitted) ......................................... 2 N/A 3
-------------------------------------------------------------------------- ------- ------ -------
American Century Investments VP Inflation Protection Fund Accumulation unit value
o Beginning of period ...................................................
o End of period .........................................................
Number of accumulation units
o End of period (000's omitted) .........................................
-------------------------------------------------------------------------- ------- ------ -------
American Funds Global Growth Accumulation unit value
o Beginning of period ...................................................
o End of period .........................................................
Number of accumulation units
o End of period (000's omitted) .........................................
-------------------------------------------------------------------------- ------- ------ -------
American Funds Global Small Capitalization Fund Accumulation unit value
o Beginning of period ................................................... $10.744 N/A $10.573
o End of period ......................................................... 10.573 N/A 15.976
Number of accumulation units
o End of period (000's omitted) ......................................... 4 N/A 8
-------------------------------------------------------------------------- ------- ------ -------
American Funds Growth Fund Accumulation unit value
o Beginning of period ................................................... $11.198 N/A $10.630
o End of period ......................................................... 10.630 N/A 14.312
Number of accumulation units
o End of period (000's omitted) ......................................... 32 N/A 142
-------------------------------------------------------------------------- ------- ------ -------
American Funds Growth-Income Fund Accumulation unit value
o Beginning of period ................................................... $11.021 N/A $10.876
o End of period ......................................................... 10.876 N/A 14.174
Number of accumulation units
o End of period (000's omitted) ......................................... 13 N/A 150
-------------------------------------------------------------------------- ------- ------ -------
American Funds International Fund Accumulation unit value
o Beginning of period ................................................... $10.961 N/A $10.890
o End of period ......................................................... 10.890 N/A 14.452
Number of accumulation units
o End of period (000's omitted) ......................................... 1 N/A 27
-------------------------------------------------------------------------- ------- ------ -------
2004
--------------------------
With With
GOP EGMDB
---------- ----------
AIM V.I. Growth Fund Accumulation unit value
o Beginning of period ................................................... N/A $13.322
o End of period ......................................................... N/A 14.159
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 1
-------------------------------------------------------------------------- --- -------
AIM V.I. International Growth Fund Accumulation unit value
o Beginning of period ................................................... N/A $13.331
o End of period ......................................................... N/A 16.229
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 1
-------------------------------------------------------------------------- --- -------
AIM V.I. Premier Equity Fund Accumulation unit value
o Beginning of period ................................................... N/A $12.740
o End of period ......................................................... N/A 13.226
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 2
-------------------------------------------------------------------------- --- -------
American Century Investments VP Inflation Protection Fund Accumulation unit value
o Beginning of period ................................................... $10.000 $ 9.906
o End of period ......................................................... 10.413 10.408
Number of accumulation units
o End of period (000's omitted) ......................................... 1 40
-------------------------------------------------------------------------- ------- -------
American Funds Global Growth Accumulation unit value
o Beginning of period ................................................... N/A $10.215
o End of period ......................................................... N/A 11.270
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 4
-------------------------------------------------------------------------- ------- -------
American Funds Global Small Capitalization Fund Accumulation unit value
o Beginning of period ................................................... N/A $15.976
o End of period ......................................................... N/A 19.006
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 16
-------------------------------------------------------------------------- ------- -------
American Funds Growth Fund Accumulation unit value
o Beginning of period ................................................... $12.322 $14.312
o End of period ......................................................... 13.655 15.845
Number of accumulation units
o End of period (000's omitted) ......................................... 15 248
-------------------------------------------------------------------------- ------- -------
American Funds Growth-Income Fund Accumulation unit value
o Beginning of period ................................................... $12.296 $14.174
o End of period ......................................................... 13.370 15.396
Number of accumulation units
o End of period (000's omitted) ......................................... 15 255
-------------------------------------------------------------------------- ------- -------
American Funds International Fund Accumulation unit value
o Beginning of period ................................................... $13.203 $14.452
o End of period ......................................................... 15.519 16.971
Number of accumulation units
o End of period (000's omitted) ......................................... 1 74
-------------------------------------------------------------------------- ------- -------
A-1
· Enlarge/Download Table
2002 2003
------------ ----------------------
With With With
EGMDB GOP EGMDB
------------ ------ ----------
AllianceBernstein VP Growth and Income Portfolio Accumulation unit value
o Beginning of period ................................................... N/A N/A $11.371
o End of period ......................................................... N/A N/A 13.936
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A 24
-------------------------------------------------------------------------- --- ------ -------
AllianceBernstein VP Large Cap Growth Portfolio Accumulation unit value
o Beginning of period ................................................... N/A N/A $10.400
o End of period ......................................................... N/A N/A 12.023
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A 2
-------------------------------------------------------------------------- --- ------ -------
AllianceBernstein VP Small/Mid Cap Portfolio Accumulation unit value
o Beginning of period ................................................... $ 11.583 N/A $11.570
o End of period ......................................................... 11.570 N/A 16.043
Number of accumulation units
o End of period (000's omitted) ......................................... 2 N/A 8
-------------------------------------------------------------------------- -------- ------ -------
AllianceBernstein VP Global Technology Portfolio Accumulation unit value
o Beginning of period ................................................... N/A N/A N/A
o End of period ......................................................... N/A N/A N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A N/A
-------------------------------------------------------------------------- -------- ------ -------
Delaware VIP Diversified Income Series Accumulation unit value
o Beginning of period ...................................................
o End of period .........................................................
Number of accumulation units
o End of period (000's omitted) .........................................
-------------------------------------------------------------------------- -------- ------ -------
Delaware VIP Emerging Markets Series Accumulation unit value
o Beginning of period ...................................................
o End of period .........................................................
Number of accumulation units
o End of period (000's omitted) .........................................
-------------------------------------------------------------------------- -------- ------ -------
Delaware VIP High Yield Series Accumulation unit value
o Beginning of period ................................................... $ 10.638 N/A $11.104
o End of period ......................................................... 11.104 N/A 14.055
Number of accumulation units
o End of period (000's omitted) ......................................... 7 N/A 25
-------------------------------------------------------------------------- -------- ------ -------
Delaware VIP REIT Series Accumulation unit value
o Beginning of period ................................................... $ 10.462 N/A $10.725
o End of period ......................................................... 10.725 N/A 14.115
Number of accumulation units
o End of period (000's omitted) ......................................... 7 N/A 44
-------------------------------------------------------------------------- -------- ------ -------
Delaware VIP Small Cap Value Series Accumulation unit value
o Beginning of period ................................................... $ 10.886 N/A $10.685
o End of period ......................................................... 10.685 N/A 14.897
Number of accumulation units
o End of period (000's omitted) ......................................... 1* N/A 14
-------------------------------------------------------------------------- -------- ------ -------
Delaware VIP Trend Series Accumulation unit value
o Beginning of period ................................................... $ 11.277 N/A $11.023
o End of period ......................................................... 11.023 N/A 14.623
Number of accumulation units
o End of period (000's omitted) ......................................... 2 N/A 7
-------------------------------------------------------------------------- -------- ------ -------
Delaware VIP U.S. Growth Series Accumulation unit value
o Beginning of period ................................................... N/A N/A $10.880
o End of period ......................................................... N/A N/A 12.353
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A 6
-------------------------------------------------------------------------- -------- ------ -------
Delaware VIP Value Series Accumulation unit value
o Beginning of period ................................................... $ 10.872 N/A $10.681
o End of period ......................................................... 10.681 N/A 13.466
Number of accumulation units
o End of period (000's omitted) ......................................... 1* N/A 12
-------------------------------------------------------------------------- -------- ------ -------
2004
----------------------------
With With
GOP EGMDB
------------ ----------
AllianceBernstein VP Growth and Income Portfolio Accumulation unit value
o Beginning of period ................................................... $ 12.018 $13.936
o End of period ......................................................... 13.167 15.253
Number of accumulation units
o End of period (000's omitted) ......................................... 7 48
-------------------------------------------------------------------------- -------- -------
AllianceBernstein VP Large Cap Growth Portfolio Accumulation unit value
o Beginning of period ................................................... N/A $12.023
o End of period ......................................................... N/A 12.819
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 2
-------------------------------------------------------------------------- -------- -------
AllianceBernstein VP Small/Mid Cap Portfolio Accumulation unit value
o Beginning of period ................................................... $ 13.131 $16.043
o End of period ......................................................... 15.403 18.800
Number of accumulation units
o End of period (000's omitted) ......................................... 1 10
-------------------------------------------------------------------------- -------- -------
AllianceBernstein VP Global Technology Portfolio Accumulation unit value
o Beginning of period ................................................... $ 12.050 N/A
o End of period ......................................................... 13.455 N/A
Number of accumulation units
o End of period (000's omitted) ......................................... 1* N/A
-------------------------------------------------------------------------- -------- -------
Delaware VIP Diversified Income Series Accumulation unit value
o Beginning of period ................................................... $ 10.000 $10.040
o End of period ......................................................... 10.882 10.875
Number of accumulation units
o End of period (000's omitted) ......................................... 1 15
-------------------------------------------------------------------------- -------- -------
Delaware VIP Emerging Markets Series Accumulation unit value
o Beginning of period ................................................... $ 10.838 $10.482
o End of period ......................................................... 13.576 13.568
Number of accumulation units
o End of period (000's omitted) ......................................... 1 7
-------------------------------------------------------------------------- -------- -------
Delaware VIP High Yield Series Accumulation unit value
o Beginning of period ................................................... $ 11.078 $14.055
o End of period ......................................................... 12.443 15.771
Number of accumulation units
o End of period (000's omitted) ......................................... 7 42
-------------------------------------------------------------------------- -------- -------
Delaware VIP REIT Series Accumulation unit value
o Beginning of period ................................................... $ 12.197 $14.115
o End of period ......................................................... 15.751 18.209
Number of accumulation units
o End of period (000's omitted) ......................................... 4 80
-------------------------------------------------------------------------- -------- -------
Delaware VIP Small Cap Value Series Accumulation unit value
o Beginning of period ................................................... $ 13.168 $14.897
o End of period ......................................................... 15.716 17.762
Number of accumulation units
o End of period (000's omitted) ......................................... 3 23
-------------------------------------------------------------------------- -------- -------
Delaware VIP Trend Series Accumulation unit value
o Beginning of period ................................................... $ 12.550 $14.623
o End of period ......................................................... 13.886 16.163
Number of accumulation units
o End of period (000's omitted) ......................................... 1 19
-------------------------------------------------------------------------- -------- -------
Delaware VIP U.S. Growth Series Accumulation unit value
o Beginning of period ................................................... $ 11.469 $12.353
o End of period ......................................................... 11.640 12.524
Number of accumulation units
o End of period (000's omitted) ......................................... 3 17
