Form 497 LINCOLN LIFE VARIABLE
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E-mailLincoln Investor Advantage® Pro Advisory
Individual Variable Annuity Contracts
Lincoln Life Variable Annuity Account N
Individual Variable Annuity Contracts
Lincoln Life Variable Annuity Account N
June 4, 2021
Home Office:
The Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46802
1-888-868-2583
www.LincolnFinancial.com
The Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46802
1-888-868-2583
www.LincolnFinancial.com
This prospectus describes an individual flexible premium
deferred variable annuity contract that is issued by The Lincoln National Life Insurance Company (Lincoln Life or Company). This contract can be purchased for use as either a nonqualified annuity or qualified retirement annuity 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. IRAs provide tax deferral, whether or not the funds are invested in an annuity contract. Further, if your
contract is a Roth IRA, you generally will not pay income tax on a distribution, provided certain conditions are met. Therefore, there should be reasons other than tax deferral for purchasing a qualified annuity contract.
This contract is available through third-party financial
intermediaries who charge an advisory fee for their services. That fee is in addition to contract fees and expenses. If you elect to pay third-party advisory fees out of your Contract Value, this deduction may reduce the Death Benefit(s) and other
guaranteed benefits, and may be subject to federal and state income taxes and a 10% federal penalty tax.
The contract is designed to accumulate Contract Value
and to provide income over a certain period of time, or for life, subject to certain conditions. The benefits offered under this contract may be a variable or fixed amount, if available, or a combination of both. This contract also offers a Death
Benefit payable upon the death of the Contractowner or Annuitant. This prospectus is used by both new purchasers and current Contractowners.
If you are a new investor in the contract, you may cancel
your contract within ten days of receiving it without paying fees or penalties. In some states, and under certain scenarios, this free look or cancellation period may be longer. Upon cancellation, you will receive either a full refund of the amount
you paid with your application or your total Contract Value. You should review this prospectus and consult with your financial professional for additional information about the specific cancellation terms that may apply.
The state in which your contract is issued will govern
whether or not certain features, riders, restrictions, limitations, charges and fees will apply to your contract. All material state variations are discussed in this prospectus, however, non-material variations may not be discussed. You should
refer to your contract regarding state-specific features. Please contact the Home Office or your financial professional regarding availability.
The minimum initial Purchase Payment for the contract is
$10,000. The minimum initial Purchase Payment for nonqualified contracts where i4LIFE® Advantage is elected,
and where the Contractowner, joint owner and/or Annuitant are ages 86 to 90 (subject to additional terms and limitations, and Home Office approval) is $50,000. Additional Purchase Payments may be made to the contract, subject to certain
restrictions, and must be at least $100 per payment ($25 if transmitted electronically), and at least $300 annually. We reserve the right to limit, restrict, or suspend Purchase Payments made to the contract upon advance written notice.
Except as noted below, you choose whether your Contract
Value accumulates on a variable or a fixed (guaranteed) basis or both. Your contract may not offer a fixed account or if permitted by your contract, we may discontinue accepting Purchase Payments or transfers into the fixed side of the contract at
any time. If any portion of your Contract Value is in the fixed account, we promise to pay you your principal and a minimum interest rate. We may impose restrictions on the fixed account for the life of your contract or during certain periods. The fixed account is not available at this time.
We offer variable annuity contracts that may offer
different investment options, features, and optional benefits. You should carefully consider whether or not this contract is the best product for you.
All Purchase Payments for benefits on a variable basis
will be placed in Lincoln Life Variable Annuity Account N (Variable Annuity Account [VAA]). 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
(“Subaccounts”), which, in turn, invest in corresponding underlying funds. 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 Subaccounts or their funds will perform. Also,
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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 funds’ prospectuses and other shareholder reports
will be made available on www.lfg.com/VAprospectus. If you wish to receive future shareholder reports in paper, free of charge, please call us at 1-888-868-2583, send an email request to [email protected], or contact your financial
professional. Your election to receive reports in paper will apply to all funds available under your Contract.
This prospectus gives you information about the Contract
that you should know before you decide to buy a Contract and make Purchase Payments. You should also review the prospectuses for the funds and keep all prospectuses for future reference.
Neither the Securities and Exchange Commission (“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.
Additional information about certain investment
products, including variable annuities, has been prepared by the SEC’s staff and is available online at Investor.gov.
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Table of Contents
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Important Information You Should Consider About the Lincoln Investor Advantage® Pro Advisory Variable Annuity Contract
| FEES AND EXPENSES | Location in Prospectus |
|||
| Charges for Early Withdrawals | There are no surrender charges associated with this Contract. | • N/A | ||
| Transaction Charges | There are no sales charges associated with this contract. | • N/A | ||
| Ongoing Fees and Expenses (annual charges) | Minimum and Maximum Annual Fee Table. The table below describes the fees and expenses that you may pay each year, depending on the options you choose. Please refer to your Contract Specifications page for information about the specific fees you will pay each year based on the options you have elected. These charges do not reflect any advisory fees paid to a financial intermediary from Contract Value or other assets of the Contractowner. If such charges were reflected, the ongoing fees and expense would be higher. | • Fee Tables• Examples• Charges and Other Deductions | ||
| Annual Fee | Minimum | Maximum | ||
| Base Contract | 0.12%1 | 0.12%1 | ||
| Investment options (fund fees and expenses) | 0.48%1 | 20.98%1 | ||
| Optional benefits available for an additional charge (for a single optional benefit, if elected) | 0.40%1 | 1.70% 2 | ||
| 1 As a percentage of average Account Value in the Subaccounts. | ||||
| 2 As an annualized percentage of the Protected Income Base. | ||||
| Lowest and Highest Annual Cost Table. Because your Contract is customizable, the choices you make affect how much you will pay. To help you understand the cost of owning your Contract, the following table shows the lowest and highest cost you could pay each year, based on current charges. This estimate assumes that you do not take withdrawals from the Contract. | ||||
| Lowest Annual Cost: $726 | Highest Annual Cost: $10,612 | |||
| Assumes: | Assumes: | |||
| • Investment of $100,000• 5% annual appreciation• Least expensive fund fees and expenses• No optional benefits• No additional Purchase Payments, transfers, or withdrawals• No sales charges or advisory fees | • Investment of $100,000• 5% annual appreciation• Most expensive combination of optional benefits and fund fees and expenses• No additional Purchase Payments, transfers, or withdrawals• No sales charges or advisory fees | |||
| RISKS | Location in Prospectus |
|||
| Risk of Loss | • You can lose money by investing in this Contract, including loss of principal. | • Principal Risks• Investments of the Variable Annuity Account | ||
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| RISKS | Location in Prospectus |
|||
| Not a Short-Term Investment | • This Contract is not designed for short-term investing and may not be appropriate for the investor who needs ready access to cash. • The benefits of tax deferral, long-term income, and living benefit protections also mean the Contract is more beneficial to investors with a long time horizon. | • Principal Risks• Surrender and Withdrawals• Fee Tables• Living Benefit Riders | ||
| Risks Associated with Investment Options | • An investment in this Contract is subject to the risk of poor investment performance of the investment options you choose. Performance can vary depending on the performance of the investment options available under the Contract. • Each investment option (including the fixed account option) has its own unique risks. • You should review the investment options before making an investment decision. | • Principal Risks• Investments of the Variable Annuity Account | ||
| Insurance Company Risks | • An investment in the Contract is subject to the risks related to us. Any obligations (including under the fixed account option), guarantees, or benefits of the Contract are subject to our claims-paying ability. If we experience financial distress, we may not be able to meet our obligations to you. More information about Lincoln Life, including our financial strength ratings, is available upon request by calling 1-800-454-6265 or visiting www.LincolnFinancial.com. | • Principal Risks | ||
| RESTRICTIONS | Location in Prospectus |
|||
| Investments | • We reserve the right to remove or substitute any funds as investment options that are available under the Contract. | • Principal Risks• Investments of the Variable Annuity Account | ||
| Optional Benefits | • Optional benefits may limit or restrict the investment options that you may select under the Contract. We may change these restrictions in the future. • Excess Withdrawals may reduce the value of an optional benefit by an amount greater than the value withdrawn or result in termination of the benefit.• You are required to have a certain level of Contract Value for some new rider elections. • We may modify or stop offering an optional benefit that is currently available at any time.• If you elect certain optional benefits, you may be limited in the amount of Purchase Payments that you can make (and when).• If you elect to pay third-party advisory fees out of your Contract Value, this deduction may reduce the Death Benefit(s) and other guaranteed benefits, and may be subject to federal and state income taxes and a 10% federal penalty tax. | • The Contracts• Living Benefit Riders• Death Benefits• The Contracts – Death Benefits and Advisory Fee Withdrawals• Federal Tax Matters – Payment of Investment Advisory Fees• Appendix B – Investment Requirements | ||
| TAXES | Location in Prospectus |
|||
| Tax Implications | • Consult with a tax professional to determine the tax implications of an investment in and payments received under this Contract.• If you purchase the Contract through a tax-qualified plan or IRA, you do not get any additional tax deferral under the Contract.• Earnings on your Contract are taxed at ordinary income tax rates when you withdraw them, and you may have to pay a penalty if you take a withdrawal before age 59½. | • Federal Tax Matters | ||
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| CONFLICTS OF INTEREST | Location in Prospectus |
|||
| Exchanges | • You should only exchange your Contract if you determine, after comparing the features, fees, and risks of both Contracts, that it is better for you to purchase the new Contract rather than continue to own your existing Contract. | • The Contracts - Replacement of Existing Insurance | ||
Overview of the Contract
Purpose of the Contract
The Lincoln Investor
Advantage® Pro Advisory variable annuity contract is designed to accumulate Contract Value and to provide income over a certain period of time
or for life subject to certain conditions. The contract can supplement your retirement income by providing a stream of income payments during the payout phase. The benefits offered under the contract may be a variable or fixed amount, if available,
or a combination of both. The contract also offers a Death Benefit payable to your designated Beneficiaries upon the death of the Contractowner or Annuitant.
This contract may be appropriate if you have a long
investment time horizon. It is not intended for people who may need to make early or frequent withdrawals or intend to engage in frequent trading in the Subaccounts.
Phases of the Contract
Your contract has two phases: (1) an accumulation
(savings) phase, prior to the Annuity Commencement Date; and (2) a payout (income) phase, after the Annuity Commencement Date.
Accumulation (Savings) Phase. To help you accumulate assets during the accumulation phase, you can invest your payments and earnings in:
| • | The variable options available under the contract, each of which has an underlying mutual fund with its own investment objective, strategies, and risks; investment adviser(s); expense ratio; and performance history; and |
| • | A fixed account option, if available, which guarantees principal and a minimum interest rate. |
A list of funds in which you currently can invest is
provided in an Appendix. Please see Appendix A: Funds Available Under the Contract.
Annuity (Income) Phase. You
can elect to annuitize your contract and turn your contract value into a stream of income payments (sometimes called Annuity Payouts), at which time the accumulation phase of the contract ends. These payments may continue for a fixed period of
years, for your entire life, or for the longer of a fixed period or your life. The payments may also be fixed or variable. Variable payments will vary based on the performance of the funds that you choose.
If you annuitize, your investments will be converted to
income payments and you may no longer be able to choose to make withdrawals from your contract. All benefits (including guaranteed minimum Death Benefits and living benefits) terminate upon annuitization.
Primary Features and Options of the Contract
Accessing your money.
During the Accumulation Phase you can surrender the contract or withdraw part of the Contract Value. If you withdraw early, an Interest Adjustment may apply and/or you may incur a tax penalty if you are younger than 59½.
Tax treatment. You can transfer money between investment options without tax implications, and earnings (if any) on your investments are generally tax-deferred. You are taxed only when: (1) you make a surrender or withdrawal; (2)
you receive an income payment from the contract; or (3) upon payment of a Death Benefit.
Death Benefits. Your
contract includes a Death Benefit that will be paid upon the death of either the Contractowner or the Annuitant. Optional Death Benefits that pay different amounts and have different fees may be available.
Optional Riders. For an
additional fee, you can purchase i4LIFE®
Advantage, a minimum Annuity Payout rider.
Additional Services. The additional services listed below are available under the contract for no additional charge (unless otherwise indicated).
| • | Dollar-cost averaging (DCA) allows you to transfer amounts from the DCA fixed account, if available, or certain Subaccounts into other Subaccounts on a monthly basis or in accordance with other terms we make available. |
| • | Portfolio rebalancing is an option that restores to a pre-determined level the percentage of Contract Value allocated to each Subaccount. Portfolio rebalancing may not be available for all funds. |
| • | Automatic Withdrawal Service (AWS) provides for an automatic periodic withdrawal of your Contract Value. Withdrawals under AWS are subject to applicable surrender charges and Interest Adjustments (as well as taxes and tax penalties). |
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| • | Fees Associated with Fee-Based Financial Plans. You may provide authorization to have your advisory fees paid to your financial professional's investment firm from your Contract Value. Advisory Fee Withdrawals may not impact benefits and values under a Death Benefit or Living Benefit Rider or be treated as a distribution for federal tax purposes under certain conditions. Advisory Fee Withdrawals may not be available in all states, and certain firms may not allow withdrawals to pay advisory fees from your Contract Value. Please check with your financial professional. |
| If you elect to pay a third-party advisory fee out of your Contract Value, this deduction may reduce the Death Benefit(s) and other guaranteed benefits, and may be subject to federal and state income taxes and a 10% federal penalty tax. See The Contracts – Death Benefits and Advisory Fee Withdrawals and Federal Tax Matters – Payment of Investment Advisory Fees. |
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Fee Tables
The following tables describe the fees and expenses that
you will pay when buying, owning, and surrendering or making withdrawals from the contract. Please refer to your Contract Specifications page for information about the specific fees you will pay each year based on the options you have elected. These charges do not reflect any advisory fees paid to a financial intermediary from Contract Value or other assets of the Contractowner. If such charges were reflected, the ongoing fees and expenses would be higher.
The first table describes the fees and expenses that you
will pay at the time that you buy the contract, surrender or withdrawing from the contract, or transfer Contract Value between investment options, and/or the fixed account (if available). State premium taxes may also be deducted.
TRANSACTION EXPENSES
| There are no sales charges, deferred sales charges, or surrender charges associated with this contract. |
The following table describes the fees and expenses that
you will pay each year during the time that you own the contract, not including fund fees and expenses. If you choose to purchase an optional benefit, you will pay additional charges, as shown below.
ANNUAL CONTRACT EXPENSES
|
Administrative Expense (Annual Account Fee):1
|
$50 |
| Base Contract Expense (as a percentage of average daily net assets in the Subaccounts):2 |
|
|
Account Value Death Benefit
|
0.10% |
| Optional Benefit Expenses |
|
| Earnings Optimizer Death Benefit Charge3 |
|
| Guaranteed Maximum Annual Charge |
|
|
Age at Issue – 1 – 69
|
1.40% |
|
Age at Issue – 70 – 75
|
1.70% |
| Current Annual Charge |
|
|
Age at Issue – 1 – 69
|
0.40% |
|
Age at Issue – 70 – 75
|
0.70% |
|
i4LIFE® Advantage:4
|
0.40% |
| 1 | During the Access Period, the account fee will be deducted from your Contract Value on each contract anniversary, or upon surrender of the contract. The account fee will be waived if your Contract Value is $50,000 or more on the contract anniversary (or day of surrender). |
| 2 | The base contract expense is comprised of a mortality and expense risk charge of 0.10% and an administrative charge of 0.00% on and after the Annuity Commencement Date. If your Contract Value equals or exceeds $250,000 immediately prior to the Annuity Commencement Date, this charge will be reduced by 0.10%. |
| 3 | We will deduct this charge from the Contract Value on a quarterly basis, with the first deduction occurring on the Valuation Date on or next following the three-month anniversary of the rider effective date. See the Charges and Other Deductions section below for a discussion of how the charges are calculated. |
| 4 | As an annualized percentage of average Account Value, computed daily. This charge is assessed on and after the effective date of i4LIFE® Advantage. This charge continues during the Access Period. The i4LIFE® Advantage charge is 0.50% during the Lifetime Income Period. If your Contract Value equals or exceeds $250,000 immediately prior to the beginning of the Lifetime Income Period under i4LIFE® Advantage, the charge rate will be reduced to 0.40% during the Lifetime Income Period. See i4LIFE® Advantage Charge for more information. |
The next table 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, 2020. A complete list of funds available under the Contract, including their annual
expenses, may be found in an appendix to this prospectus. See Appendix A: Funds Available Under the Contract.
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| Annual Fund Expenses |
Minimum | Maximum | ||
|
Expenses that are deducted from the fund assets, including management fees, distribution and/or service (12b-1) fees, and other expenses before reimbursements.
|
0.48% | 20.98% | ||
|
Expenses that are deducted from the fund assets, including management fees, distribution and/or service (12b-1) fees, and other expenses after any waivers or expense reimbursements.1
|
0.48% | 2.38% |
| 1 | Any expense waivers or reimbursements will remain in effect until at least April 30, 2022, and can only be terminated early with approval by the fund’s board of directors. |
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 transaction expenses, contract fees, annual contract expenses, and annual fund fees and expenses. The Examples have been calculated using
the fees and expenses of the funds prior to the application of any contractual waivers and/or reimbursements.
The Example assumes that you invest $100,000 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 i4LIFE® Advantage with the Earnings Optimizer Death Benefit at the guaranteed maximum charge are in effect. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1) If you surrender your contract at the end of the
applicable time period:
| 1 year | 3 years | 5 years | 10 years | |||
| $21,276 | $53,730 | $76,164 | $106,115 |
2) If you annuitize or do not surrender your contract at
the end of the applicable time period:
| 1 year | 3 years | 5 years | 10 years | |||
| $21,276 | $53,730 | $76,164 | $106,115 |
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. These Examples do not reflect any advisory fees paid to a financial intermediary from Contract Value or other assets
of the Contractowner. If such charges were reflected, the ongoing fees and expenses would be higher. The examples do not reflect Large Account Credits. Different fees and expenses not reflected in the examples may be imposed during a period in
which Annuity Payouts are made. See 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.
Principal Risks
The principal risks of investing in the contract
include:
Risk of Loss. You can lose money by investing in this contract, including loss of principal. Neither the U.S. Government nor any federal agency insures or guarantees your investment in the contract.
Short-Term Investment Risk. This contract is not designed for short-term investing and is not appropriate for an investor who needs ready access to cash. The benefits of tax deferral, long-term income, and living benefit
protections also mean that the contract is more beneficial to investors with a long time horizon.
Variable Option Risk. You take all the investment risk on the Contract Value and the retirement income for amounts placed into one or more of the Subaccounts, which invest in corresponding underlying funds. If the
Subaccounts you select make money, your Contract Value goes up; if they lose money, your Contract Value goes down. How much it goes up or down depends on the performance of the Subaccounts you select. Each underlying fund is subject to its own
investment risks. When you invest in a Subaccount, you are exposed to the investment risks of the underlying fund.
Investment Requirements Risk. If you elect the Earnings Optimizer Death Benefit, you may be subject to Investment Requirements, which means you may not be permitted to invest in certain investment options or you may be permitted
to invest in certain investment options only to a limited extent. Failing to satisfy applicable Investment Requirements may result in the termination of your optional benefit. We impose Investment Requirements to reduce the risk of investment
losses that may require us to use our own assets to make guaranteed payments under an optional benefit. In turn, your compliance with the Investment Requirements could
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limit your participation in market gains. This may conflict with your
investment objectives by limiting your ability to maximize potential growth of your Contract Value and the value of your guaranteed benefits.
Managed Volatility Fund Risk. Certain underlying funds may employ risk management strategies to provide for downside protection during sharp downward movements in equity markets. These funds usually, but not always, have “Managed
Risk” or “Managed Volatility” in the name of the fund. These strategies could limit the upside participation of the fund in rising equity markets relative to other funds. The Death Benefits offered under the contract also provide protection in
the event of a market downturn. Likewise, there are additional costs associated with the Death Benefits, which can limit the contract’s upside participation in the markets. Risk management strategies, in periods of high market volatility, could
limit your participation in market gains. This may conflict with your investment objectives by limiting your ability to maximize potential growth of your Contract Value and the value of your guaranteed benefits. For more information on these
funds and their risk management strategies, please see the funds’ prospectuses.
Defined Outcome Funds Risk. Certain underlying funds may employ a strategy to provide buffer protection, which includes a capped upside return risk and an outcome period risk. These funds usually have “Buffer” in the name of the
fund. These strategies could limit the upside participation of the fund in rising equity markets relative to other funds. The buffer provides limited protection in the event of a market downturn. There is no guarantee a fund will successfully
buffer against reference asset price decreases. This may conflict with your investment objectives by limiting your ability to maximize growth of your Contract Value and the value of your guaranteed benefits. The Lincoln Defined Outcome Funds have
characteristics unlike many other traditional investment products and may not be suitable for all investors. The funds seek to provide a buffer against the first 12% or 22% of index price decreases over each outcome period, before expenses (the
“Buffer”). The fund, and therefore investors, will bear all index losses exceeding 12% or 22%. There is no guarantee the fund will successfully buffer against index price decreases. The Buffer is designed to have its full effect only for
investors who hold fund shares for an entire outcome period. For each outcome period, fund performance is subject to an upside return cap that represents the maximum percentage return the fund can achieve during the outcome period, before
expenses (the “Cap”). The Cap is set on the first day of an outcome period and may increase or decrease from one outcome period to the next. If the index experiences returns over an outcome period in excess of the Cap, the fund will not
experience those excess gains. Specified outcomes of the funds may not be achieved, and you may lose some or all of your investment. For more information on these funds and whether investment in these funds is right for you, please see the funds’
prospectus.
Withdrawal Risk (Illiquidity Risk). You should carefully consider the risks associated with taking a withdrawal or surrender under the contract. The proceeds of your withdrawal or surrender may be subject to ordinary income taxes,
including a tax penalty if you are younger than age 59½.
You should also consider the impact that a withdrawal
may have on the standard and optional benefits under your contract.
Transfer Risk. Your ability to transfer amounts between investment options is subject to restrictions. You are generally restricted to no more than 12 transfers per Contract Year. There are also restrictions on the
minimum amount that may be transferred from a variable option and the maximum amount that may be transferred from the fixed account option. If permitted by your contract, we may discontinue accepting transfers into the fixed side of the contract
at any time. Your ability to transfer between investment options may also be restricted as a result of Investment Requirements if you have elected an optional benefit.