-------------------------------------------------------------------------- -------- -------
Delaware VIP Value Series Accumulation unit value
o Beginning of period ................................................... $ 12.049 $13.466
o End of period ......................................................... 13.601 15.185
Number of accumulation units
o End of period (000's omitted) ......................................... 2 14
-------------------------------------------------------------------------- -------- -------
A-2
· Enlarge/Download Table
2002
------------
With
EGMDB
------------
Fidelity VIP Contrafund Portfolio Accumulation unit value
o Beginning of period ................................................... $ 10.025
o End of period ......................................................... 9.977
Number of accumulation units
o End of period (000's omitted) ......................................... 1*
-------------------------------------------------------------------------- --------
Fidelity VIP Equity-Income Portfolio Accumulation unit value
o Beginning of period ................................................... N/A
o End of period ......................................................... N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A
-------------------------------------------------------------------------- --------
Fidelity VIP Growth Portfolio Accumulation unit value
o Beginning of period ................................................... N/A
o End of period ......................................................... N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A
-------------------------------------------------------------------------- --------
Fidelity VIP Overseas Portfolio Accumulation unit value
o Beginning of period ................................................... N/A
o End of period ......................................................... N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A
-------------------------------------------------------------------------- --------
FTVIPT Franklin Small-Mid Cap Growth Securities Fund Accumulation unit value
o Beginning of period ................................................... $ 11.848
o End of period ......................................................... 11.538
Number of accumulation units
o End of period (000's omitted) ......................................... 1*
-------------------------------------------------------------------------- --------
FTVIPT Templeton Growth Securities Fund Accumulation unit value
o Beginning of period ................................................... $ 10.813
o End of period ......................................................... 10.594
Number of accumulation units
o End of period (000's omitted) ......................................... 1*
-------------------------------------------------------------------------- --------
Janus Aspen Balanced Portfolio Accumulation unit value
o Beginning of period ................................................... N/A
o End of period ......................................................... N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A
-------------------------------------------------------------------------- --------
Janus Aspen Mid Cap Growth Portfolio Accumulation unit value
o Beginning of period ................................................... N/A
o End of period ......................................................... N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A
-------------------------------------------------------------------------- --------
Janus Aspen Worldwide Growth Portfolio Accumulation unit value
o Beginning of period ................................................... N/A
o End of period ......................................................... N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A
-------------------------------------------------------------------------- --------
Lincoln VIP Aggressive Growth Fund Accumulation unit value
o Beginning of period ................................................... N/A
o End of period ......................................................... N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A
-------------------------------------------------------------------------- --------
Lincoln VIP Bond Fund Accumulation unit value
o Beginning of period ................................................... $ 10.063
o End of period ......................................................... 10.303
Number of accumulation units
o End of period (000's omitted) ......................................... 93
-------------------------------------------------------------------------- --------
Lincoln VIP Capital Appreciation Fund Accumulation unit value
o Beginning of period ................................................... $ 11.087
o End of period ......................................................... 10.161
Number of accumulation units
o End of period (000's omitted) ......................................... 2
-------------------------------------------------------------------------- --------
2003 2004
------------------------ ------------
With With With
GOP EGMDB GOP
------ ------------ ------------
Fidelity VIP Contrafund Portfolio Accumulation unit value
o Beginning of period ................................................... N/A $ 9.977 $ 12.404
o End of period ......................................................... N/A 12.587 13.909
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 37 8
-------------------------------------------------------------------------- ------ -------- --------
Fidelity VIP Equity-Income Portfolio Accumulation unit value
o Beginning of period ................................................... N/A $ 11.143 $ 12.404
o End of period ......................................................... N/A 13.787 13.591
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 12 1*
-------------------------------------------------------------------------- ------ -------- --------
Fidelity VIP Growth Portfolio Accumulation unit value
o Beginning of period ................................................... N/A $ 9.374 $ 12.402
o End of period ......................................................... N/A 13.422 12.488
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 2 6
-------------------------------------------------------------------------- ------ -------- --------
Fidelity VIP Overseas Portfolio Accumulation unit value
o Beginning of period ................................................... N/A $ 11.674 $ 14.193
o End of period ......................................................... N/A 14.620 15.844
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 4 1
-------------------------------------------------------------------------- ------ -------- --------
FTVIPT Franklin Small-Mid Cap Growth Securities Fund Accumulation unit value
o Beginning of period ................................................... N/A $ 11.538 N/A
o End of period ......................................................... N/A 15.584 N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 12 N/A
-------------------------------------------------------------------------- ------ -------- --------
FTVIPT Templeton Growth Securities Fund Accumulation unit value
o Beginning of period ................................................... N/A $ 10.594 N/A
o End of period ......................................................... N/A 13.777 N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 18 N/A
-------------------------------------------------------------------------- ------ -------- --------
Janus Aspen Balanced Portfolio Accumulation unit value
o Beginning of period ................................................... N/A $ 9.863 $ 10.850
o End of period ......................................................... N/A 11.338 11.575
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 15 1
-------------------------------------------------------------------------- ------ -------- --------
Janus Aspen Mid Cap Growth Portfolio Accumulation unit value
o Beginning of period ................................................... N/A $ 9.924 $ 12.600
o End of period ......................................................... N/A 13.567 14.725
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 2 3
-------------------------------------------------------------------------- ------ -------- --------
Janus Aspen Worldwide Growth Portfolio Accumulation unit value
o Beginning of period ................................................... N/A $ 10.212 $ 11.847
o End of period ......................................................... N/A 12.557 12.577
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 1* 1*
-------------------------------------------------------------------------- ------ -------- --------
Lincoln VIP Aggressive Growth Fund Accumulation unit value
o Beginning of period ................................................... N/A $ 12.757 N/A
o End of period ......................................................... N/A 13.541 N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 1 N/A
-------------------------------------------------------------------------- ------ -------- --------
Lincoln VIP Bond Fund Accumulation unit value
o Beginning of period ................................................... N/A $ 10.303 $ 10.361
o End of period ......................................................... N/A 10.878 10.411
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 313 15
-------------------------------------------------------------------------- ------ -------- --------
Lincoln VIP Capital Appreciation Fund Accumulation unit value
o Beginning of period ................................................... N/A $ 10.161 $ 11.788
o End of period ......................................................... N/A 13.246 12.672
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 6 5
-------------------------------------------------------------------------- ------ -------- --------
2004 2004
------------ ------------
With
EGMDB
------------
Fidelity VIP Contrafund Portfolio Accumulation unit value
o Beginning of period ................................................... $ 12.587
o End of period ......................................................... 14.266
Number of accumulation units
o End of period (000's omitted) ......................................... 71
-------------------------------------------------------------------------- --------
Fidelity VIP Equity-Income Portfolio Accumulation unit value
o Beginning of period ................................................... $ 13.787
o End of period ......................................................... 15.092
Number of accumulation units
o End of period (000's omitted) ......................................... 28
-------------------------------------------------------------------------- --------
Fidelity VIP Growth Portfolio Accumulation unit value
o Beginning of period ................................................... $ 13.422
o End of period ......................................................... 13.622
Number of accumulation units
o End of period (000's omitted) ......................................... 6
-------------------------------------------------------------------------- --------
Fidelity VIP Overseas Portfolio Accumulation unit value
o Beginning of period ................................................... $ 14.620
o End of period ......................................................... 16.303
Number of accumulation units
o End of period (000's omitted) ......................................... 13
-------------------------------------------------------------------------- --------
FTVIPT Franklin Small-Mid Cap Growth Securities Fund Accumulation unit value
o Beginning of period ................................................... $ 15.584
o End of period ......................................................... 17.097
Number of accumulation units
o End of period (000's omitted) ......................................... 16
-------------------------------------------------------------------------- --------
FTVIPT Templeton Growth Securities Fund Accumulation unit value
o Beginning of period ................................................... $ 13.777
o End of period ......................................................... 15.731
Number of accumulation units
o End of period (000's omitted) ......................................... 31
-------------------------------------------------------------------------- --------
Janus Aspen Balanced Portfolio Accumulation unit value
o Beginning of period ................................................... $ 11.338
o End of period ......................................................... 12.084
Number of accumulation units
o End of period (000's omitted) ......................................... 31
-------------------------------------------------------------------------- --------
Janus Aspen Mid Cap Growth Portfolio Accumulation unit value
o Beginning of period ................................................... $ 13.567
o End of period ......................................................... 16.086
Number of accumulation units
o End of period (000's omitted) ......................................... 5
-------------------------------------------------------------------------- --------
Janus Aspen Worldwide Growth Portfolio Accumulation unit value
o Beginning of period ................................................... $ 12.557
o End of period ......................................................... 12.917
Number of accumulation units
o End of period (000's omitted) ......................................... 1*
-------------------------------------------------------------------------- --------
Lincoln VIP Aggressive Growth Fund Accumulation unit value
o Beginning of period ................................................... $ 13.541
o End of period ......................................................... 15.147
Number of accumulation units
o End of period (000's omitted) ......................................... 1
-------------------------------------------------------------------------- --------
Lincoln VIP Bond Fund Accumulation unit value
o Beginning of period ................................................... $ 10.878
o End of period ......................................................... 11.273
Number of accumulation units
o End of period (000's omitted) ......................................... 424
-------------------------------------------------------------------------- --------
Lincoln VIP Capital Appreciation Fund Accumulation unit value
o Beginning of period ................................................... $ 13.246
o End of period ......................................................... 13.724
Number of accumulation units
o End of period (000's omitted) ......................................... 18
-------------------------------------------------------------------------- --------
A-3
· Enlarge/Download Table
2002 2003
------------ ----------------------
With With With
EGMDB GOP EGMDB
------------ ------ ----------
Lincoln VIP Global Asset Allocation Fund Accumulation unit value
o Beginning of period ................................................... N/A N/A N/A
o End of period ......................................................... N/A N/A N/A
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A N/A
-------------------------------------------------------------------------- --- ------ ---
Lincoln VIP International Fund Accumulation unit value
o Beginning of period ................................................... N/A N/A $10.154
o End of period ......................................................... N/A N/A 14.665
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A 5
-------------------------------------------------------------------------- --- ------ -------
Lincoln VIP Money Market Fund Accumulation unit value
o Beginning of period ................................................... $ 9.997 N/A $ 9.990
o End of period ......................................................... 9.990 N/A 9.899
Number of accumulation units
o End of period (000's omitted) ......................................... 15 N/A 76
-------------------------------------------------------------------------- -------- ------ -------
Lincoln VIP Social Awareness Fund Accumulation unit value ...........................................
o Beginning of period ................................................... N/A N/A $12.083
o End of period ......................................................... N/A N/A 13.630
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A 14
-------------------------------------------------------------------------- -------- ------ -------
MFS VIT Capital Opportunities Series Accumulation unit value
o Beginning of period ................................................... N/A N/A $12.219
o End of period ......................................................... N/A N/A 13.326
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A 2
-------------------------------------------------------------------------- -------- ------ -------
MFS VIT Emerging Growth Series Accumulation unit value
o Beginning of period ................................................... $ 10.710 N/A $10.198
o End of period ......................................................... 10.198 N/A 13.041
Number of accumulation units
o End of period (000's omitted) ......................................... 1* N/A 7
-------------------------------------------------------------------------- -------- ------ -------
MFS VIT Total Return Series Accumulation unit value
o Beginning of period ................................................... $ 10.594 N/A $10.399
o End of period ......................................................... 10.399 N/A 11.872
Number of accumulation units
o End of period (000's omitted) ......................................... 1 N/A 73
-------------------------------------------------------------------------- -------- ------ -------
MFS VIT Utilities Series Accumulation unit value
o Beginning of period ................................................... $ 10.967 N/A $11.381
o End of period ......................................................... 11.381 N/A 15.184
Number of accumulation units
o End of period (000's omitted) ......................................... 7 N/A 14
-------------------------------------------------------------------------- -------- ------ -------
Neuberger Berman AMT Mid-Cap Growth Portfolio Accumulation unit value
o Beginning of period ................................................... $ 10.257 N/A $ 9.949
o End of period ......................................................... 9.949 N/A 12.540
Number of accumulation units
o End of period (000's omitted) ......................................... 1 N/A 24
-------------------------------------------------------------------------- -------- ------ -------
Neuberger Berman AMT Regency Portfolio Accumulation unit value
o Beginning of period ................................................... N/A N/A $10.131
o End of period ......................................................... N/A N/A 13.980
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A 3
-------------------------------------------------------------------------- -------- ------ -------
Putnam VT Growth & Income Fund Accumulation unit value
o Beginning of period ................................................... N/A N/A $ 9.641
o End of period ......................................................... N/A N/A 13.542
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A 4
-------------------------------------------------------------------------- -------- ------ -------
Putnam VT Health Sciences Fund Accumulation unit value
o Beginning of period ................................................... N/A N/A $10.812
o End of period ......................................................... N/A N/A 11.331
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A 1
-------------------------------------------------------------------------- -------- ------ -------
2004
------------------------------
With With
GOP EGMDB
------------ ------------
Lincoln VIP Global Asset Allocation Fund Accumulation unit value
o Beginning of period ................................................... $ 12.324 $ 12.476
o End of period ......................................................... 12.719 13.726
Number of accumulation units
o End of period (000's omitted) ......................................... 1 2
-------------------------------------------------------------------------- -------- --------
Lincoln VIP International Fund Accumulation unit value
o Beginning of period ................................................... $ 13.033 $ 14.665
o End of period ......................................................... 15.679 17.454
Number of accumulation units
o End of period (000's omitted) ......................................... 3 19
-------------------------------------------------------------------------- -------- --------
Lincoln VIP Money Market Fund Accumulation unit value
o Beginning of period ................................................... $ 9.926 $ 9.899
o End of period ......................................................... 9.882 9.827
Number of accumulation units
o End of period (000's omitted) ......................................... 10 81
-------------------------------------------------------------------------- -------- --------
Lincoln VIP Social Awareness Fund Accumulation unit value .............
o Beginning of period ................................................... $ 12.331 $ 13.630
o End of period ......................................................... 13.645 15.118
Number of accumulation units
o End of period (000's omitted) ......................................... 3 31
-------------------------------------------------------------------------- -------- --------
MFS VIT Capital Opportunities Series Accumulation unit value
o Beginning of period ................................................... N/A $ 13.326
o End of period ......................................................... N/A 14.699
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 3
-------------------------------------------------------------------------- -------- --------
MFS VIT Emerging Growth Series Accumulation unit value
o Beginning of period ................................................... $ 11.916 $ 13.041
o End of period ......................................................... 13.173 14.466
Number of accumulation units
o End of period (000's omitted) ......................................... 1 5
-------------------------------------------------------------------------- -------- --------
MFS VIT Total Return Series Accumulation unit value
o Beginning of period ................................................... $ 11.101 $ 11.872
o End of period ......................................................... 12.142 12.972
Number of accumulation units
o End of period (000's omitted) ......................................... 7 88
-------------------------------------------------------------------------- -------- --------
MFS VIT Utilities Series Accumulation unit value
o Beginning of period ................................................... $ 11.939 $ 15.184
o End of period ......................................................... 15.271 19.404
Number of accumulation units
o End of period (000's omitted) ......................................... 7 9
-------------------------------------------------------------------------- -------- --------
Neuberger Berman AMT Mid-Cap Growth Portfolio Accumulation unit value
o Beginning of period ................................................... $ 12.151 $ 12.540
o End of period ......................................................... 13.922 14.354
Number of accumulation units
o End of period (000's omitted) ......................................... 1 37
-------------------------------------------------------------------------- -------- --------
Neuberger Berman AMT Regency Portfolio Accumulation unit value
o Beginning of period ................................................... $ 12.811 $ 13.980
o End of period ......................................................... 15.443 16.834
Number of accumulation units
o End of period (000's omitted) ......................................... 2 19
-------------------------------------------------------------------------- -------- --------
Putnam VT Growth & Income Fund Accumulation unit value
o Beginning of period ................................................... N/A $ 13.542
o End of period ......................................................... N/A 14.808
Number of accumulation units
o End of period (000's omitted) ......................................... N/A 4
-------------------------------------------------------------------------- -------- --------
Putnam VT Health Sciences Fund Accumulation unit value
o Beginning of period ................................................... $ 11.302 $ 11.331
o End of period ......................................................... 11.598 11.946
Number of accumulation units
o End of period (000's omitted) ......................................... 1* 1*
-------------------------------------------------------------------------- -------- --------
A-4
· Enlarge/Download Table
2002 2003
------------ ----------------------
With With With
EGMDB GOP EGMDB
------------ ------ ----------
Scudder VIT EAFE Equity Index Fund Accumulation unit value
o Beginning of period ................................................... $ 10.435 N/A $10.422
o End of period ......................................................... 10.422 N/A 13.679
Number of accumulation units
o End of period (000's omitted) ......................................... 1* N/A 2
-------------------------------------------------------------------------- -------- ------ -------
Scudder VIT Equity 500 Index Fund Accumulation unit value
o Beginning of period ................................................... $ 10.751 N/A $10.456
o End of period ......................................................... 10.456 N/A 13.188
Number of accumulation units
o End of period (000's omitted) ......................................... 1* N/A 6
-------------------------------------------------------------------------- -------- ------ -------
Scudder VIT Small Cap Index Fund Accumulation unit value
o Beginning of period ................................................... N/A N/A $11.920
o End of period ......................................................... N/A N/A 15.958
Number of accumulation units
o End of period (000's omitted) ......................................... N/A N/A 1
-------------------------------------------------------------------------- -------- ------ -------
2004
----------------------------
With With
GOP EGMDB
------------ ----------
Scudder VIT EAFE Equity Index Fund Accumulation unit value
o Beginning of period ................................................... $ 12.738 $13.679
o End of period ......................................................... 15.168 16.029
Number of accumulation units
o End of period (000's omitted) ......................................... 1* 9
-------------------------------------------------------------------------- -------- -------
Scudder VIT Equity 500 Index Fund Accumulation unit value
o Beginning of period ................................................... $ 11.752 $13.188
o End of period ......................................................... 13.143 14.353
Number of accumulation units
o End of period (000's omitted) ......................................... 1* 34
-------------------------------------------------------------------------- -------- -------
Scudder VIT Small Cap Index Fund Accumulation unit value
o Beginning of period ................................................... $ 12.924 $15.958
o End of period ......................................................... 15.736 18.494
Number of accumulation units
o End of period (000's omitted) ......................................... 3 5
-------------------------------------------------------------------------- -------- -------
* Units less than 500 were rounded up to 1,000.
A-5
[THIS PAGE INTENTIONALLY LEFT BLANK]
Lincoln ChoicePlus II Bonus
Lincoln Life & Annuity Variable
Annuity Account N (Registrant)
Lincoln Life & Annuity Company of New York (Depositor)
Statement of Additional Information (SAI)
This SAI should be read in conjunction with the Lincoln ChoicePlus II Bonus
prospectus of Lincoln Life & Annuity Variable Annuity Account N dated May 1,
2005. You may obtain a copy of the Lincoln ChoicePlus II Bonus prospectus on
request and without charge. Please write Lincoln Life & Annuity Company of New
York, PO Box 7866, Fort Wayne, IN 46802-7866, or call 1-888-868-2583.
Table of Contents
· Download Table
Item Page
Special terms B-2
Services B-2
Principal underwriter B-2
Purchase of securities being offered B-2
Interest adjustment example B-2
Annuity payouts B-4
· Download Table
Item Page
Determination of accumulation and annuity unit
value B-6
Advertising and sales literature B-6
Additional services B-7
Other information B-9
Financial statements B-9
This SAI is not a prospectus.
The date of this SAI is May 1, 2005.
Special terms
The special terms used in this SAI are the ones defined in the Prospectus.
Services
Independent Registered Public Accounting Firm
The financial statements of the VAA and the financial statements of Lincoln New
York appearing in this SAI and Registration Statement have been audited by
Ernst & Young LLP, independent registered public accounting firm, 2300 National
City Center, 110 West Berry Street, Fort Wayne, Indiana 46802, as set forth in
their reports, also appearing in this SAI and in the Registration Statement.
The financial statements audited by Ernst & Young LLP, have been included
herein in reliance on their reports given on their authority as experts in
accounting and auditing.
Keeper of records
All accounts, books, records and other documents which are required to be
maintained for the VAA are maintained by us or by third parties responsible to
Lincoln New York. We have entered into an agreement with the Delaware
Management Holdings, Inc. and Delaware Service Company, Inc., One Commerce
Square, 2005 Market Street, Philadelphia, PA 19103, to provide accounting
services to the VAA. No separate charge against the assets of the VAA is made
by us for this service. Administrative services necessary for the operations of
the VAA and the contracts are currently provided by Lincoln Life. However,
neither the assets of Lincoln Life nor the assets of LNC support the obligation
of Lincoln New York under the contracts.
Principal underwriter
Lincoln Financial Advisors Corporation (LFA), an affiliate of ours, serves as
principal underwriter for the contracts, as described in the prospectus. LFA is
a member of the Securities Investor Protection Corporation. We offer the
contracts to the public on a continuous basis. We anticipate continuing to
offer the contracts, but reserve the right to discontinue the offering. We
offer the contracts through our sales representatives ("Lincoln Sales
Representatives"), who are also associated with LFA. We and LFA also may enter
into selling agreements with other broker-dealers ("Selling Firms") for the
sale of the contracts. Lincoln Sales Representatives and sales representatives
of Selling Firms are appointed as our insurance agents. LFA paid $3,315,352,
$3,485,310, and $5,268,760 to Lincoln Sales Representatives and Selling Firms
in 2002, 2003, and 2004, respectively, as sales compensation with respect to
the contracts. LFA retained no underwriting commissions for the sale of the
contracts.
Purchase of securities being offered
The variable annuity contracts are offered to the public through licensed
insurance agents who specialize in selling our products; through independent
insurance brokers; and through certain securities brokers/dealers selected by
us whose personnel are legally authorized to sell annuity products. There are
no special purchase plans for any class of prospective buyers. However, under
certain limited circumstances described in the prospectus under the section
Charges and other deductions, any applicable account fee and/or surrender
charge may be reduced or waived.
Both before and after the annuity commencement date, there are exchange
privileges between subaccounts, and from the VAA to the general account (if
available) subject to restrictions set out in the prospectus. See The
contracts, in the prospectus. No exchanges are permitted between the VAA and
other separate accounts.
The offering of the contracts is continuous.
Interest adjustment example
Note: This example is intended to show how the interest adjustment calculation
impacts the surrender value of a representative contract. The surrender
charges, annual account fee, adjustment factor, and guaranteed minimum interest
rate values shown here are generally different from those that apply to
specific contracts, particularly those contracts that deduct an initial sales
load or pay a bonus on deposits. Calculations of the interest adjustment in
your contract, if applicable, will be based on the factors applicable to your
contract. The interest adjustment may be referred to as a market value
adjustment in your contract.