Purchase Payment Risk. Your ability to make additional Purchase Payments may be restricted under the contract, depending on the version of the contract that you own, the optional benefits that you have elected, and other
factors. You must obtain our approval for Purchase Payments totaling $5 million or more. This amount includes total purchase payments for all Lincoln Investor Advantage® Pro contracts for the same owner, joint owner, or annuitant. We reserve the right to further
limit, restrict or suspend the ability to make additional Purchase Payments under the contract.
If you elect the Earnings Optimizer Death Benefit,
further restrictions apply to additional Purchase Payment. See The Contracts – Purchase Payments for complete details.
Deduction of Advisory Fee Risk. This deduction of advisory fees from Contract Value may reduce the Death Benefit and other guaranteed benefits, and may be subject to federal and state income taxes and a 10% federal penalty tax.
Election of Optional Benefit Risk. There are a variety of optional benefits available under the contract that are designed for different financial goals and to protect against different financial risks. There is a risk that you may
not choose the benefit or benefits that are best suited for you based on your present or future needs and circumstances. In addition, if you elect an optional benefit and do not use it, or if the contingencies upon which the benefit depend never
occur, you will have paid for a benefit that did not provide a financial return. There is also a risk that any financial return of an optional benefit, if any, will ultimately be less than the amount you paid for the benefit. You should consult
with your financial professional to determine which optional benefits (if any) are appropriate for you.
Fee and Expense Risk. You are subject to the risk that we may increase certain contract fees and charges, and that underlying fund expenses may increase.
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Financial Strength and Claims-Paying Ability Risk. An investment in the contract is subject to the risks related to us, Lincoln Life. Any obligations (including under the fixed account option), guarantees, or benefits of the contract are subject to
our claims-paying ability. If we experience financial distress, we may not be able to meet our obligations to you.
Cybersecurity and Business Interruption Risk. We rely heavily on interconnected computer systems and digital data to conduct our annuity products business. Because our business is highly dependent upon the effective operation of our computer
systems and those of our business partners, our business is vulnerable to disruptions from utility outages, and susceptible to operational and information security risks resulting from information systems failure (e.g., hardware and software
malfunctions), and cyber-attacks. These risks include, among other things, the theft, misuse, corruption and destruction of data maintained online or digitally, interference with or denial of service, attacks on websites and other operational
disruption and unauthorized release of confidential customer information. Such systems failures and cyber-attacks affecting us, any third-party administrator, the underlying funds, intermediaries and other affiliated or third-party service
providers may adversely affect us and your Contract Value. For instance, systems failures and cyber-attacks may interfere with our processing of contract transactions, including the processing of orders from our website or with the underlying
funds, impact our ability to calculate Accumulation Unit value, cause the release and possible destruction of confidential customer or business information, impede order processing, subject us and/or our service providers and intermediaries to
regulatory fines and financial losses and/or cause reputational damage. Cyber security risks may also impact the issuers of securities in which the underlying funds invest, which may cause the funds underlying your contract to lose value. There
can be no assurance that we or the underlying funds or our service providers will avoid losses affecting your contract due to cyber-attacks or information security breaches in the future.
In addition to cyber security risks, we are exposed to
risks related to natural and man-made disasters and catastrophes, such as (but not limited to) storms, fires, floods, earthquakes, public health crises, malicious acts, and terrorist acts, any of which could adversely affect our ability to conduct
business. A natural or man-made disaster or catastrophe, including a pandemic (such as COVID-19), could affect the ability or willingness of our employees or the employees of our service providers to perform their job responsibilities. Even if our
employees and the employees of our service providers are able to work remotely, those remote work arrangements could result in our business operations being less efficient than under normal circumstances and could lead to delays in our processing
of contract-related transactions, including orders from Contractowners. Catastrophic events may negatively affect the computer and other systems on which we rely, impact our ability to calculate accumulation unit values, or have other possible
negative impacts. There can be no assurance that we or our service providers will be able to successfully avoid negative impacts associated with natural and man-made disasters and catastrophes.
Financial Statements
The December 31, 2020 financial statements of the VAA
and the December 31, 2020 consolidated financial statements of Lincoln Life are located in the SAI. Instructions on how to obtain a free copy of the SAI are provided on the last page of this prospectus.
Investments of the Variable Annuity Account
You decide the Subaccount(s) to which you allocate
Purchase Payments. There is a separate Subaccount which corresponds to each class of each fund. You may change your allocation without penalty or charges. Shares of the funds will be sold at net asset value with no initial sales charge to the VAA
in order to fund the Contracts. The funds are required to redeem fund shares at net asset value upon our request.
Descriptions of the Funds
Information regarding each fund, including (1) its name,
(2) its type or investment objective, (3) its investment adviser and any sub-investment adviser, (4) current expenses, and (5) performance is available in Appendix A: Funds Available Under the Contract. Each fund has issued a prospectus that
contains more detailed information about the fund. Paper or electronic copies of the fund prospectuses may be obtained by contacting our Home Office or visiting www.lfg.com/VAprospectus.
Certain Payments We Receive with Regard to the Funds
We (and/or our affiliates) incur expenses in promoting,
marketing, and administering the contracts and the underlying funds. With respect to a fund, including affiliated funds, the adviser and/or distributor, or an affiliate thereof, may make payments to us (or an affiliate) for certain services we
provide on behalf of the funds. Such services include, but are not limited to, recordkeeping; aggregating and processing purchase and redemption orders; providing Contractowners with statements showing their interests within the funds; processing
dividend payments; providing subaccounting services; and forwarding shareholder communications, such as proxies, shareholder reports, tax notices, and printing and delivering prospectuses and updates to Contractowners. It is anticipated that
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such payments will be based on a percentage of assets of the particular
fund attributable to the contracts along with certain other variable contracts issued or administered by us (or an affiliate). These percentages are negotiated and vary with each fund. Some advisers and/or distributors may pay us significantly more
than other advisors and/or distributors and the amount we receive may be substantial. These percentages currently range up to 0.50%, and as of the date of this prospectus, we were receiving payments from most fund families. We (or our affiliates)
may profit from these payments. These payments may be derived, in whole or in part, from the investment advisory fee deducted from fund assets. Contractowners, through their indirect investment in the funds, bear the costs of these investment
advisory fees (see the funds' prospectuses for more information). Additionally, a fund's adviser and/or distributor or its affiliates may provide us with certain services that assist us in the distribution of the contracts and may pay us and/or
certain affiliates amounts for marketing programs and sales support, as well as amounts to participate in training and sales meetings.
In addition to the payments described above, most of the
funds offered as part of this contract make payments to us under their distribution plans (12b-1 plans) for the marketing and distribution of fund shares. The payment rates range up to 0.35% based on the amount of assets invested in those funds.
Payments made out of the assets of the fund will reduce the amount of assets that otherwise would be available for investment, and will reduce the fund's investment return. The dollar amount of future asset-based fees is not predictable because
these fees are a percentage of the fund's average net assets, which can fluctuate over time. If, however, the value of the fund goes up, then so would the payment to us (or our affiliates). Conversely, if the value of the funds goes down, payments
to us or our affiliates would decrease.
Selection of the Funds
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, the capability and qualification of each sponsoring investment firm, and whether the fund
is affiliated with us.
As noted above, a factor we may consider during the
initial selection process is whether the fund (or an affiliate, investment adviser or distributor of the fund) being evaluated is an affiliate of ours and whether we are compensated for providing administrative, marketing, and/or support services
that would otherwise be provided by the fund, its investment adviser or its distributor.
Some funds pay us significantly more than others and the
amount we receive may be substantial. We often receive more revenue from an affiliated fund than one that is not affiliated with us. These factors give us an incentive to select a fund that yields more revenue, and this is often an affiliated fund.
We may also consider the ability of the fund to help
manage volatility and our risks associated with the guarantees we provide under the contract and under optional riders.
We review each fund periodically after it is selected.
We reserve the right to remove a fund or restrict allocation of additional Purchase Payments to a fund if we determine the fund no longer meets one or more of the factors and/or if the fund has not attracted significant Contractowner assets.
Finally, when we develop a variable annuity product in
cooperation with a fund family or distributor (e.g., a “private label” product), we generally will include funds based on recommendations made by the fund family or distributor, whose selection criteria may differ from our selection criteria.
Certain funds offered as part of this contract have similar investment objectives and policies to other portfolios managed by the adviser. The investment results of the funds, however, may be higher or lower than the other portfolios that are
managed by the adviser or sub-adviser. There can be no assurance, and no representation is made, that the investment results of any of the funds will be comparable to the investment results of any other portfolio managed by the adviser or
sub-adviser, if applicable.
Certain funds invest their assets in other funds. As a
result, you will pay fees and expenses at both fund levels. This will reduce your investment return. These arrangements are referred to as funds of funds or master-feeder funds, which may have higher expenses than funds that invest directly in debt
or equity securities. An adviser affiliated with us manages some of the available funds of funds. Our affiliates may promote the benefits of such funds to Contractowners and/or suggest that Contractowners consider whether allocating some or all of
their Contract Value to such portfolios is consistent with their desired investment objectives. In doing so, we may be subject to conflicts of interest insofar as we may derive greater revenues from the affiliated fund of funds than certain other
funds available to you under your contract.
Certain funds may employ risk management strategies to
provide for downside protection during sharp downward movements in equity markets. These funds usually, but not always, have “Managed Risk” or “Managed Volatility” in the name of the fund. These strategies could limit the upside participation of
the fund in rising equity markets relative to other funds. The Death Benefits offered under the contract also provide protection in the event of a market downturn. Risk management strategies, in periods of high market volatility, could limit your
participation in market gains; this may conflict with your investment objectives by limiting your ability to maximize potential growth of your Contract Value and, in turn, the value of any guaranteed benefit that is tied to investment performance.
Certain Lincoln funds seek to provide a “defined
outcome” investment experience. These funds are referred to as Lincoln Defined Outcome Funds in this prospectus. The defined outcome is not a set return, but rather a variable return within certain
parameters. For example, one fund may track the S&P 500® up to a certain cap percentage (for example, 10%, but that may change year to year) and
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protects investors for losses up to the amount of the buffer over a
certain period, usually one year. There is no guarantee a fund will successfully buffer against reference asset price decreases. The Lincoln Defined Outcome Funds currently offered have “Buffer” in the name of the fund. See the funds' prospectus
for complete details.
You should consult with your financial professional to
determine which combination of investment choices is appropriate for you.
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 Subaccount 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.
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. In the event of a substitution, the Contract Value allocated to the existing fund will be allocated to the substitute fund. Any future allocations to the substitute fund will
automatically be allocated according to the instructions we have on file for you unless otherwise instructed by you. If we don’t have instructions from you on file, your Purchase Payments will be allocated to the substitute fund.
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. In the event of a fund closure, any Contract Value you have invested in the closed fund will remain in that fund until you transfer it elsewhere. Any future allocation to the closed fund will be allocated in accordance with the
instructions we have on file for you unless you instruct us otherwise.
In addition, a Subaccount may become unavailable due to
the liquidation of its underlying fund portfolio. To the extent permitted by applicable law, upon notice to you and unless you otherwise instruct us, we will re-allocate any Contract Value in the liquidated fund to the money market subaccount. Any
future allocations to the liquidated fund will automatically be allocated according to the instructions we have on file for you unless you instruct us otherwise.