B-2
SAMPLE CALCULATIONS FOR MALE 35 ISSUE
CASH SURRENDER VALUES
· Download Table
Single Premium ................... $50,000
Premium taxes .................... None
Withdrawals ...................... None
Guaranteed Period ................ 5 years
Guaranteed Interest Rate ......... 3.50%
Annuity Date ..................... Age 70
Index Rate A ..................... 3.50%
Index Rate B ..................... 4.00% End of contract year 1
3.50% End of contract year 2
3.00% End of contract year 3
2.00% End of contract year 4
Percentage adjustment to B ....... 0.50%
· Download Table
Formula (1 + Index A)n
------------------------------
-1
(1 + Index B + % Adjustment)n
SURRENDER VALUE CALCULATION
· Download Table
(3)
(1) (2) Adjusted
Annuity Index Rate Annuity
Contract Year Value Factor Value
--------------- --------- ------------ ----------
1 ........... $51,710 0.962268 $49,759
2 ........... $53,480 0.985646 $52,712
3 ........... $55,312 1.000000 $55,312
4 ........... $57,208 1.009756 $57,766
5 ........... $59,170 N/A $59,170
(4) (5) (6) (7)
Minimum Greater of Surrender Surrender
Contract Year Value (3) & (4) Charge Value
--------------- --------- ------------ ----------- ----------
1 ........... $50,710 $50,710 $4,250 $46,460
2 ........... $51,431 $52,712 $4,250 $48,462
3 ........... $52,162 $55,312 $4,000 $51,312
4 ........... $52,905 $57,766 $3,500 $54,266
5 ........... $53,658 $59,170 $3,000 $56,170
ANNUITY VALUE CALCULATION
· Download Table
BOY* Annual EOY**
Annuity Guaranteed Account Annuity
Contract Year Value Interest Rate Fee Value
-------------------- --------- --------------- --------- ----------
1 ................ $50,000 x 1.035 - $40 = $51,710
2 ................ $51,710 x 1.035 - $40 = $53,480
3 ................ $53,480 x 1.035 - $40 = $55,312
4 ................ $55,312 x 1.035 - $40 = $57,208
5 ................ $57,208 x 1.035 - $40 = $59,170
SURRENDER CHARGE CALCULATION
· Download Table
Surrender
Charge Surrender
Contract Year Factor Deposit Charge
-------------------- ---------- --------- ----------
1 ................ 8.5% x $50,000 = $4,250
2 ................ 8.5% x $50,000 = $4,250
3 ................ 8.0% x $50,000 = $4,000
4 ................ 7.0% x $50,000 = $3,500
5 ................ 6.0% x $50,000 = $3,000
B-3
INDEX RATE FACTOR CALCULATION
· Download Table
Contract Year Index A Index B Adj Index B N Result
------------------ --------- --------- ------------- ----- ---------
1 .............. 3.50% 4.00% 4.50% 4 0.962268
2 .............. 3.50% 3.50% 4.00% 3 0.985646
3 .............. 3.50% 3.00% 3.50% 2 1.000000
4 .............. 3.50% 2.00% 2.50% 1 1.009756
5 .............. 3.50% N/A N/A N/A N/A
MINIMUM VALUE CALCULATION
· Download Table
Minimum Annual
Guaranteed Account Minimum
Contract Year Interest Rate Fee Value
-------------------- --------------- --------- ----------
1 ................ $50,000 x 1.015 - $40 = $50,710
2 ................ $50,710 x 1.015 - $40 = $51,431
3 ................ $51,431 x 1.015 - $40 = $52,162
4 ................ $52,162 x 1.015 - $40 = $52,905
5 ................ $52,905 x 1.015 - $40 = $53,658
* BOY = beginning of year
** EOY = end of year
Annuity payouts
Variable annuity payouts
Variable annuity payouts will be determined on the basis of:
o the dollar value of the contract on the annuity commencement date less any
applicable premium tax (and less any surrender charges on purchase payments
in the contract for less than 12 months if bonus credits applied to the
purchase payments);
o the annuity tables contained in the contract;
o the type of annuity option selected; and
o the investment results of the fund(s) selected.
In order to determine the amount of variable annuity payouts, we make the
following calculation:
o first, we determine the dollar amount of the first payout;
o second, we credit the contract with a fixed number of annuity units based on
the amount of the first payout; and
o third, we calculate the value of the annuity units each period thereafter.
These steps are explained below.
The dollar amount of the first periodic variable annuity payout is determined
by applying the total value of the accumulation units credited under the
contract valued as of the annuity commencement date (less any premium taxes) to
the annuity tables contained in the contract. The first variable annuity payout
will be paid 14 days after the annuity commencement date. This day of the month
will become the day on which all future annuity payouts will be paid. Amounts
shown in the tables are based on the 1983 Table "a" Individual Annuity
Mortality Tables modified, with an assumed investment return at the rate of 3%,
4% or 5% per annum, depending on the terms of your contract. The first annuity
payout is determined by multiplying the benefit per $1,000 of value shown in
the contract tables by the number of thousands of dollars of value accumulated
under the contract. These annuity tables vary according to the form of annuity
selected and the age of the annuitant at the annuity commencement date. The
assumed interest rate is the measuring point for subsequent annuity payouts. If
the actual net investment rate (annualized) exceeds the assumed interest rate,
the payout will increase at a rate equal to the amount of such excess.
Conversely, if the actual rate is less than the assumed interest rate, annuity
payouts will decrease. If the assumed rate of interest were to be increased,
annuity payouts would start at a higher level but would decrease more rapidly
or increase more slowly.
We may use sex-distinct annuity tables in contracts that are not associated
with employer sponsored plans and where not prohibited by law.
At an annuity commencement date, the contract is credited with annuity units
for each subaccount on which variable annuity payouts are based. The number of
annuity units to be credited is determined by dividing the amount of the first
periodic payout by the value of an annuity unit in each subaccount selected.
Although the number of annuity units is fixed by this process, the value of
such units will
B-4
vary with the value of the underlying fund. The amount of the second and
subsequent periodic payouts is determined by multiplying the contractowner's
fixed number of annuity units in each subaccount by the appropriate annuity
unit value for the valuation date ending 14 days prior to the date that payout
is due.
The value of each subaccount's annuity unit will be set initially at $1.00. The
annuity unit value for each subaccount at the end of any valuation date is
determined by multiplying the subaccount annuity unit value for the immediately
preceding valuation date by the product of:
o The net investment factor of the subaccount for the valuation period for
which the annuity unit value is being determined, and
o A factor to neutralize the assumed investment return in the annuity table.
The value of the annuity units is determined as of a valuation date 14 days
prior to the payment date in order to permit calculation of amounts of annuity
payouts and mailing of checks in advance of their due dates. Such checks will
normally be issued and mailed at least three days before the due date.
Proof of age, sex and survival
We may require proof of age, sex, or survival of any payee upon whose age, sex,
or survival payments depend.
i4LIFE (Reg. TM) Advantage
During the Access Period for non-Qualified contracts, regular income payments
will be determined on the basis of:
o the dollar value of the contract on the valuation date not more than
fourteen days prior to the initial regular income date, less any applicable
premium taxes, and each regular income payment date thereafter (or each
subsequent anniversary of the initial regular income date if levelized
payments are selected);
o the annuity factor for the i4LIFE (Reg. TM) Advantage or Income4Life (Reg.
TM) Solution selected; and
o the investment results of the fixed and/or variable subaccounts selected.
During the Access Period for IRA contracts, regular income payments will be
determined on the basis of:
o the dollar value of the contract on December 31 of each year prior to the
initial regular income payment and each subsequent regular income payment;
o the annuity factor for the i4LIFE (Reg. TM) Advantage or Income4Life (Reg.
TM) Solution selected; and
o the investment results of the fixed and/or variable subaccounts selected.
For non-qualified contracts, the initial regular income payment is determined
by dividing the contract value as of the valuation date no more than fourteen
days prior to the initial regular income payment date, less any premium taxes,
by 1,000 and multiplying this result by the annuity factor. Subsequent regular
income payments are determined by dividing the Account Value as of the
valuation date not more than fourteen days prior to the regular income payment
due date (or each subsequent anniversary of the initial regular income date if
levelized payments are selected) by 1,000 and multiplying this result by the
annuity factor adjusted for the remaining annuity period.
For IRA contracts, the initial regular income payment is determined by dividing
the contract value as of December 31 of the year prior to the initial regular
income payment date by 1,000 and multiplying this result by the annuity factor.
Any regular income payments due in the same calendar year will be equal to the
first regular income payment of the calendar year. This results in the regular
income payment remaining level for a full calendar year and then adjusting at
the beginning of the next calendar year. The first regular income payment of a
subsequent calendar year will be determined by dividing the Account Value as of
December 31 of the year prior by 1,000 and multiplying this result by the
annuity factor adjusted for the remaining annuity period.
The annuity factors are based on whether the i4LIFE (Reg. TM) Advantage or
Income4Life (Reg. TM) Solution is selected, an assumed investment return of
either 3%, 4% or 5% per annum, the length of the Access Period, the length of
time any regular income payments are guaranteed after the Access Period, the
frequency of the regular income payments, and the age(s) and sex of the
annuitant(s) as of the date the initial regular income payment is calculated,
and when applicable, the 1983 Table "a" Individual Annuity Mortality Table,
modified.
The assumed interest rate is the measuring point for subsequent regular income
payments. If the actual net investment rate (annualized) for the
contract,whether based upon a fixed and/or variable subaccount, exceeds the
assumed rate, the regular income payment will increase at a rate approximately
equal to the amount of such excess. Conversely, if the actual net investment
rate for the contract is less than the assumed rate, the regular income payment
will decrease. If a higher assumed rate of interest is selected, regular income
payments will start at a higher level but will decrease more rapidly or
increase more slowly. We may use sex-distinct annuity factors for contracts
that are not associated with employer sponsored plans and where not prohibited
by law.
At the end of the Access Period, the periodic regular income payment will
purchase annuity units at the then current annuity unit value. Subsequent
regular income payments made after the Access Period will be calculated using
annuity units as described in the Variable annuity payouts section above.
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Determination of accumulation and annuity unit value
A description of the days on which accumulation and annuity units will be
valued is given in the prospectus. The New York Stock Exchange's (NYSE) most
recent announcement (which is subject to change) states that it will be closed
on weekends and on these holidays: New Year's Day, Martin Luther King Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. If any of these holidays occurs on a
weekend day, the Exchange may also be closed on the business day occurring just
before or just after the holiday. It may also be closed on other days.
Since the portfolios of some of the fund and series will consist of securities
primarily listed on foreign exchanges or otherwise traded outside the United
States, those securities may be traded (and the net asset value of those fund
and series and of the variable account could therefore be significantly
affected) on days when the investor has no access to those funds and series.
Advertising and sales literature
As set forth in the prospectus, we may refer to the following indexes and
organizations (and others) in our marketing materials:
A.M. Best's Rating System - is designed to evaluate the various factors
affecting the overall performance of an insurance company in order to provide
an opinion as to an insurance company's relative financial strength and ability
to meet its contractual obligations. The procedure includes both a quantitative
and qualitative review of each company. A.M. Best also provides certain
rankings, to which we intend to refer.
Dow Jones Industrial Average (DJIA) - price-weighted average of 30 actively
traded blue chip stocks, primarily industrials but currently including American
Express Company and American Telephone and Telegraph Company. Prepared and
published by Dow Jones & Company, it is the oldest and most widely quoted of
all the market indicators. The average is quoted in points, not dollars.
EAFE Index - is prepared by Morgan Stanley Capital International (MSCI). It
measures performance of equity securities in Europe, Australasia and the Far
East. The index reflects the movements of world stock markets by representing
the evolution of an unmanaged portfolio. The EAFE Index offers international
diversification representing over 1,000 companies across 20 different
countries.
FITCH - provides ratings on over 800 insurance entities in close to 30
countries. The Insurance Group maintains three significant analytical staffing
centers in Chicago, London and New York, and also coordinates local analytical
resources in other parts of the world on behalf of Fitch's global office
network.
Lehman Brothers Aggregate Bond Index - Composed of securities from Lehman
Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and
the Asset-Backed Securities Index. Indexes are rebalanced monthly by market
capitalization.
Lehman Brothers Government/Corporate Bond Index - This is a measurement of the
movement of approximately 4,200 corporate, publicly traded, fixed-rate,
nonconvertible, domestic debt securities, as well as the domestic debt
securities issued by the U.S. government or its agencies.
Lehman Brothers Government Intermediate Bond Index - Composed of all bonds
covered by the Lehman Brothers Government Bond Index (all publicly issued,
nonconvertible, domestic debt of the U.S. government or any agency thereof,
quasi-federal corporations, or corporate debt guaranteed by the U.S.
government) with maturities between one and 9.99 years.
Lipper Variable Insurance Products Performance Analysis Service - is a
publisher of statistical data covering the investment company industry in the
United States and overseas. Lipper is recognized as the leading source of data
on open-end and closed-end funds. Lipper currently tracks the performance of
over 5,000 investment companies and publishes numerous specialized reports,
including reports on performance and portfolio analysis, fee and expense
analysis.
Merrill Lynch High Yield Master Index - This is an index of high yield debt
securities. High yield securities are those below the top four quality rating
categories and are considered more risky than investment grade. Issues must be
rated by Standard & Poor's or by Moody's Investors Service as less than
investment grade (i.e., BBB or Baa) but not in default (i.e. DDD1 or less).
Issues must be in the form of publicly placed nonconvertible, coupon-bearing
U.S. domestic debt and must carry a term to maturity of at least one year.
Moody's - insurance financial strength rating is an opinion of an insurance
company's financial strength and ability to meet financial obligations. The
purpose of Moody's ratings is to provide investors with a simple system of
gradation by which the relative quality of insurance companies may be noted.
Morgan Stanley Emerging Markets Free Index - A market capitalization weighted
index composed of companies representative of the market structure of 22
Emerging Market countries in Europe, Latin America, and the Pacific Basin. This
index excludes closed markets and those shares in otherwise free markets, which
are not purchasable by foreigners.
Morgan Stanley Pacific Basin (Ex-Japan) Index - An arithmetic, market
value-weighted average of the performance of securities listed on the stock
exchanges of the following Pacific Basin Countries: Australia, Hong Kong,
Malaysia, New Zealand and Singapore.
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Morgan Stanley World Capital International World Index - A market
capitalization weighted index composed of companies representative of the
market structure of 22 Developed Market countries in North America, Europe and
the Asia/Pacific Region.
Morningstar - is an independent financial publisher offering comprehensive
statistical and analytical coverage of open-end and closed-end funds and
variable annuities.
Nareit Equity Reit Index - All of the data is based on the last closing price
of the month for all tax-qualified REITs listed on the New York Stock Exchange,
American Stock Exchange, and the NASDAQ National Market System. The data is
market weighted.
NASDAQ-OTC Price Index - this index is based on the NASD Automated Quotations
(NASDAQ) and represents all domestic over-the-counter stocks except those
traded on exchanges and those having only one market maker, a total of some
3,500 stocks. It is market value-weighted and was introduced with a base of
100.00 on February 5, 1971.
Russell 1000 Index - Measures the performance of the 1,000 largest companies in
the Russell 3000 Index. These 1,000 companies represent approximately 92% of
the U.S. equity markets, as of June 2004.
Russell 2000 Index - Measures the performance of the 2,000 smallest companies
in the Russell 3000 Index. These 2,000 companies represents the small cap
segment of the U. S. equity market, approximately 6%, as of June 2004.
Russell 3000 Index - Russell 3000 (Reg. TM) Index measures the performance of
the 3,000 largest U.S. companies based on total stock value and represents 98%
of the U.S. equity market. As of June 2004, the average firm's stock value in
the index was $4.4 billion; the median was $822 million. The range of stock
value was from $317.8 billion to $175.8 million.
Salomon Brothers 90 Day Treasury-Bill Index - Equal dollar amounts of
three-month Treasury bills are purchased at the beginning of each of three
consecutive months. As each bill matures, all proceeds are rolled over or
reinvested in a new three-month bill.
Salomon Brothers World Government Bond (Non US) Index - A market capitalization
weighted index consisting of government bond markets of the following 13
countries: Australia, Austria, Belgium, Canada, Denmark, France, Germany,
Italy, Japan, The Netherlands, Spain, Sweden, and The United Kingdom.
Standard & Poor's insurance claims - paying ability rating is an opinion of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with the terms. The likelihood of a timely flow
of funds from the insurer to the trustee for the bondholders is a key element
in the rating determination for such debt issues.
Standard and Poor's Index (S&P 400) - Consists of 400 domestic stocks chosen
for market size, liquidity, and industry representations.
Standard & Poor's 500 Index - A broad-based measurement of U.S. stock-market
performance based on the weighted average performance of 500 common stocks of
leading company's and leading industries; commonly known as the Standard &
Poor's 500 (S&P 500). The selection of stocks, their relative weightings to
reflect differences in the number of outstanding shares, and publication of the
index itself are services of Standard & Poor's Corporation, a financial
advisory, securities rating, and publishing firm.
Standard and Poor's Utilities Index - The utility index is one of several
industry groups within the broader S&P 500. Utility stocks include electric,
natural gas, and telephone companies included in the S&P 500.
VARDS (Variable Annuity Research and Data Service) - provides a comprehensive
guide to variable annuity contract features and historical fund performance.
The service also provides a readily understandable analysis of the comparative
characteristics and market performance of funds inclusive in variable
contracts.
In our advertisements and other sales literature for the VAA and the funds, we
intend to illustrate the advantages of the contracts in a number of ways:
Compound Interest Illustrations - These will emphasize several advantages of
the variable annuity contract. For example, but not by way of illustration, the
literature may emphasize the potential tax savings through tax deferral; the
potential advantage of the variable annuity account over the fixed account; and
the compounding effect when a client makes regular deposits to his or her
contract.
Internet - An electronic communications network which may be used to provide
information regarding Lincoln New York, performance of the subaccounts and
advertisement literature.
Additional services
Dollar Cost Averaging (DCA) - You may systematically transfer, on a monthly
basis, amounts from certain subaccounts, or the fixed side (if available) of
the contract into the subaccounts. You may elect to participate in the DCA
program at the time of application or at anytime before the annuity
commencement date by completing an election form available from us. The minimum
amount to be dollar cost averaged is $2,000 over any period between six and 60
months. Once elected, the program will remain in effect until the earlier of:
o the annuity commencement date;
B-7
o the value of the amount being DCA'd is depleted; or
o you cancel the program by written request or by telephone if we have your
telephone authorization on file.
A transfer made as part of this program is not considered a transfer for
purposes of limiting the number of transfers that may be made, or assessing any
charges or interest adjustment which may apply to transfers. Upon receipt of an
additional purchase payment allocated to the DCA fixed account, the existing
program duration will be extended to reflect the end date of the new DCA
program. However, the existing interest crediting rate will not be extended.
The existing interest crediting rate will expire at its originally scheduled
expiration date and the value remaining in the DCA account from the original
amount as well as any additional purchase payments will be credited with
interest at the standard DCA rate at the time. We reserve the right to
discontinue this program at any time. DCA does not assure a profit or protect
against loss.
Automatic Withdrawal Service (AWS) - AWS provides an automatic, periodic
withdrawal of contract value to you. AWS may take place on either a monthly,
quarterly, semi-annual or annual basis, as selected by the contractowner. You
may elect to participate in AWS at the time of application or at any time
before the annuity commencement date by sending a written request to us. The
minimum contract value required to establish AWS is $10,000. You may cancel or
make changes to your AWS program at any time by sending a written request to
us. If telephone authorization has been elected, certain changes may be made by
telephone. Notwithstanding the requirements of the program, any withdrawal must
be permitted under Section 401(a)(9) of the IRC for qualified plans or
permitted under Section 72 of the IRC for non-qualified contracts. To the
extent that withdrawals under AWS do not qualify for an exemption from the
contingent deferred sales charge, we will assess any applicable surrender
charges on those withdrawals. See Contingent deferred sales charges.
Cross Reinvestment Program/Earnings Sweep Program - Under this option, account
value in a designated variable subaccount of the contract that exceeds a
certain baseline amount is automatically transferred to another specific
variable subaccount(s) of the contract at specific intervals. You may elect to
participate in the cross reinvestment program at the time of application or at
any time before the annuity commencement date by sending a written request to
us or by telephone if we have your telephone authorization on file. You
designate the holding account, the receiving account(s), and the baseline
amount. Cross reinvestment will continue until we receive authorization to
terminate the program.
The minimum holding account value required to establish cross-reinvestment is
$10,000. A transfer under this program is not considered a transfer for
purposes of limiting the number of transfers that may be made. We reserve the
right to discontinue this service at any time.
Portfolio Rebalancing - Portfolio rebalancing is an option, which, if elected
by the contractowner, restores to a pre-determined level the percentage of the
contract value, allocated to each variable subaccount. This pre-determined
level will be the allocation initially selected when the contract was
purchased, unless subsequently changed. The portfolio rebalancing allocation
may be changed at any time by submitting a written request to us. If portfolio
rebalancing is elected, all purchase payments allocated to the variable
subaccounts must be subject to portfolio rebalancing. Portfolio rebalancing may
take place on either a monthly, quarterly, semi-annual or annual basis, as
selected by the contractowner. Once the portfolio rebalancing option is
activated, any variable subaccount transfers executed outside of the portfolio
rebalancing program will terminate the portfolio rebalancing program. Any
subsequent purchase payment or withdrawal that modifies the account balance
within each variable subaccount may also cause termination of the portfolio
rebalancing program. Any such termination will be confirmed to the
contractowner. The contractowner may terminate the portfolio rebalancing
program or re-enroll at any time by sending a written request to us. If
telephone authorization has been elected, the contractowner may make these
elections by phone. The portfolio rebalancing program is not available
following the annuity commencement date.
Lincoln Financial Group. Lincoln Financial Group is the marketing name for
Lincoln National Corporation (NYSE:LNC) and its affiliates. With headquarters
in Philadelphia, Lincoln Financial Group has consolidated assets of $116
billion and had consolidated revenues of $5.4 billion in 2004. Through its
wealth accumulation and protection businesses, the company provides annuities,
life insurance, 401(k) and 403(b) plans, 529 college savings plans, mutual
funds, managed accounts, institutional investment and financial planning and
advisory services.
Lincoln New York's customers. Sales literature for the VAA and the funds may
refer to the number of employers and the number of individual annuity clients
which Lincoln New York serves. As of the date of this SAI, Lincoln New York was
serving over 500 employers and more than 10,000 individuals.
Lincoln New York's assets, size. Lincoln New York may discuss its general
financial condition (see, for example, the reference to A.M. Best Company
above); it may refer to its assets; it may also discuss its relative size
and/or ranking among companies in the industry or among any sub-classification
of those companies, based upon recognized evaluation criteria (see reference to
A.M. Best Company above). For example, at year-end 2004 Lincoln New York had
total assets of approximately $3.7 billion.