From time to time, certain of the underlying funds may
merge with other funds. If a merger of an underlying fund occurs, the Contract Value allocated to the existing fund will be merged into the surviving underlying fund. Any future allocations, including future Purchase Payments, to the merged fund
will automatically be allocated to the surviving underlying fund unless you instruct us otherwise.
We may also:
| • | remove, combine, or add Subaccounts and make the new Subaccounts available to you at our discretion; |
| • | transfer assets supporting the contracts from one Subaccount to another or from the VAA to another separate account; |
| • | combine the VAA with other separate accounts and/or create new separate accounts; |
| • | deregister the VAA under the 1940 Act; and |
| • | operate the VAA as a management investment company under the 1940 Act or as any other form permitted by law. |
We may modify the provisions of the contracts to reflect
changes to the Subaccounts and the VAA and to comply with applicable law. We will not make any changes without any necessary approval by the SEC. We will also provide you written notice.
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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:
| • | processing applications for and issuing the contracts; |
| • | processing purchases and redemptions of fund shares as required (including dollar cost averaging, portfolio rebalancing, and automatic withdrawal services – See Additional Services and the SAI for more information on these programs); |
| • | maintaining records; |
| • | administering Annuity Payouts; |
| • | furnishing accounting and valuation services (including the calculation and monitoring of daily Subaccount values); |
| • | reconciling and depositing cash receipts; |
| • | providing contract confirmations; |
| • | providing toll-free inquiry services; and |
| • | furnishing telephone and other electronic surrenders, withdrawals and fund transfer services. |
The risks we assume include:
| • | the risk that Annuitants upon which Annuity Payouts are based live longer than we assumed when we calculated our guaranteed rates (these rates are incorporated in the contract and cannot be changed); |
| • | the risk that our costs in providing the services will exceed our revenues from contract charges (which we cannot change); and |
| • | the risk that Death Benefits paid will exceed the actual Contract Value. |
The amount of a charge may not necessarily correspond to
the costs associated with providing the services or benefits indicated by the description of the charge. Any remaining expenses will be paid from our general account which may consist, among other things, of proceeds derived from base contract
expenses deducted from the account. We may profit from one or more of the fees and charges deducted under the contract. We may use these profits for any corporate purpose, including financing the distribution of the contracts.
Deductions from the VAA
Contract Value Death Benefit. A charge applies to the average daily net asset value of the Subaccounts, equal to an annual rate of 0.10%.
Administrative Expense (Annual Account Fee)
During the accumulation period, we will deduct an
account fee of $50 from the Contract Value on each contract anniversary to compensate us for the administrative services provided to you; this account fee will also be deducted from the Contract Value upon surrender. The deduction of the account
fee will be made in the following order:
| • | proportionately from all non-Lincoln Defined Outcome Funds, until exhausted; and then |
| • | proportionately from all Lincoln Defined Outcome Funds. |
This fee may be lower in certain states, if required.
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 (or date of surrender). There is no account fee on contracts issued to Selling Group Individuals.
Earnings Optimizer Death Benefit Charge. The current charge rate for the Earnings Optimizer Death Benefit is based on the oldest Contractowner’s or Annuitant’s age at the time the rider is elected, according to the following table:
| Age at Issue |
Current Annual Rate | |
|
1 – 69
|
0.40% | |
|
70 – 75
|
0.70% |
We will deduct this charge from the Contract Value on a
quarterly basis, with the first deduction occurring on the Valuation Date on or next following the three-month anniversary of the rider effective date. The quarterly charge equals the quarterly charge rate multiplied by the greater of the Contract
Value on the Valuation Date the charge is deducted, or the sum of all Purchase Payments as adjusted for withdrawals (such result will never be less than zero). Withdrawals (excluding Regular Income Payments under i4LIFE® Advantage and Advisory Fee Withdrawals up to 1.25% of your Account Value) reduce the sum of all Purchase Payments in the same proportion that
withdrawals reduce the Contract Value. The deduction of the charge will be made in the following order:
| • | proportionately from all non-Lincoln Defined Outcome Funds, until exhausted; and then |
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| • | proportionately from all Lincoln Defined Outcome Funds. |
The rider charge is in addition to the base contract
expense.
The charge rate may not change prior to the 20th rider date anniversary; thereafter, the charge may change every year. Any increase or decrease will be effective on the rider anniversary date, subject
to the stated guaranteed maximum annual rate. We will notify you in writing of such an increase or decrease. A portion of the charge, based on the number of days the death benefit was in effect that quarter, will be deducted upon surrender of the
contract or the election of any Annuity Payout option (except i4LIFE® Advantage). The charge will not be
deducted upon death.
Rider Charge
i4LIFE® Advantage Charge. While this rider is in effect, there is a
daily charge for i4LIFE® Advantage that is based
on your Account Value. The annual i4LIFE®
Advantage charge rate is 0.40%. This rate is added to your base contract expense.
The initial Account Value is your Contract Value on the
Valuation Date i4LIFE® Advantage
becomes effective (or your initial Purchase Payment if i4LIFE® Advantage is purchased at contract issue), less
any applicable premium taxes. During the Access Period, your Account Value equals the total value of all of the Contractowner's Accumulation Units plus the Contractowner's value in the fixed account, and will be reduced by Regular Income Payments
and any withdrawals.
If i4LIFE® Advantage is elected at issue of the contract, i4LIFE® Advantage and the charge will begin on the contract’s effective date. Otherwise, i4LIFE® Advantage and the charge will begin on the Periodic Income Commencement Date which is the Valuation Date on which the Regular Income Payment is
determined and the beginning of the Access Period. Refer to the i4LIFE® Advantage
section for explanations of the Account Value, the Access Period, the Lifetime Income Period, and the Periodic Income Commencement Date.
The Earnings Optimizer Death Benefit rider charge will
apply in addition to the i4LIFE® Advantage charge rate added to the contract expense if both are elected.
Deductions for Premium Taxes
Any premium tax or other tax levied by any governmental
entity as a result of the existence of the contracts or the VAA will be deducted from the Contract Value, unless the governmental entity dictates otherwise, when incurred, or at another time of our choosing.
The applicable premium tax rates that states and other
governmental entities impose on the purchase of an annuity are subject to change by legislation, by administrative interpretation or by judicial action. These premium tax rates generally depend upon the law of your state of residence. The tax rates
range from zero to 5%.
Other Charges and Deductions
We apply an annual product charge rate of 0.10% to the
daily asset value of the Subaccounts during the time you receive Annuity Payouts (except for i4LIFE® Advantage,
which has a different charge), including options that may be offered that do not have a life contingency and therefore no mortality risk. This charge covers the expense risk and administrative services listed previously in this prospectus. The
expense risk is the risk that our costs in providing the services will exceed our revenues from contract charges. If your Contract Value equals or exceeds $250,000 immediately prior to the Annuity Commencement Date, this charge will be reduced by
0.10%.
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:
| • | the use of mass enrollment procedures, |
| • | the performance of administrative or sales functions by the employer, |
| • | the use by an employer of automated techniques in submitting deposits or information related to deposits on behalf of its employees, |
| • | the issue of a new Lincoln Investor Advantage® contract with the proceeds from the surrender of an existing Lincoln variable annuity contract, if available with your broker-dealer and in your state, or |
| • | 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.
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The Contracts
Purchase of Contracts
This contract is issued as part of a Fee-Based Financial
Plan. A Fee-Based Financial Plan generally refers to a wrap account, managed account or other investment program whereby an investment firm/professional offers asset allocation and/or investment advice for a fee. Such programs can be offered by
broker-dealers, banks and registered investment advisors, trust companies and other firms. Under this arrangement, the Contractowner pays the investment firm/professional directly for services. you may be able to pay this fee by taking Advisory Fee
Withdrawals from your Contract Value.
If you wish to purchase a Contract, you must apply for
it through a financial professional 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 either directly or through your financial professional. See Distribution of the Contracts. The purchase of multiple contracts with identical Contractowners, Annuitants and Beneficiaries will be allowed only upon Home
Office approval.
When a completed application and all other information
necessary for processing a purchase order is received in Good Order at our Home Office, an initial Purchase Payment will be priced no later than two business days after we receive the order. If you submit your application and/or initial Purchase
Payment to your financial professional, we will not begin processing your purchase order until we receive the application and initial Purchase Payment from your financial professional’s broker-dealer. While attempting to finish an incomplete
application, we may hold the initial Purchase Payment for no more than five business days unless we receive your consent to our retaining the payment until the application is completed. If the incomplete application cannot be completed within those
five days and we have not received your consent, you will be informed of the reasons, and the Purchase Payment will be returned immediately. Once the application is complete, we will allocate your initial Purchase Payment within two business days.
Who Can Invest
To apply for a contract, you must be of legal age in a
state where the contracts may be lawfully sold and also be eligible to participate in any of the qualified or nonqualified plans for which the contracts are designed. At the time of issue, the Contractowner, joint owner and Annuitant must be under
age 86. If the Earnings Optimizer Death Benefit is elected, the oldest Contractowner, joint owner (if applicable), or Annuitant must be under age 76 (or for nonqualified contracts only, under age 91, if i4LIFE® Advantage with Account Value Death Benefit is elected, subject to additional terms and limitations, and Home Office approval). Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account in an effort to help the government fight the funding of terrorism and money
laundering activities. When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license, photo i.d. or other identifying documents.
In accordance with anti-money laundering laws and
federal economic sanction policy, the Company may be required in a given instance to reject a Purchase Payment and/or freeze a Contractowner’s account. This means we could refuse to honor requests for transfers, withdrawals, surrenders or Death
Benefits. Once frozen, monies would be moved from the VAA and fixed account, if any, to an interest-bearing account maintained solely for the Contractowner, and held in that account until instructions are received from the appropriate regulator.
Do not purchase this contract if you plan to use it, or
any of its riders, for speculation, arbitrage, viatical arrangement, or other similar investment scheme. The contract may not be resold, traded on any stock exchange, or sold on any secondary market.
If you are purchasing the contract through a tax-favored
arrangement, including traditional IRAs and Roth IRAs, you should consider carefully the costs and benefits of the contract (including annuity income benefits) before purchasing the contract, since the tax-favored arrangement itself provides
tax-deferred growth.
Replacement of Existing Insurance
Careful consideration should be given prior to
surrendering or withdrawing money from an existing insurance contract to purchase a contract described in this prospectus. Surrender charges may be imposed on your existing contract. The benefits offered under this contract may be less favorable or
more favorable than the benefits offered under your current contract. It also may have different charges. You should also consult with your financial professional and/or your tax advisor prior to making an exchange. Cash surrenders from an existing
contract may be subject to tax and tax penalties.
Purchase Payments
You may make Purchase Payments to the contract at any
time, prior to the Annuity Commencement Date, subject to certain conditions. You are not required to make any additional Purchase Payments after the initial Purchase Payment. The minimum initial Purchase Payment is $10,000. The minimum for Selling
Group Individuals is $1,500. The minimum annual amount for additional Purchase Payments is $300. The minimum initial Purchase Payment for nonqualified contracts where i4LIFE® Advantage is elected, and
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where the Contractowner, joint owner and/or Annuitant are ages 86 to 90
(subject to additional terms and limitations, and Home Office approval) is $50,000. Please check with your financial professional about making additional Purchase Payments since the requirements of your state may vary. The minimum payment to the
contract at any one time must be at least $100 ($25 if transmitted electronically). If a Purchase Payment is submitted that does not meet the minimum amount, we will contact you to ask whether additional money will be sent, or whether we should
return the Purchase Payment to you.
Purchase Payments totaling $5 million or more are
subject to Home Office approval. This amount takes into consideration the total Purchase Payments for all existing Lincoln Investor Advantage® contracts for the same Contractowner, joint owner, and/or Annuitant. If you stop making Purchase Payments, the contract will remain in force,
however, we may terminate the contract as allowed by your state's non-forfeiture law for individual deferred annuities. 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.
If you elect the Earnings Optimizer Death Benefit,
cumulative additional Purchase Payments after the first rider date anniversary and after the 70th birthday of the oldest Contractowner or Annuitant may
not exceed $100,000 each rider year. While the rider is in effect, we reserve the right to limit future Purchase Payments after the 76th birthday of the
oldest Contractowner or Annuitant. If the oldest Contractowner or Annuitant is age 70 or older at the time a Purchase Payment is made, Purchase Payments totaling $1 million or more are subject to Home Office approval. This amount takes into
consideration the total Purchase Payments for all existing Lincoln Investor Advantage® contracts with the
Earnings Optimizer Death Benefit for the same Contractowner and/or Annuitant. If the Contract Value is zero, then no additional Purchase Payments will be accepted.
In addition to the specific Purchase Payment
restrictions and limitations immediately above, upon advance written notice, we reserve the right to further limit, restrict, or suspend Purchase Payments made to the contract.
These restrictions and limitations will limit your
ability to increase your Contract Value (or Account Value under i4LIFE® Advantage) by making additional
Purchase Payments to the contract. You should carefully consider these limitations and restrictions, and any other limitations and restrictions of the contract, and how they may impact your long-term investment plans, especially if you intend to
increase Contract Value (or Account Value under i4LIFE® Advantage) by making additional Purchase Payments over
a long period of time.
Large Account Credit
Contractowners will receive a Large Account Credit when
your Contract Value reaches a threshold of $250,000 threshold. During the first Contract Year, the Large Account Credit will apply if either the cumulative Purchase Payments (decreased by withdrawals taken since the contract effective date or
Regular Income Payments under i4LIFE® Advantage) or the Contract Value (or Account Value under i4LIFE® Advantage) is equal to or greater than $250,000 threshold on the quarterly Valuation Date. The amount of the
Large Account Credit during the first Contract Year will be calculated by multiplying the greater of: 1) the amount of cumulative Purchase Payments (less any withdrawals since the contract effective date or Regular Income Payments under i4LIFE® Advantage); or 2) the value of the Subaccounts at the time of the credit, by 0.10% (0.0250% quarterly).
After the first Contract Year anniversary, the Large
Account Credit will apply if the Contract Value (or Account Value under i4LIFE® Advantage) equals or exceeds
$250,000 threshold on the quarterly Valuation Date. The amount of the Large Account Credit will be calculated by multiplying the value of the Subaccounts at the time of the credit by 0.10% (0.0250% quarterly).
The Large Account Credit will be allocated in proportion
to the Contract Value across all non-Lincoln Defined Outcome Funds. If the contract is only invested in Lincoln Defined Outcome Funds, then it will be allocated proportionally across the Lincoln Defined Outcome Funds. There is no additional charge
to receive this Large Account Credit, and in no case will the Large Account Credit be less than zero. The amount of any Large Account Credit received will be noted on your quarterly statement. Confirmation statements for each individual transaction
will not be issued. Large Account Credits are not considered Purchase Payments.
The Large Account Credit will end on the Annuity
Commencement Date or when the Lifetime Income Period begins under i4LIFE® Advantage.
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 side of the
contract are placed into the VAA’s Subaccounts, according to your instructions. You may also allocate Purchase Payments to the fixed account, if available. In the absence of instructions accompanying the Purchase Payment or otherwise not being in
Good Order, we will allocate the Purchase Payment in the same manner as your last Purchase Payment or, if not possible, otherwise contact you or your financial professional for additional information.
The minimum amount of any Purchase Payment which can be
put into any one Subaccount is $20.
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Purchase Payments received from you or your
broker-dealer in Good Order at our Home Office prior to the close of the New York Stock Exchange (normally 4:00 p.m., New York time), will be processed using the Accumulation Unit value computed on that Valuation Date. Purchase Payments received in
Good Order after market close will be processed using the Accumulation Unit value computed on the next Valuation Date. Purchase Payments submitted to your financial professional will generally not be processed by us until they are received from
your financial professional’s broker-dealer. If your broker-dealer submits your Purchase Payment to us through the Depository Trust and Clearing Corporation (DTCC) or, pursuant to terms agreeable to us, uses a proprietary order placement system to
submit your Purchase Payment to us, and your Purchase Payment was placed with your broker-dealer prior to market close, then we will use the Accumulation Unit value computed on that Valuation Date when processing your Purchase Payment. Purchase
Payments placed with your broker-dealer after market close will be processed using the Accumulation Unit value computed on the next Valuation Date. There may be circumstances under which the New York Stock Exchange may close early (prior to 4:00
p.m., New York time). In such instances, Purchase Payments received after such early market close will be processed using the Accumulation Unit value computed on the next Valuation Date.
The number of Accumulation Units determined in this way
is not impacted by any subsequent change in the value of an Accumulation Unit. However, the dollar value of an Accumulation Unit will vary depending not only upon how well the underlying fund’s investments perform, but also upon the expenses of the
VAA and the underlying funds.
If an underlying fund imposes restrictions with respect
to the acceptance of Purchase Payments, allocations or transfers, we reserve the right to reject an allocation or transfer request at any time the underlying fund notifies us of such a restriction. We will notify you if your allocation request is
or becomes subject to such restrictions.
Valuation of Accumulation Units
Purchase Payments allocated to the VAA are converted
into Accumulation Units. This is done by dividing the amount allocated by the value of an Accumulation Unit for the Valuation Period during which the Purchase Payments are allocated to the VAA. The Accumulation Unit value for each Subaccount was or
will be established at the inception of the Subaccount. It may increase or decrease from Valuation Period to Valuation Period. Accumulation Unit values are affected by investment performance of the funds, fund expenses, and the contract charges.
The Accumulation Unit value for a Subaccount for a later Valuation Period is determined as follows:
| 1. | The total value of the fund shares held in the Subaccount is calculated by multiplying the number of fund shares owned by the Subaccount at the beginning of the Valuation Period by the net asset value per share of the fund at the end of the Valuation Period, and adding any dividend or other distribution of the fund if an ex-dividend date occurs during the Valuation Period; minus |
| 2. | The liabilities of the Subaccount at the end of the Valuation Period; these liabilities include daily charges imposed on the Subaccount, and may include a charge or credit with respect to any taxes paid or reserved for by us that we determine result from the operations of the VAA; and |
| 3. | The result is divided by the number of Subaccount units outstanding at the beginning of the Valuation Period. |
The daily charges imposed on a Subaccount for any
Valuation Period are equal to the daily product charge multiplied by the number of calendar days in the Valuation Period. Contracts with different features have different daily charges, and therefore, will have different corresponding Accumulation
Unit values on any given day. In certain circumstances (for example, when separate account assets are less than $1,000), and when permitted by law, it may be prudent for us to use a different standard industry method for this calculation, called
the Net Investment Factor method. We will achieve substantially the same result using either method.
Transfers On or Before the Annuity Commencement Date
After the first 30 days from the effective date of your
contract, you may transfer all or a portion of your investment from one Subaccount to another. A transfer among Subaccounts involves the surrender of Accumulation Units in one Subaccount and the purchase of Accumulation Units in the other
Subaccount. A transfer will be done using the respective Accumulation Unit values determined at the end of the Valuation Date on which the transfer request is received.
Transfers (among the Subaccounts and as permitted
between the variable and fixed accounts) are limited to 12 per Contract Year unless otherwise authorized by us. This limit does not apply to transfers made under the automatic transfer programs of dollar cost averaging or portfolio rebalancing. See
Additional Services and the SAI for more information on these programs. These transfer rights and restrictions also apply during the i4LIFE® Advantage Access Period (the time period during which you may make withdrawals from the i4LIFE® Advantage Account Value). See i4LIFE® Advantage.
The minimum amount which may be transferred between
Subaccounts is $300 (or the entire amount in the Subaccount, if less than $300). If the transfer from a Subaccount would leave you with less than $300 in the Subaccount, we may transfer the total balance of the Subaccount.
Generally, a transfer request may be made to our Home
Office in writing or through your online account. Our address, telephone number, and Internet address are on the first page of this prospectus. Some features or benefits of this contract may limit the manner in which transfer requests can be
submitted. Requests for transfers will be processed on the Valuation Date that they are received when they are received in Good Order at our Home Office before the close of the New York Stock Exchange (normally 4:00 p.m., New York
20
time). If we receive a transfer request in Good Order after market
close, we will process the request using the Accumulation Unit value computed on the next Valuation Date.
There may be circumstances under which the New York
Stock Exchange may close early (prior to 4:00 p.m., New York time). In such instances transfers received after such early market close will be processed using the Accumulation Unit value computed on the next Valuation Date.
We may defer or reject a transfer request that is
subject to a restriction imposed by an underlying fund. Certain Subaccounts (Lincoln Defined Outcome Funds) require us to stop accepting requests prior to the close of the New York Stock Exchange. If a transfer request for Lincoln Defined Outcome
Funds is received in Good Order at our Home Office on or prior to the early cut off of 2:00 p.m. EST, that transfer request will be processed on the Valuation Date it is received. All transfer requests involving Lincoln Defined Outcome Funds
received after 2:00 p.m. EST, will be processed using the Accumulation Unit value at the end of the next Valuation Date. There may be circumstances under which the New York Stock Exchange may close early (prior to 4:00 p.m., New York time). In such
instances transfer requests involving Lincoln Defined Outcome Funds must be received two hours earlier than the close of the New York Stock Exchange to receive the Accumulation Unit value computed on that Valuation Date.
If you request a specific dollar amount be shifted into
or out of the Lincoln Defined Outcome Funds, it must be less than 90% of the current investment. If it is greater than or equal to 90%, you must provide a percentage or the number of units to shift into or out of the Lincoln Defined Outcome Funds.
After the first 30 days from the effective date of your
contract, if your contract offers a fixed account, you may also transfer all or any part of the Contract Value from the Subaccount(s) to the fixed side of the contract, except during periods when (if permitted by your contract) we have discontinued
accepting transfers into the fixed side of the contract. The minimum amount which can be transferred to a fixed account is $2,000 or the total amount in the Subaccount if less than $2,000. However, if a transfer from a Subaccount would leave you
with less than $300 in the Subaccount, we may transfer the total amount to the fixed side of the contract.
You may also transfer part of the Contract Value from a
fixed account to the Subaccount(s) subject to the following restrictions:
| • | total fixed account transfers are limited to 25% of the value of that fixed account in any 12-month period; and |
| • | the minimum amount that can be transferred is $300 or, if less, the amount in the fixed account. |
Because of these restrictions, it may take several years
to transfer all of the Contract Value in the fixed accounts to the Subaccounts. You should carefully consider whether the fixed account meets your investment criteria.
Transfers may be delayed as permitted by the 1940 Act.
See Delay of Payments.