B-8
Other information
Due to differences in redemption rates, tax treatment or other considerations,
the interests of contractowners under the variable life accounts could conflict
with those of contractowners under the VAA. In those cases, where assets from
variable life and variable annuity separate accounts are invested in the same
fund(s) (i.e., where mixed funding occurs), the Boards of Directors of the fund
involved will monitor for any material conflicts and determine what action, if
any, should be taken. If it becomes necessary for any separate account to
replace shares of any fund with another investment, that fund may have to
liquidate securities on a disadvantageous basis. Refer to the prospectus for
each fund for more information about mixed funding.
Financial statements
Financial statements of the VAA and of Lincoln New York appear on the following
pages.
B-9
Lincoln ChoicePlus Assurance (Bonus)
Lincoln New York Account N
for Variable Annuities
Individual Variable Annuity Contracts
Home Office:
Lincoln Life & Annuity Company of New York
100 Madison Street, Suite 1860
Syracuse, NY 13202
www.LincolnRetirement.com
Servicing Office:
Lincoln Life & Annuity Company of New York
PO Box 7866
Fort Wayne, IN 46802-7866
1-888-868-2583
This prospectus describes the individual flexible premium deferred variable
annuity contract that is issued by Lincoln Life & Annuity Company of New York.
It is primarily for use with nonqualified plans and qualified retirement plans
under Sections 408 (IRAs) and 408A (Roth IRAs) of the tax code. Generally, you
do not pay federal income tax on the contract's growth until it is paid out.
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 and to
provide retirement income that you cannot outlive or for an agreed upon time.
These benefits may be a variable or fixed amount, if available, or a
combination of both. If you die before the annuity commencement date, we will
pay your beneficiary a death benefit. In the alternative, you generally may
choose to receive a death benefit upon the death of the annuitant.
The minimum initial purchase payment for the contract is $10,000 . Additional
purchase payments may be made to the contract and must be at least $100 per
payment ($25 if transmitted electronically), and at least $300 annually.
Except as noted below, you choose whether your contract value accumulates on a
variable or a fixed (guaranteed) basis or both. Your contract may not offer a
fixed account or if permitted by your contract, we may discontinue accepting
purchase payments or transfers into the fixed side of the contract at any time.
If your purchase payments, bonus credits and persistency credits are in the
fixed account, we guarantee your principal and a minimum interest rate. For the
life of your contract or during certain periods, we may impose restrictions on
the fixed account. For contracts issued after September 30, 2003, the only
fixed account available is for dollar cost averaging purposes.
We do offer variable annuity contracts that have lower fees. Expenses for
contracts offering a bonus or persistency credit may be higher. Because of
this, the amount of the bonus or persistency credits may, over time, be offset
by additional fees and charges.
You should carefully consider whether or not this contract is the best product
for you.
All purchase payments, bonus credits and persistency credits for benefits on a
variable basis will be placed in Lincoln New York Account N for Variable
Annuities (variable annuity account [VAA]). The VAA is a segregated investment
account of Lincoln New York. You take all the investment risk on the contract
value and the retirement income for amounts placed into one or more of the
contract's variable options. If the subaccounts you select make money, your
contract value goes up; if they lose money, it goes down. How much it goes up
or down depends on the performance of the subaccounts you select. We do not
guarantee how any of the variable options or their funds will perform. Also,
neither the U.S. Government nor any federal agency insures or guarantees your
investment in the contract. The contracts are not bank deposits and are not
endorsed by any bank or government agency.
The available funds are listed below:
AIM Variable Insurance Funds (Series II):
AIM V.I. Growth Fund**
AIM V.I. International Growth Fund**
AIM V.I. Premier Equity Fund**
AllianceBernstein Variable Products Series Fund (Class B):
AllianceBernstein Growth and Income Portfolio
AllianceBernstein Large Cap Growth Portfolio***
(formerly AllianceBernstein Premier Growth)
AllianceBernstein Small/Mid Cap Value Portfolio
(formerly AllianceBernstein Small Cap)
AllianceBernstein Global Technology Portfolio
(formerly AllianceBernstein Technology)
American Century Investments Variable Products (Class II):
American Century Investments VP Inflation Protection Fund
American Funds Insurance SeriesSM (Class 2):
American Funds Global Growth Fund
American Funds Global Small Capitalization Fund
American Funds Growth Fund
American Funds Growth-Income Fund
American Funds International Fund
1
Delaware VIP Trust (Service Class):
Delaware VIP Capital Reserves Series*
Delaware VIP Diversified Income Series
Delaware VIP Emerging Markets Series
Delaware VIP High Yield Series
Delaware VIP REIT Series
Delaware VIP Small Cap Value Series
Delaware VIP Trend Series
Delaware VIP U.S. Growth Series***
Delaware VIP Value Series
(formerly Delaware VIP Large Cap Value)
Fidelity (Reg. TM) Variable Insurance Products (Service Class 2):
Fidelity (Reg. TM) VIP Contrafund Portfolio
Fidelity (Reg. TM) VIP Equity-Income Portfolio***
Fidelity (Reg. TM) VIP Growth Portfolio
Fidelity (Reg. TM) VIP Mid Cap Portfolio*
Fidelity (Reg. TM) VIP Overseas Portfolio
Franklin Templeton Variable Insurance Products Trust (Class 2):
FTVIPT Franklin Small-Mid Cap Growth Securities Fund
(formerly FTVIPT Franklin Small Cap)
FTVIPT Templeton Global Income Securities Fund*
FTVIPT Templeton Growth Securities Fund
Janus Aspen Series (Service Class):
Janus Aspen Balanced Portfolio***
Janus Aspen Mid Cap Growth Portfolio***
Janus Aspen Worldwide Growth Portfolio**
Lincoln Variable Insurance Products Trust (Service Class):
Lincoln VIP Aggressive Growth Fund
Lincoln VIP Bond Fund
Lincoln VIP Capital Appreciation Fund
Lincoln VIP Global Asset Allocation Fund
Lincoln VIP International Fund
Lincoln VIP Money Market Fund
Lincoln VIP Social Awareness Fund
Lincoln VIP Core Fund*
Lincoln VIP Equity-Income Fund****
Lincoln VIP Growth Fund*
Lincoln VIP Growth and Income Fund*
Lincoln VIP Growth Opportunities Fund*
Lincoln VIP Conservative Profile Fund*
Lincoln VIP Moderate Profile Fund*
Lincoln VIP Moderately Aggressive Profile Fund*
Lincoln VIP Aggressive Profile Fund*
MFS (Reg. TM) Variable Insurance TrustSM (Service Class):
MFS (Reg. TM) VIT Capital Opportunities Series***
MFS (Reg. TM) VIT Emerging Growth Series***
MFS (Reg. TM) VIT Total Return Series
MFS (Reg. TM) VIT Utilities Series
Neuberger Berman Advisers Management Trust:
Neuberger Berman AMT Mid-Cap Growth Portfolio
Neuberger Berman AMT Regency Portfolio
Putnam Variable Trust (Class IB):
Putnam VT Growth & Income Fund**
Putnam VT Health Sciences Fund**
Scudder Investment VIT Funds (Class B):
Scudder VIT EAFE Equity Index Fund***
Scudder VIT Equity 500 Index Fund
Scudder VIT Small Cap Index Fund
* These funds will be available for allocations of purchase payments or
contract value on or around June 6, 2005. Check with your investment
representative regarding availability.
** These funds are not offered in contracts issued on or after May 24, 2004.
*** These funds will not be offered in contracts issued on or after June 6,
2005.
**** This fund is only available for contracts issued on or after June 6, 2005.
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 is
incorporated by reference into this prospectus and is legally part of this
prospectus. For a free copy of the SAI, write: Lincoln Life & Annuity Company
of New York, PO Box 7866, Fort Wayne, IN 46802-7866, or call 1-888-868-2583.
The SAI and other information about Lincoln New York 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, 2005
2
Table of Contents
· Download Table
Item Page
Special terms 4
Expense tables 5
Summary of common questions 9
Lincoln Life & Annuity Company of New York 11
Variable annuity account (VAA) 11
Investments of the variable annuity account 12
Charges and other deductions 18
The contracts 21
Purchase payments 22
Bonus credits 22
Persistency credits 22
Transfers on or before the annuity commencement date 23
Death benefit 25
Lincoln SmartSecuritySM Advantage 28
Surrenders and withdrawals 31
Distribution of the contracts 32
i4LIFE (Reg. TM) Advantage 33
Annuity payouts 36
Fixed side of the contract 37
Federal tax matters 38
Additional information 43
Voting rights 43
Return privilege 43
Other information 44
Legal proceedings 44
Statement of Additional Information
Table of Contents for Lincoln New York Account N for Variable Annuities 45
Appendix A - Condensed financial information A-1
3
Special terms
In this prospectus, the following terms have the indicated meanings:
Account or variable annuity account (VAA) - The segregated investment account,
Account N, into which we set aside and invest the assets for the variable side
of the contract offered in this prospectus.
Accumulation unit - A measure used to calculate contract value for the variable
side of the contract before the annuity commencement 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.
Annuity payout - An amount paid at regular intervals after the annuity
commencement date under one of several options available to the annuitant
and/or any other payee. This amount may be paid on a variable or fixed basis,
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.
Beneficiary - The person you choose to receive any death benefit paid if you
die before the annuity commencement date.
Bonus Credit - The additional amount credited to the contract for each purchase
payment.
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 - 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.
Death benefit - Before the annuity commencement date, the amount payable to
your designated beneficiary if the contractowner dies or, if selected, to the
contractowner if the annuitant dies. See The contracts - Death benefit for a
description of the various death benefit options.
i4LIFE (Reg. TM) Advantage - An income program which combines periodic variable
lifetime income payments with the ability to make withdrawals during a defined
period.
Persistency credit - The additional amount credited to the contract after the
fourteenth contract anniversary.
Lincoln New York (we, us, our) - Lincoln Life & Annuity Company of New York
(LNY)
Purchase payments - Amounts paid into the contract other than bonus credits and
persistency credits.
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.
Valuation date - Each day the New York Stock Exchange (NYSE) is open for
trading.
Valuation period - The period starting at the close of trading (currently 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.
4
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 the fixed account. State premium taxes may
also be deducted.
Contractowner Transaction Expenses:
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o Surrender charge (as a percentage of purchase payments surrendered/withdrawn): 8.5%*
o Transfer charge: $ 25**
* 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 waive this charge in certain situations.
See Charges and other deductions-Surrender charge.
** The transfer charge will not be imposed on the first 12 transfers during a
contract year. We reserve the right to charge a $25 fee for the 13th and
each additional transfer during any contract year, excluding automatic
dollar cost averaging, portfolio rebalancing and cross reinvestment
transfers.
The next table describes the fees and expenses that you will pay periodically
during the time that you own the contract, not including fund fees and
expenses.
Annual Account Fee: $30*
Separate Account Annual Expenses (as a percentage of average daily net assets
in the subaccounts):
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o Mortality and expense risk charge
o Administrative charge
o Total annual charge for each
subaccount**
With Enhanced Guarantee of
Guaranteed Minimum Principal Death
Death Benefit (EGMDB) Benefit (GOP) Account Value death benefit
----------------------- ---------------- ----------------------------
o 1.65% 1.40% 1.35%
o 0.15% 0.15% 0.15%
---- ---- ----
o
1.80% 1.55% 1.50%
* The account fee will be waived if your contract value is $100,000 or more
at the end of any particular year. The account fee will be waived after the
fifteenth contract year.