Telephone and Electronic Transactions
A surrender, withdrawal, or transfer request may be made
to our Home Office in writing or by fax. These transactions may also be made by telephone or other electronic means, provided the appropriate authorization is on file with us. In order to prevent unauthorized or fraudulent transfers, we may require
certain identifying information before we will act upon instructions. We may also assign the Contractowner a Personal Identification Number (PIN) to serve as identification. We will not be liable for following instructions we reasonably believe are
genuine. Telephone and other electronic requests will be recorded and written confirmation of all transactions will be mailed or sent electronically to the Contractowner on the next Valuation Date.
Please note that the telephone and/or electronic devices
may not always be available. Any telephone, fax machine or other electronic device, whether it is yours, your service provider’s, or your financial professional’s, can experience outages or slowdowns for a variety of reasons. These outages or
slowdowns may delay or prevent our processing of your request. Although we have taken precautions to limit these problems, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your
request by writing to our Home Office.
Market Timing
Frequent, large, or short-term transfers among
Subaccounts and the fixed account, such as those associated with “market timing” transactions, can affect the funds and their investment returns. Such transfers may dilute the value of the fund shares, interfere with the efficient management of the
fund's portfolio, and increase brokerage and administrative costs of the funds. As an effort to protect our Contractowners and the funds from potentially harmful trading activity, we utilize certain market timing policies and procedures (the
“Market Timing Procedures”). Our Market Timing Procedures are designed to detect and prevent such transfer activity among the Subaccounts and the fixed account that may affect other Contractowners or fund shareholders.
In addition, the funds may have adopted their own
policies and procedures with respect to frequent purchases and redemptions of their respective shares. The prospectuses for the funds describe any such policies and procedures, which may be more or less restrictive than the frequent trading
policies and procedures of other funds and the Market Timing Procedures we have adopted to discourage frequent transfers among Subaccounts. While we reserve the right to enforce these policies and procedures, Contractowners and other persons with
interests under the Contracts should be aware that we may not have the contractual authority or the operational capacity to apply the frequent trading policies and procedures of the funds. However, under SEC rules, we are
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required to: (1) enter into a written agreement with each fund or its
principal underwriter that obligates us to provide to the fund promptly upon request certain information about the trading activity of individual Contractowners, and (2) execute instructions from the fund to restrict or prohibit further purchases
or transfers by specific Contractowners who violate the excessive trading policies established by the fund.
You should be aware that the purchase and redemption
orders received by the funds generally are “omnibus” orders from intermediaries such as retirement plans or separate accounts funding variable insurance contracts. The omnibus orders reflect the aggregation and netting of multiple orders from
individual retirement plan participants and/or individual owners of variable insurance contracts. The omnibus nature of these orders may limit the funds’ ability to apply their respective disruptive trading policies and procedures. We cannot
guarantee that the funds (and thus our Contractowners) will not be harmed by transfer activity relating to the retirement plans and/or other insurance companies that may invest in the funds. In addition, if a fund believes that an omnibus order we
submit may reflect one or more transfer requests from Contractowners engaged in disruptive trading activity, the fund may reject the entire omnibus order.
Our Market Timing Procedures detect potential “market
timers” by examining the number of transfers made by Contractowners within given periods of time. In addition, managers of the funds might contact us if they believe or suspect that there is market timing. If requested by a fund company, we may
vary our Market Timing Procedures from Subaccount to Subaccount to comply with specific fund policies and procedures.
We may increase our monitoring of Contractowners who we
have previously identified as market timers. When applying the parameters used to detect market timers, we will consider multiple contracts owned by the same Contractowner if that Contractowner has been identified as a market timer. For each
Contractowner, we will investigate the transfer patterns that meet the parameters being used to detect potential market timers. We will also investigate any patterns of trading behavior identified by the funds that may not have been captured by our
Market Timing Procedures.
Once a Contractowner has been identified as a market
timer under our Market Timing Procedures, we will notify the Contractowner in writing that future transfers (among the Subaccounts and/or the fixed account) will be temporarily permitted to be made only by original signature sent to us by U.S.
mail, first-class delivery for the remainder of the Contract Year (or calendar year if the contract is an individual contract that was sold in connection with an employer sponsored plan). Overnight delivery or electronic instructions (which may
include telephone, facsimile, or Internet instructions) submitted during this period will not be accepted. If overnight delivery or electronic instructions are inadvertently accepted from a Contractowner that has been identified as a market timer,
upon discovery, we will reverse the transaction within 1 or 2 business days. We will impose this “original signature” restriction on that Contractowner even if we cannot identify, in the particular circumstances, any harmful effect from that
Contractowner's particular transfers.
Contractowners seeking to engage in frequent, large, or
short-term transfer activity may deploy a variety of strategies to avoid detection. Our ability to detect such transfer activity may be limited by operational systems and technological limitations. The identification of Contractowners determined to
be engaged in such transfer activity that may adversely affect other Contractowners or fund shareholders involves judgments that are inherently subjective. We cannot guarantee that our Market Timing Procedures will detect every potential market
timer. If we are unable to detect market timers, you may experience dilution in the value of your fund shares and increased brokerage and administrative costs in the funds. This may result in lower long-term returns for your investments.
Our Market Timing Procedures are applied consistently to
all Contractowners. An exception for any Contractowner will be made only in the event we are required to do so by a court of law. In addition, certain funds available as investment options in your Contract may also be available as investment
options for owners of other, older life insurance policies issued by us. Some of these older life insurance policies do not provide a contractual basis for us to restrict or refuse transfers which are suspected to be market timing activity. In
addition, because other insurance companies and/or retirement plans may invest in the funds, we cannot guarantee that the funds will not suffer harm from frequent, large, or short-term transfer activity among Subaccounts and the fixed accounts of
variable contracts issued by other insurance companies or among investment options available to retirement plan participants.
In our sole discretion, we may revise our Market Timing
Procedures at any time without prior notice as necessary to better detect and deter frequent, large, or short-term transfer activity to comply with state or federal regulatory requirements, and/or to impose additional or alternate restrictions on
market timers (such as dollar or percentage limits on transfers). If we modify our Market Timing Procedures, they will be applied uniformly to all Contractowners or as applicable to all Contractowners investing in underlying funds.
Some of the funds have reserved the right to temporarily
or permanently refuse payments or transfer requests from us if, in the judgment of the fund’s investment adviser, the fund would be unable to invest effectively in accordance with its investment objective or policies, or would otherwise potentially
be adversely affected. To the extent permitted by applicable law, we reserve the right to defer or reject a transfer request at any time that we are unable to purchase or redeem shares of any of the funds available through the VAA, including any
refusal or restriction on purchases or redemptions of the fund shares as a result of the funds' own policies and procedures on market timing activities. If a fund refuses to accept a transfer request we have already processed, we will reverse the
transaction within 1 or 2 business days. We will notify you in writing if we have reversed, restricted or refused any of your transfer requests. Some funds also may impose redemption fees on short-term trading (i.e., redemptions of mutual fund
shares within a certain number of business days after purchase). We reserve the right to administer and collect any such redemption fees on behalf of
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the funds. You should read the prospectuses of the funds for more
details on their redemption fees and their ability to refuse or restrict purchases or redemptions of their shares.
Transfers After the Annuity Commencement Date
You may transfer all or a portion of your investment in
one Subaccount to another Subaccount or to the fixed side of the Contract, as permitted under your Contract. Those transfers will be limited to three times per Contract Year. You may also transfer from a variable Annuity Payout to a fixed Annuity
Payout. You may not transfer from a fixed Annuity Payout to a variable Annuity Payout. Once elected, the fixed Annuity Payout is irrevocable.
These provisions also apply during the i4LIFE® Advantage Lifetime Income Period. See i4LIFE® Advantage.
Ownership
The Contractowner on the date of issue will be the
person or entity designated in the contract specifications. The Contractowner of a nonqualified contract may name a joint owner.
As Contractowner, you have all rights under the
Contract. According to Indiana law, the assets of the VAA are held for the exclusive benefit of all Contractowners and their designated Beneficiaries; and the assets of the VAA are not chargeable with liabilities arising from any other business
that we may conduct. We reserve the right to approve all ownership and Annuitant changes. Nonqualified contracts may not be sold, discounted, or pledged as collateral for a loan or for any other purpose. Qualified contracts are not transferable
unless allowed under applicable law. Nonqualified contracts may not be collaterally assigned. Assignments may have an adverse impact on your Death Benefits and may be prohibited under the terms of a particular feature. We assume no responsibility
for the validity or effect of any assignment. Consult your tax advisor about the tax consequences of an assignment.
Joint Ownership
If a Contract has joint owners, the joint owners shall
be treated as having equal undivided interests in the Contract. Either owner, independently of the other, may exercise any ownership rights in this Contract. Not more than two owners (an owner and joint owner) may be named and contingent owners are
not permitted.
Annuitant
The following rules apply prior to the Annuity
Commencement Date. You may name only one Annuitant (unless you are a tax-exempt entity, then you can name two joint Annuitants). You (if the Contractowner is a natural person) have the right to change the Annuitant at any time by notifying us in
writing of the change. However, we reserve the right to approve all Annuitant changes. This may not be allowed if certain riders are in effect. The new Annuitant must be under age 86 (or, for Annuitant changes made to contracts issued on and after
December 11, 2017, under age 91, subject to terms and limitations and Home Office approval) as of the effective date of the change. A contingent Annuitant may be named or changed by notifying us in writing. Contingent Annuitants are not allowed on
Contracts owned by non-natural owners. On or after the Annuity Commencement Date, the Annuitant or joint Annuitants may not be changed and contingent Annuitant designations are no longer applicable.
Surrenders and Withdrawals
Before the Annuity Commencement Date, we will allow the
surrender of the contract or a withdrawal of the Contract Value upon your written request on an approved Lincoln distribution request form (available from the Home Office), fax, or other electronic means. Withdrawal requests may be made by
telephone or our website, subject to certain restrictions. All surrenders and withdrawals may be made in accordance with the rules discussed below. Surrender or withdrawal rights after the Annuity Commencement Date depend on the Annuity Payout
option selected. The amount available upon surrender/withdrawal is the Contract Value less any applicable charges, fees, and taxes at the end of the Valuation Period during which the written request for surrender/withdrawal is received in Good
Order at the Home Office.
Unless a request for withdrawal specifies otherwise, all
withdrawals will be made in the following order:
| • | Proportionally from all non-Lincoln Defined Outcome Funds, until all exhausted; then |
| • | Proportionally from all Lincoln Defined Outcome Funds. |
The minimum amount which can be withdrawn is $300.
Unless prohibited, surrender/withdrawal payments will be mailed within seven days after we receive a valid written request at the Home Office. The payment may be postponed as permitted by the 1940 Act.
If you request a specific dollar amount be withdrawn
from a Lincoln Defined Outcome Fund, it must be less than 90% of the current amount invested in the fund. If it is greater than or equal to 90%, you must provide a percentage or number of units to withdraw from the fund.
Surrenders and withdrawals may be taxable and, prior to
age 59½, subject to a tax penalty. The tax consequences of a surrender/withdrawal are discussed later in this prospectus. See Federal Tax Matters – Taxation of Withdrawals and Surrenders.
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Withdrawals may have a negative impact on certain
optional living benefits and on certain death benefits, and the impact could be significant. A withdrawal may reduce or even terminate certain benefits.
Withdrawals from the fixed account may be subject to an
interest adjustment, which could have a significant negative impact.