**For contracts purchased before June 6, 2005, the total annual charges are as
follows: EGMDB 1.60%; Guarantee of Principal 1.50%; Account Value N/A.
Optional Rider Charges:
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Lincoln SmartSecuritySM Lincoln SmartSecuritySM
Advantage - 5 Year Elective Advantage - 1 Year Automatic
Step-Up option Step-Up option
----------------------------- -----------------------------
Guaranteed maximum annual
percentage charge* 0.95% 1.50%
Current annual percentage charge* 0.45% 0.65%
*The annual percentage charge is assessed against the Guaranteed Amount as
adjusted for purchase payments, bonus credits, step-ups and withdrawals. See
Charges and other deductions 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, 2004. More
detail concerning each fund's fees and expenses is contained in the prospectus
for each fund.
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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): 0.54% 4.13%
Net Total Annual Fund Operating Expenses
(after contractual waivers/reimbursements*): 0.54% 1.75%
* 21 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 30, 2006.
5
The following table shows the expenses charged by each fund for the year ended
December 31, 2004:
(as a percentage of each fund's average net assets):
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Management
Fees (before
any waivers/
reimbursements) +
AIM V.I. Growth Fund (Series II) 0.63 %
AIM V.I. International Growth Fund (Series II) 0.74
AIM V.I. Premier Equity Fund (Series II) 0.61
AllianceBernstein Growth and Income Portfolio (class B) 0.55
AllianceBernstein Large Cap Growth Portfolio (class B) 0.75
AllianceBernstein Small/Mid Cap Value Portfolio (class B) 0.75
AllianceBernstein Global Technology Portfolio (class B) 0.75
American Century Investments VP II Inflation Protection (Class II) 0.50
American Funds Global Growth Fund (class 2) (1) 0.61
American Funds Global Small Capitalization Fund (class 2) (1) 0.77
American Funds Growth Fund (class 2) (1) 0.35
American Funds Growth-Income Fund (class 2) (1) 0.29
American Funds International Fund (class 2) (1) 0.54
Delaware VIP Capital Reserves Series (Service Class) (2) 0.50
Delaware VIP Diversified Income Series(Service Class) (3) 0.65
Delaware VIP Emerging Markets Series(Service Class) (4) 1.25
Delaware VIP High Yield Series (Service class) (2) 0.65
Delaware VIP Value Series (Service class) (5) 0.65
Delaware VIP REIT Series (Service class) (6) 0.74
Delaware VIP Small Cap Value Series (Service class) (6) 0.74
Delaware VIP Trend Series (Service class) (6) 0.74
Delaware VIP U.S. Growth Series (Service class) (2) 0.65
Fidelity (Reg. TM) VIP Contrafund Portfolio (Service class 2) (7) 0.57
Fidelity (Reg. TM) VIP Equity-Income Portfolio (Service class 2) (7) 0.47
Fidelity (Reg. TM) VIP Growth Portfolio (Service class 2) (7) 0.58
Fidelity (Reg. TM) Mid Cap Portfolio (Service class 2) (7) 0.57
Fidelity (Reg. TM) VIP Overseas Portfolio (Service class 2) (7) 0.72
FTVIPT Franklin Small-Mid Cap Growth Securities Fund (class 2) (8) 0.48
FTVIPT Templeton Global Income Sercurities Fund (Class 2) 0.62
FTVIPT Templeton Growth Securities Fund (class 2) 0.79
Janus Aspen Mid Cap Growth Portfolio (Service class) 0.64
Janus Aspen Balanced Portfolio (Service class) 0.55
Janus Aspen Worldwide Growth Portfolio (Service class) 0.60
Lincoln VIP Aggressive Growth Fund (Service class) 0.74
Lincoln VIP Bond Fund (Service class) 0.36
Lincoln VIP Core Fund (Service class) (9) 0.69
Lincoln VIP Capital Appreciation Fund (Service class) (15) 0.74
Lincoln VIP Equity-Income Fund (Service class) (16) 0.73
Lincoln VIP Global Asset Allocation Fund (Service class) 0.74
Lincoln VIP Growth Fund (Service class) (9) 0.74
Lincoln VIP Growth and Income Fund (Service class) 0.33
Lincoln VIP Growth Opportunities Fund (Service class) (9) 0.99
12b-1 Fees Other Expenses
(before any (before any
waivers/ waivers/
reimbursements) + reimbursements)
AIM V.I. Growth Fund (Series II) 0.25 % 0.28 %
AIM V.I. International Growth Fund (Series II) 0.25 0.40
AIM V.I. Premier Equity Fund (Series II) 0.25 0.30
AllianceBernstein Growth and Income Portfolio (class B) 0.25 0.05
AllianceBernstein Large Cap Growth Portfolio (class B) 0.25 0.06
AllianceBernstein Small/Mid Cap Value Portfolio (class B) 0.25 0.12
AllianceBernstein Global Technology Portfolio (class B) 0.25 0.13
American Century Investments VP II Inflation Protection (Class II) 0.25 0.00
American Funds Global Growth Fund (class 2) (1) 0.25 0.04
American Funds Global Small Capitalization Fund (class 2) (1) 0.25 0.04
American Funds Growth Fund (class 2) (1) 0.25 0.01
American Funds Growth-Income Fund (class 2) (1) 0.25 0.02
American Funds International Fund (class 2) (1) 0.25 0.05
Delaware VIP Capital Reserves Series (Service Class) (2) 0.30 0.12
Delaware VIP Diversified Income Series(Service Class) (3) 0.30 0.33
Delaware VIP Emerging Markets Series(Service Class) (4) 0.30 0.38
Delaware VIP High Yield Series (Service class) (2) 0.30 0.10
Delaware VIP Value Series (Service class) (5) 0.30 0.10
Delaware VIP REIT Series (Service class) (6) 0.30 0.10
Delaware VIP Small Cap Value Series (Service class) (6) 0.30 0.09
Delaware VIP Trend Series (Service class) (6) 0.30 0.10
Delaware VIP U.S. Growth Series (Service class) (2) 0.30 0.11
Fidelity (Reg. TM) VIP Contrafund Portfolio (Service class 2) (7) 0.25 0.11
Fidelity (Reg. TM) VIP Equity-Income Portfolio (Service class 2) (7) 0.25 0.11
Fidelity (Reg. TM) VIP Growth Portfolio (Service class 2) (7) 0.25 0.10
Fidelity (Reg. TM) Mid Cap Portfolio (Service class 2) (7) 0.25 0.14
Fidelity (Reg. TM) VIP Overseas Portfolio (Service class 2) (7) 0.25 0.19
FTVIPT Franklin Small-Mid Cap Growth Securities Fund (class 2) (8) 0.25 0.29
FTVIPT Templeton Global Income Sercurities Fund (Class 2) 0.25 0.16
FTVIPT Templeton Growth Securities Fund (class 2) 0.25 0.07
Janus Aspen Mid Cap Growth Portfolio (Service class) 0.25 0.01
Janus Aspen Balanced Portfolio (Service class) 0.25 0.01
Janus Aspen Worldwide Growth Portfolio (Service class) 0.25 0.03
Lincoln VIP Aggressive Growth Fund (Service class) 0.25 0.17
Lincoln VIP Bond Fund (Service class) 0.25 0.06
Lincoln VIP Core Fund (Service class) (9) 0.25 2.90
Lincoln VIP Capital Appreciation Fund (Service class) (15) 0.25 0.07
Lincoln VIP Equity-Income Fund (Service class) (16) 0.25 0.07
Lincoln VIP Global Asset Allocation Fund (Service class) 0.25 0.29
Lincoln VIP Growth Fund (Service class) (9) 0.25 2.89
Lincoln VIP Growth and Income Fund (Service class) 0.25 0.04
Lincoln VIP Growth Opportunities Fund (Service class) (9) 0.25 2.89
Total
Total Expenses Contractual
(before any waivers/
waivers/ reimbursements
= reimbursements) (if any)
AIM V.I. Growth Fund (Series II) 1.16 %
AIM V.I. International Growth Fund (Series II) 1.39
AIM V.I. Premier Equity Fund (Series II) 1.16
AllianceBernstein Growth and Income Portfolio (class B) 0.85
AllianceBernstein Large Cap Growth Portfolio (class B) 1.06
AllianceBernstein Small/Mid Cap Value Portfolio (class B) 1.12
AllianceBernstein Global Technology Portfolio (class B) 1.13
American Century Investments VP II Inflation Protection (Class II) 0.75
American Funds Global Growth Fund (class 2) (1) 0.90
American Funds Global Small Capitalization Fund (class 2) (1) 1.06
American Funds Growth Fund (class 2) (1) 0.61
American Funds Growth-Income Fund (class 2) (1) 0.56
American Funds International Fund (class 2) (1) 0.84
Delaware VIP Capital Reserves Series (Service Class) (2) 0.92 -0.05 %
Delaware VIP Diversified Income Series(Service Class) (3) 1.28 -0.23
Delaware VIP Emerging Markets Series(Service Class) (4) 1.93 -0.18
Delaware VIP High Yield Series (Service class) (2) 1.05 -0.05
Delaware VIP Value Series (Service class) (5) 1.05 -0.05
Delaware VIP REIT Series (Service class) (6) 1.14 -0.05
Delaware VIP Small Cap Value Series (Service class) (6) 1.13 -0.05
Delaware VIP Trend Series (Service class) (6) 1.14 -0.05
Delaware VIP U.S. Growth Series (Service class) (2) 1.06 -0.05
Fidelity (Reg. TM) VIP Contrafund Portfolio (Service class 2) (7) 0.93
Fidelity (Reg. TM) VIP Equity-Income Portfolio (Service class 2) (7) 0.83
Fidelity (Reg. TM) VIP Growth Portfolio (Service class 2) (7) 0.93
Fidelity (Reg. TM) Mid Cap Portfolio (Service class 2) (7) 0.96
Fidelity (Reg. TM) VIP Overseas Portfolio (Service class 2) (7) 1.16
FTVIPT Franklin Small-Mid Cap Growth Securities Fund (class 2) (8) 1.02 -0.03
FTVIPT Templeton Global Income Sercurities Fund (Class 2) 1.03
FTVIPT Templeton Growth Securities Fund (class 2) 1.11
Janus Aspen Mid Cap Growth Portfolio (Service class) 0.90
Janus Aspen Balanced Portfolio (Service class) 0.81
Janus Aspen Worldwide Growth Portfolio (Service class) 0.88
Lincoln VIP Aggressive Growth Fund (Service class) 1.16
Lincoln VIP Bond Fund (Service class) 0.67
Lincoln VIP Core Fund (Service class) (9) 3.84 -2.75
Lincoln VIP Capital Appreciation Fund (Service class) (15) 1.06 -0.13
Lincoln VIP Equity-Income Fund (Service class) (16) 1.05 -0.04
Lincoln VIP Global Asset Allocation Fund (Service class) 1.28
Lincoln VIP Growth Fund (Service class) (9) 3.88 -2.77
Lincoln VIP Growth and Income Fund (Service class) 0.62
Lincoln VIP Growth Opportunities Fund (Service class) (9) 4.13 -2.70
Total Expenses
(after
Contractual
waivers/
reimbursements
s)
AIM V.I. Growth Fund (Series II)
AIM V.I. International Growth Fund (Series II)
AIM V.I. Premier Equity Fund (Series II)
AllianceBernstein Growth and Income Portfolio (class B)
AllianceBernstein Large Cap Growth Portfolio (class B)
AllianceBernstein Small/Mid Cap Value Portfolio (class B)
AllianceBernstein Global Technology Portfolio (class B)
American Century Investments VP II Inflation Protection (Class II)
American Funds Global Growth Fund (class 2) (1)
American Funds Global Small Capitalization Fund (class 2) (1)