Benefits Available Under the Contract
The following tables summarize information about the
benefits available under the Contract. A detailed description of each benefit follows the table.
| Standard Benefits | |||
| Name of Benefit | Purpose | Maximum Fee | Brief Description of Restrictions / Limitations |
| Account Value Death Benefit | Provides a Death Benefit equal to the Contract Value. | • 0.10% |
• Poor investment performance could significantly reduce the benefit.• Withdrawals could significantly reduce the benefit. |
| Dollar-Cost Averaging | Allows you to automatically transfer amounts between certain investment options on a monthly basis. | None | • Minimum amount to be dollar cost averaged is $1,500 over any time period between 3 and 60 months.• Cannot be used simultaneously with portfolio rebalancing. |
| Portfolio Rebalancing | Allows you to automatically reallocate your Contract Value among investment options on a periodic basis based on your standing allocation instructions. | None | • Cannot be used simultaneously with dollar cost averaging.• Not available for amounts allocated to Lincoln Defined Outcome Funds. |
| Automatic Withdrawal Service | Allows you to take periodic withdrawals from your Contract automatically. | None | • Automatically terminates once i4LIFE® Advantage begins. |
| Advisory Fee Withdrawals | Allows you to take withdrawals from your Contract to pay the advisory fees. | None | • May not be available in all states.• You may take Advisory Fee Withdrawals up to 1.25% annually without negatively impacting your rider guarantees.
• The deduction of advisory fees from Contract Value may reduce the Death Benefit and other guaranteed benefits, and may be subject to federal and state income taxes and a 10% federal penalty tax. |
| Optional Benefits – Available for Election | |||
| Name of Benefit | Purpose | Maximum Fee | Brief Description of Restrictions / Limitations |
| Earnings Optimizer Death Benefit | Provides a Death Benefit equal to the greatest of (1) Contract Value; (2) all Purchase Payments, adjusted for withdrawals; (3) the current Contract Value we approve the claim equal to the Enhancement Rate multiplied by the lesser of the contract earnings or earnings limit. | • 1.70% | • Investment Requirements apply.• Withdrawals could significantly reduce the benefit.• Poor investment performance could significantly reduce and limit potential increases to the highest Contract Value. |
| i4LIFE® Advantage | Provides:• Variable periodic Regular Income Payments for life.• The ability to make additional withdrawals and surrender the contract during the Access Period. | • 0.40% in addition to your base contract expense | • Withdrawals could significantly reduce or terminate the benefit.• Restrictions apply to the length of the Access Period.• Additional Purchase Payments may be subject to restrictions. |
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Death Benefits
The chart below provides a brief overview of how the Death
Benefit proceeds will be distributed if death occurs prior to i4LIFE® Advantage elections or prior to the
Annuity Commencement Date. Refer to your Contract for the specific provisions applicable upon death.
| upon death of: | and... | and... | Death Benefit proceeds pass to: |
| Contractowner | There is a surviving joint owner | The Annuitant is living or deceased | Joint owner |
| Contractowner | There is no surviving joint owner | The Annuitant is living or deceased | Designated Beneficiary |
| Contractowner | There is no surviving joint owner and the Beneficiary predeceases the Contractowner | The Annuitant is living or deceased | Contractowner's estate |
| Annuitant | The Contractowner is living | 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 Contractowner is living | The contingent Annuitant is living | Contingent Annuitant becomes the Annuitant and the Contract continues |
| Annuitant** | The Contractowner is a trust or other non-natural person | No contingent Annuitant allowed with non-natural Contractowner | Designated Beneficiary |
| * | Notification from the Contractowner to receive 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. |
A Death Benefit may be payable if the Contractowner (or
a joint owner) or Annuitant dies prior to the Annuity Commencement Date. This Death Benefit terminates if you elect i4LIFE®
Advantage or elect any other annuitization option.
You should consider the following provisions carefully
when designating the Beneficiary, Annuitant, any contingent Annuitant and any joint owner, as well as before changing any of these parties. The identity of these parties under the Contract may significantly affect the amount and timing of the Death
Benefit or other amount paid upon a Contractowner's or Annuitant's death.
You may designate a Beneficiary during your lifetime and
change the Beneficiary by filing a written request with our Home Office. Each change of Beneficiary revokes any previous designation. We reserve the right to request that you send us the Contract for endorsement of a change of Beneficiary.
Upon the death of the Contractowner, a Death Benefit
will be paid to the Beneficiary. Upon the death of a joint owner, the Death Benefit will be paid to the surviving joint owner. If the Contractowner is a corporation or other non-individual (non-natural person), the death of the Annuitant will be
treated as death of the Contractowner.
If an Annuitant who is not the Contractowner or joint
owner dies, then the contingent Annuitant, if named, becomes the Annuitant and no Death Benefit is payable on the death of the Annuitant. If no contingent Annuitant is named, the Contractowner (or younger of joint owners) becomes the Annuitant.
Alternatively, a Death Benefit may be paid to the Contractowner (and joint owner, if applicable, in equal shares). Notification of the election of this Death Benefit must be received by us within 75 days of the death of the Annuitant. The Contract
terminates when any Death Benefit is paid due to the death of the Annuitant.
Only the Contract Value as of the Valuation Date we
approve the payment of the death claim is available as a Death Benefit if a Contractowner, joint owner or Annuitant was added or changed subsequent to the effective date of this contract unless the change occurred because of the death of a prior
Contractowner, joint owner or Annuitant. If your Contract Value equals zero, no Death Benefit will be paid.
All references below to “Contract Value” include Account
Value if i4LIFE® Advantage is in effect.
Account Value Death Benefit. The Account Value Death Benefit provides a Death Benefit equal to the Contract Value on the Valuation Date the Death Benefit is approved by us for payment. No additional Death Benefit is provided. For example, assume an initial deposit into the contract of $10,000. The Contract Value increases and equals $12,000 on the Valuation Date the Death Benefit is approved. The amount of Death Benefit paid equals $12,000.
Earnings Optimizer Death Benefit. The amount of the Death Benefit payable under this rider is the greatest of the following amounts:
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| • | the current Contract Value as of the Valuation Date we approve the payment of the claim; or |
| • | the sum of all Purchase Payments decreased by all withdrawals (including additional withdrawals under i4LIFE® Advantage) in the same proportion that withdrawals reduce the Contract Value. Regular Income Payments under i4LIFE® Advantage reduce the sum of all Purchase Payments on a dollar for dollar basis; or |
| • | the current Contract Value as of the Valuation Date we approve the payment of the claim plus an amount equal to the Enhancement Rate multiplied by the lesser of: |
| • | the contract earnings; or |
| • | the earnings limit. |
Note: If there are no contract earnings, the Enhancement Rate will not apply to Death Benefit amounts. However, there will always be at least a Contract Value death benefit.
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. This is because the reduction in the benefit may be more that the dollar amount of the withdrawal from the Contract
Value. All references to withdrawals include deductions for any applicable charges associated with those withdrawals, financial planning fees, and premium taxes, if any.
Subject to state approval, annual Advisory Fee
Withdrawals up to 1.25% of your Contract Value within a Contract Year will not be considered a withdrawal under your Death Benefit calculation of the sum of all Purchase Payments or highest Contract Value. Your Contract Value will be reduced by the
amount of the withdrawal, but the value of your Death Benefit will not be negatively impacted. For Annual Advisory Fee Withdrawals that exceed 1.25% of your Contract Value within a Contract Year, the portion of the Advisory Fee Withdrawal over
1.25% will be treated as a withdrawal under this Death Benefit and reduce your guarantees.
The Enhancement Rate is 40% for all Contractowners.
Contract earnings equal:
| • | the current Contract Value as of the date of death of the individual for whom a death claim is approved by us for payment; minus |
| • | the sum of all Purchase Payments, decreased by withdrawals as of the date of death (including additional withdrawals under i4LIFE® Advantage) in the same proportion that withdrawals reduce the Contract Value (such result will never be less than zero). Regular Income Payments under i4LIFE® Advantage and Advisory Fee Withdrawals up to 1.25% of your Account Value reduce the sum of all Purchase Payments on a dollar for dollar basis (such result will never be less than zero). |
The earnings limit equals 200% (as of the date of death)
of:
| • | the sum of all Purchase Payments, decreased by withdrawals (including additional withdrawals under i4LIFE® Advantage) in the same proportion that withdrawals reduce the Contract Value (such result will never be less than zero). Regular Income Payments under i4LIFE® Advantage do not reduce the sum of all Purchase Payments. The following example shows how the death benefit amount is calculated under the Earnings Optimizer Death Benefit. It assumes an initial deposit of $10,000 and an Enhancement rate of 40%: |
|
Contract Value on the Valuation Date the Death Benefit is approved
|
$12,500 | |
|
Contract Value on the Date of Death
|
$12,000 | |
|
Contract Earnings
|
$2,000 ($12,000 - $10,000) | |
|
Covered Earnings Limit
|
$20,000 ($10,000 x 2) | |
|
The enhancement rate is multiplied by the lesser of the contract earnings amount ($2,000) or the covered earnings limit amount ($20,000)
|
$800 (40% x $2,000) | |
|
Total Death Benefit amount
|
$13,300 ($12,500 + $800) |
Availability. The Earnings Optimizer Death Benefit may not
be available in all states. Please check with your financial professional regarding availability. The Earnings Optimizer Death Benefit is available for both qualified and nonqualified contracts, and can only be
elected at the time the contract is purchased. If elected, the rider will be effective on the contract’s effective date. The oldest Contractowner, joint owner (if applicable), or Annuitant must be under age 76 at the time of election.
If you elect the Earnings Optimizer Death Benefit, you
will be required to adhere to Investment Requirements, which will limit your ability to invest in certain Subaccounts offered in your contract. See The Contracts – Investment Requirements.
The Earnings Optimizer Death Benefit may not be
terminated unless you surrender the contract. In addition, the rider will terminate:
| 1. | on the Annuity Commencement Date; |
| 2. | on the date the Lifetime Income Period begins under i4LIFE® Advantage; |
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| 3. | upon payment of a Death Benefit under the Earnings Optimizer Death Benefit; or |
| 4. | at any time all Contractowners or Annuitants are changed, except when a surviving spouse elects to continue the contract as the new Contractowner without taking the increase in Contract Value, as described below. |
If the Beneficiary is the spouse of the Contractowner,
the surviving spouse may elect to continue the contract as the new Contractowner. In this situation, 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 Valuation Date we approve the claim will be added to the Contract Value. If the contract is continued in this way, the Earnings Optimizer Death Benefit rider and charge will
terminate, and the spouse will have the Contract Value Death Benefit.
Alternatively, if the surviving spouse elected to
continue the contract as the new Contractowner without taking the increase in Contract Value described above, the spouse may continue the Earnings Optimizer Death Benefit with no change in the way it is calculated. The rider charge rate that was in
effect immediately prior to the death will continue to apply.
General Death Benefit Information
Your Death Benefit terminates on and after the Annuity
Commencement Date. i4LIFE® Advantage only provides Death Benefit options during the Access Period. There are no
Death Benefits during the Lifetime Income Period. Please see the i4LIFE®
Advantage – i4LIFE® Advantage Death Benefit section of this prospectus for more information.
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 continued the contract, we will pay a Death Benefit to the
designated Beneficiary(s) unless Earnings Optimizer Death Benefit is in effect as described above.
If the Beneficiary is the spouse of the Contractowner,
then the spouse may elect to continue the contract as the new Contractowner. Same-sex spouses should carefully consider whether to purchase annuity products that provide benefits based upon status as a spouse, and whether to exercise any spousal
rights under the contract. You are strongly encouraged to consult a tax advisor before electing spousal rights under the contract.