American Funds Growth Fund (class 2) (1)
American Funds Growth-Income Fund (class 2) (1)
American Funds International Fund (class 2) (1)
Delaware VIP Capital Reserves Series (Service Class) (2) 0.87 %
Delaware VIP Diversified Income Series(Service Class) (3) 1.05
Delaware VIP Emerging Markets Series(Service Class) (4) 1.75
Delaware VIP High Yield Series (Service class) (2) 1.00
Delaware VIP Value Series (Service class) (5) 1.00
Delaware VIP REIT Series (Service class) (6) 1.09
Delaware VIP Small Cap Value Series (Service class) (6) 1.08
Delaware VIP Trend Series (Service class) (6) 1.09
Delaware VIP U.S. Growth Series (Service class) (2) 1.01
Fidelity (Reg. TM) VIP Contrafund Portfolio (Service class 2) (7)
Fidelity (Reg. TM) VIP Equity-Income Portfolio (Service class 2) (7)
Fidelity (Reg. TM) VIP Growth Portfolio (Service class 2) (7)
Fidelity (Reg. TM) Mid Cap Portfolio (Service class 2) (7)
Fidelity (Reg. TM) VIP Overseas Portfolio (Service class 2) (7)
FTVIPT Franklin Small-Mid Cap Growth Securities Fund (class 2) (8) 0.99
FTVIPT Templeton Global Income Sercurities Fund (Class 2)
FTVIPT Templeton Growth Securities Fund (class 2)
Janus Aspen Mid Cap Growth Portfolio (Service class)
Janus Aspen Balanced Portfolio (Service class)
Janus Aspen Worldwide Growth Portfolio (Service class)
Lincoln VIP Aggressive Growth Fund (Service class)
Lincoln VIP Bond Fund (Service class)
Lincoln VIP Core Fund (Service class) (9) 1.09
Lincoln VIP Capital Appreciation Fund (Service class) (15) 0.93
Lincoln VIP Equity-Income Fund (Service class) (16) 1.01
Lincoln VIP Global Asset Allocation Fund (Service class)
Lincoln VIP Growth Fund (Service class) (9) 1.11
Lincoln VIP Growth and Income Fund (Service class)
Lincoln VIP Growth Opportunities Fund (Service class) (9) 1.43
6
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Management
Fees (before
any waivers/
reimbursements) +
Lincoln VIP International Fund (Service class) 0.82 %
Lincoln VIP Money Market Fund (Service class) 0.44
Lincoln VIP Social Awareness Fund (Service class) 0.35
Lincoln VIP Conservative Profile Fund (Service class) (10) 0.25
Lincoln VIP Moderate Profile Fund (Service class) (10) 0.25
Lincoln VIP Moderately Aggressive Profile Fund (Service class) (10) 0.25
Lincoln VIP Aggressive Profile Fund (Service class) (10) 0.25
MFS (Reg. TM) VIT Capital Opportunities Series (Service class) (11)(12) 0.75
MFS (Reg. TM)VIT Emerging Growth Series (Service class) (12) 0.75
MFS (Reg. TM) VIT Total Return Series (Service class)(12) 0.75
MFS (Reg. TM) VIT Utilities Series (Service class) (12) 0.75
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.84
Neuberger Berman AMT Regency Portfolio 0.85
Putnam VT Growth & Income Fund (class 1B) 0.48
Putnam VT Health Sciences Fund (class 1B) 0.70
Scudder VIT EAFE Equity Index Fund (class B) (13) 0.45
Scudder VIT Equity 500 Index Fund (class B) 0.20
Scudder VIT Small Cap Index Fund (class B) (14) 0.35
12b-1 Fees Other Expenses
(before any (before any
waivers/ waivers/
reimbursements) + reimbursements)
Lincoln VIP International Fund (Service class) 0.25 % 0.16 %
Lincoln VIP Money Market Fund (Service class) 0.25 0.09
Lincoln VIP Social Awareness Fund (Service class) 0.25 0.06
Lincoln VIP Conservative Profile Fund (Service class) (10) 0.25 2.27
Lincoln VIP Moderate Profile Fund (Service class) (10) 0.25 1.55
Lincoln VIP Moderately Aggressive Profile Fund (Service class) (10) 0.25 1.36
Lincoln VIP Aggressive Profile Fund (Service class) (10) 0.25 1.67
MFS (Reg. TM) VIT Capital Opportunities Series (Service class) (11)(12) 0.25 0.13
MFS (Reg. TM)VIT Emerging Growth Series (Service class) (12) 0.25 0.12
MFS (Reg. TM) VIT Total Return Series (Service class)(12) 0.25 0.08
MFS (Reg. TM) VIT Utilities Series (Service class) (12) 0.25 0.14
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.00 0.08
Neuberger Berman AMT Regency Portfolio 0.00 0.19
Putnam VT Growth & Income Fund (class 1B) 0.25 0.06
Putnam VT Health Sciences Fund (class 1B) 0.25 0.15
Scudder VIT EAFE Equity Index Fund (class B) (13) 0.25 0.37
Scudder VIT Equity 500 Index Fund (class B) 0.25 0.09
Scudder VIT Small Cap Index Fund (class B) (14) 0.25 0.13
Total
Total Expenses Contractual
(before any waivers/
waivers/ reimbursements
= reimbursements) (if any)
Lincoln VIP International Fund (Service class) 1.23 %
Lincoln VIP Money Market Fund (Service class) 0.78
Lincoln VIP Social Awareness Fund (Service class) 0.66
Lincoln VIP Conservative Profile Fund (Service class) (10) 2.77 -1.53 %
Lincoln VIP Moderate Profile Fund (Service class) (10) 2.05 -0.74
Lincoln VIP Moderately Aggressive Profile Fund (Service class) (10) 1.86 -0.74
Lincoln VIP Aggressive Profile Fund (Service class) (10) 2.17 -0.73
MFS (Reg. TM) VIT Capital Opportunities Series (Service class) (11)(12) 1.13
MFS (Reg. TM)VIT Emerging Growth Series (Service class) (12) 1.12
MFS (Reg. TM) VIT Total Return Series (Service class)(12) 1.08
MFS (Reg. TM) VIT Utilities Series (Service class) (12) 1.14
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.92
Neuberger Berman AMT Regency Portfolio 1.04
Putnam VT Growth & Income Fund (class 1B) 0.79
Putnam VT Health Sciences Fund (class 1B) 1.10
Scudder VIT EAFE Equity Index Fund (class B) (13) 1.07 -0.17
Scudder VIT Equity 500 Index Fund (class B) 0.54
Scudder VIT Small Cap Index Fund (class B) (14) 0.73 -0.03
Total Expenses
(after
Contractual
waivers/
reimbursements
s)
Lincoln VIP International Fund (Service class)
Lincoln VIP Money Market Fund (Service class)
Lincoln VIP Social Awareness Fund (Service class)
Lincoln VIP Conservative Profile Fund (Service class) (10) 1.24 %
Lincoln VIP Moderate Profile Fund (Service class) (10) 1.31
Lincoln VIP Moderately Aggressive Profile Fund (Service class) (10) 1.39
Lincoln VIP Aggressive Profile Fund (Service class) (10) 1.44
MFS (Reg. TM) VIT Capital Opportunities Series (Service class) (11)(12)
MFS (Reg. TM)VIT Emerging Growth Series (Service class) (12)
MFS (Reg. TM) VIT Total Return Series (Service class)(12)
MFS (Reg. TM) VIT Utilities Series (Service class) (12)
Neuberger Berman AMT Mid-Cap Growth Portfolio
Neuberger Berman AMT Regency Portfolio
Putnam VT Growth & Income Fund (class 1B)
Putnam VT Health Sciences Fund (class 1B)
Scudder VIT EAFE Equity Index Fund (class B) (13) 0.90
Scudder VIT Equity 500 Index Fund (class B)
Scudder VIT Small Cap Index Fund (class B) (14) 0.70
(1) The Series' investment adviser began voluntarily waiving 5% of its
management fees on September 1, 2004. Beginning April 1, 2005, this waiver
increased to 10% and will continue at this level until further review.
Total annual fund operating expenses do not reflect this waiver. The
effect of the waiver on total operating expenses can be found in the
Financial Highlights table in the Series' Prospectus and in the audited
financial statements in the Series' annual report.
(2) For the period May 1, 2002 through April 30, 2005, the adviser
contractually waived its management fee and/or reimbursed the Series for
expenses to the extent that total expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) would not exceed
0.80%. Effective May 1, 2005 through April 30, 2006, the adviser has
contractually agreed to waive its management fee and/or reimburse the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees)
will not exceed 0.80%. The Service Class shares are subject to an annual
12b-1 fee of not more than 0.30%. Effective May 1, 2005 through April 30,
2006, Delaware Distributors, L.P. has contracted to limit the Service
Class shares 12b-1 fee to no more than 0.25%.
(3) For the period May 1, 2002 through April 30, 2005, the adviser
contractually waived its management fee and/or reimbursed the Series for
expenses to the extent that total expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) would not exceed
0.98%. Effective May 1, 2005 through April 30, 2006, the adviser has
contractually agreed to waive its management fee and/or reimburse the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees)
will not exceed 0.80%. The Service Class shares are subject to an annual
12b-1 fee of not more than 0.30%. Effective May 1, 2005 through April 30,
2006, Delaware Distributors, L.P. has contracted to limit the Service
Class shares 12b-1 fee to no more than 0.25%.
(4) For the period May 1, 2002 through April 30, 2005, the adviser
contractually waived its management fee and/or reimbursed the Series for
expenses to the extent that total expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) would not exceed
1.50%. Effective May 1, 2005 through April 30, 2006, the adviser has
contractually agreed to waive its management fee and/or reimburse the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees)
will not exceed 1.50%. The Service Class shares are subject to an annual
12b-1 fee of not more than 0.30%. Effective May 1, 2005 through April 30,
2006, Delaware Distributors, L.P. has contracted to limit the Service
Class shares 12b-1 fee to no more than 0.25%.
(5) For the period May 1, 2002 through April 30, 2005, the adviser
contractually waived its management fee and/or reimbursed the Series for
expenses to the extent that total expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) would not exceed
0.80%. Without such an arrangement, the total operating expense for the
Series would have been 0.75% for the fiscal year 2004 (excluding 12b-1
fees). Effective May 1, 2005 through April 30, 2006, the adviser has
contractually agreed to waive its management fee and/or reimburse the
Series for expenses to the extent that total expenses (excluding any
taxes, interest, brokerage fees, extraordinary expenses and 12b-1 fees)
will not exceed 0.80%. The Service Class shares are subject to an annual
12b-1 fee of not more than 0.30%. Effective May 1, 2005 through 