The value of the Death Benefit will be determined as of
the Valuation Date we approve the payment of the claim. Approval of payment will occur upon our receipt of a claim submitted in Good Order. To be in Good Order, we require all the following:
| 1. | 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:
| • | 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 |
| • | 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.
The Beneficiary may choose the method of payment of the
Death Benefit unless the Contractowner has already selected a settlement option. If the contract is a nonqualified contract, 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. If the
Death Benefit is not distributed within five years of the Contractowner’s date of death, for any reason, including the claim was not presented in Good Order, then the Company will pay the proceeds to the Beneficiary.
If the contract is a qualified contract or IRA, then
according to the IRC, the Death Benefit payable to the Beneficiary or joint owner must be distributed within ten years of the Contractowner’s date of death unless the Beneficiary is an “eligible designated beneficiary”. An eligible designated
beneficiary may take the Death Benefit distribution in the form of a life annuity or an annuity for a designated period not extending beyond the Beneficiary’s life expectancy, subject to certain additional exceptions. If the contract is not
distributed within the ten-year deadline, for any reason, including that the claim was not presented in Good Order, the balance is treated as a required minimum distribution under the Internal Revenue Code and subject to a 50% tax.
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.
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The recipient of a Death Benefit 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.
Abandoned Property.
Every state has unclaimed property laws which generally declare annuity contracts to be abandoned after a period of inactivity of three to five years from the date a benefit is due and payable. For example, if the payment of a Death Benefit has
been triggered, but, if after a thorough search, we are still unable to locate the Beneficiary of the Death Benefit, or the Beneficiary does not come forward to claim the Death Benefit in a timely manner, the Death Benefit will be “escheated”.
This means that the Death Benefit will be paid to the abandoned property division or unclaimed property office of the state in which the Beneficiary or the Contractowner last resided, as shown on our books and records, or to our state of
domicile. This escheatment is revocable and the state is obligated to pay the Death Benefit (without interest) if your Beneficiary steps forward to claim it with the proper documentation.
To prevent such escheatment, it is important that you
update your Beneficiary designations, including addresses, if and as they change. You may update your Beneficiary designations by submitting a Beneficiary change form to our Home Office.
Additional Services
These additional services are available to you under
your contract: dollar-cost averaging (DCA), portfolio rebalancing and automatic withdrawal service (AWS). Currently, there is no charge for these services. However, we reserve the right to impose one after appropriate notice to Contractowners. In
order to take advantage of one of these services, you will need to complete the appropriate election form that is available from our Home Office or call 1-888-868-2583. These services will stop once we become aware of a pending death claim. For
further detailed information on these services, please see Additional Services in the SAI.
Dollar-Cost Averaging. Dollar-cost
averaging allows you to transfer amounts from the DCA fixed account, if available, or certain Subaccounts into the Subaccounts on a monthly basis or in accordance with other terms we make available.
You may elect to participate in the DCA program at the
time of application or at any time before the Annuity Commencement Date by completing our election form by calling our Home Office, or by other electronic means. The minimum amount to be dollar cost averaged (DCA'd) is $1,500 over time any period
between three and 60 months. We may offer different time periods for new Purchase Payments and for transfers of Contract Value. State variations may exist. Once elected, the program will remain in effect until the earlier of:
| • | the Annuity Commencement Date; |
| • | the value of the amount being DCA'd is depleted; or |
| • | you cancel the program by written request or by telephone if we have your telephone authorization on file. |
We reserve the right to limit certain time periods or to
restrict access to this program at any time.
A transfer made as part of this program is not
considered a transfer for purposes of limiting the number of transfers that may be made, or assessing any charges 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. If you cancel the DCA program, your remaining Contract Value in the DCA program
will be allocated to the Subaccounts according to your allocation instructions. We reserve the right to discontinue or modify this program at any time. If you have chosen DCA from one of the Subaccounts, only the amount allocated to be DCA’d will
be transferred. Investment gain, if any, will remain in that Subaccount unless you reallocate it to one of the other Subaccounts. DCA does not assure a profit or protect against loss.
Portfolio Rebalancing. Portfolio
rebalancing is an option that restores to a pre-determined level the percentage of Contract Value allocated to each Subaccount. The rebalancing may take place monthly, quarterly, semi-annually or annually. Rebalancing events will be noted on your
quarterly statement. Confirmation statements for each individual rebalancing event will not be issued. Portfolio rebalancing is not available for amounts allocated to the Lincoln Defined Outcome Funds.
Only one of the two additional services (DCA and
portfolio rebalancing) may be used at one time. For example, you cannot have DCA and portfolio rebalancing running simultaneously. We reserve the right to discontinue any or all of these administrative services at any time.
Automatic Withdrawal Service. The automatic withdrawal service (AWS) provides for an automatic periodic withdrawal of your Contract Value. Withdrawals under AWS will be noted on your quarterly statement. Confirmation statements for each individual
withdrawal will not be issued. AWS is available for amounts allocated to the fixed account.
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Fees Associated with Fee-Based Financial Plans. This discussion applies only to contracts that were purchased as part of a Fee-Based Financial Plan. You have purchased this contract as part of a Fee-Based Financial Plan whereby an investment firm or professional
offers investment advice for a fee. The fee for this advice is set by your financial professional, and is covered in a separate agreement between you and your financial professional. Lincoln has not made any independent review of your financial
professional. You may elect to have the fee paid to your financial professional’s investment firm from your Contract Value (“Advisory Fee Withdrawal”), if certain conditions apply.
Partial withdrawals to pay the fee may be taken
automatically by enrolling in an AWS designated specifically for this purpose. Withdrawals are available in monthly, quarterly, semi-annual, or annual frequencies. You may enroll in this service by completing the appropriate election form that is
available from your financial professional. Additionally, you may authorize your financial professional to set up or change your AWS program, or to take one-time withdrawals to pay for the advisory fee. Once you have elected this service, it will
continue until you instruct us in writing to terminate it. Withdrawals under this AWS option and one-time withdrawals will be noted on your quarterly statement as an Advisory Fee Withdrawal. This AWS service may not be available through all
broker-dealers.
Advisory Fee Withdrawals may not impact benefits and
values provided under a Death Benefit or i4LIFE® Advantage if certain criteria are met. See the Death Benefit
sections of this prospectus for more information on how withdrawals affect these benefits. This Advisory Fee Withdrawal treatment may not be available in all states. Advisory Fee Withdrawals will not be treated as a distribution for federal tax
purposes, if certain conditions are met. See Federal Tax Matters – Payment of Investment Advisory Fees for more information. Regardless of how the Advisory Fee Withdrawal is treated for federal tax purposes, an Advisory Fee Withdrawal from the
contract will always reduce the Contract Value and Contract Value portion of the elected Death Benefit on a dollar for dollar basis.
For example, if your Account Value is $100,000, and your
annual Advisory Fee Withdrawals equal 1.00% of your Contract Value, your Advisory Fee is $1,000. Since your Advisory Fee Withdrawal percentage is under the Advisory Fee Withdrawal limit of 1.25%, your withdrawal will not be treated as a withdrawal,
and there is no negative impact to the guarantees under your Living Benefit Rider. If your annual Advisory Fee Withdrawals equal 1.30% of your Account Value, your Advisory Fee is $1,300. Since your Advisory Fee Withdrawal percentage is greater than
the Advisory Fee Withdrawal limit of 1.25%, the percentage of total advisory fees that exceed 1.25% will be treated as a withdrawal and will reduce the guarantees under your Living Benefit Rider.
Advisory Fee Withdrawals
You may elect to take withdrawals from your contract to
pay the advisory fees associated with your Fee-Based Financial Plan (Advisory Fee Withdrawals). This Advisory Fee Withdrawal treatment may not be available in states. You may take Advisory Fee Withdrawals of up to 1.25% annually without negatively
impacting your rider. Advisory Fee Withdrawals may not be available in all states and certain broker-dealers or advisory firms may not allow withdrawals to pay advisory fees, so please check with your financial professional.
Cumulative annual Advisory Fee Withdrawals up to 1.25%
of your Contract Value within a Contract Year will not be considered a withdrawal under your rider. We reserve the right to increase or decrease this percentage at any time. For cumulative annual Advisory Fee Withdrawals that exceed 1.25% of your
Contract Value within a Contract Year, the portion of the Advisory Fee Withdrawal over 1.25% will be treated as a withdrawal under your rider. Your Contract Value will be reduced by the amount of each Advisory Fee Withdrawal. The impact of Advisory
Fee Withdrawals on the i4LIFE® Advantage is explained below.
i4LIFE® Advantage
i4LIFE® Advantage (the Variable Annuity Payout Option Rider in your contract) is an optional Annuity Payout rider you may
purchase at an additional cost and is separate and distinct from other Annuity Payout options offered under your contract and described later in this prospectus. See Charges and Other Deductions – i4LIFE® Advantage Charge.
i4LIFE® Advantage provides variable, periodic Regular Income Payments for life subject to certain conditions. These payments are
made during two time periods: an Access Period and a Lifetime Income Period, which are discussed in further detail below. If your Account Value is reduced to zero (except by additional withdrawals as described below), these payments will continue
for your life (or the lives of you and your Secondary Life under the joint life option) during the Lifetime Income Period. i4LIFE® Advantage is different from other Annuity Payout options provided by Lincoln because with i4LIFE® Advantage, you have the ability to make additional withdrawals or surrender the contract during the Access Period. If your Account Value is reduced to zero due to any additional withdrawals (except for Advisory Fee
Withdrawals that are within the Advisory Fee Withdrawal percentage), i4LIFE® Advantage will end and your
contract will terminate.
When you elect i4LIFE® Advantage, you must choose the Annuitant and Secondary Life (if applicable). The Annuitant and Secondary Life may not be changed after i4LIFE® Advantage is elected. For qualified contracts, the Secondary Life must be the spouse. See i4LIFE® Advantage Death Benefit regarding the impact of a change to the Annuitant prior to the i4LIFE® Advantage election.
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If i4LIFE® Advantage is selected, the applicable transfer provisions among Subaccounts and the fixed account will continue to be those specified in your
annuity contract for transfers on or before the Annuity Commencement Date. However, once i4LIFE® Advantage
begins, any automatic withdrawal service will terminate (except an AWS service designated specifically for the purpose of Advisory Fee Withdrawals). See The Contracts – Transfers on or Before the Annuity Commencement Date.
Additional Purchase Payments may be made during the
Access Period for an IRA annuity contract, Additional Purchase Payments will not be accepted after the Periodic Income Commencement Date for a nonqualified annuity contract.
Availability. i4LIFE® Advantage is available for contracts with a Contract
Value of at least $50,000 and may be elected at the time of application or at any time before any other Annuity Payout option is elected by sending a written request to our Home Office.
i4LIFE® Advantage is available on nonqualified annuities, IRAs and Roth IRAs (check with your financial professional regarding
availability with SEP market). i4LIFE® Advantage for IRA contracts is only available if the Annuitant and
Secondary Life are age 59½ or older at the time the option is elected. i4LIFE® Advantage must be elected by
age 80 on IRA contracts or age 110 on nonqualified contracts. i4LIFE® Advantage is not available to
beneficiaries of IRA contracts. Additional limitations on issue ages and features may be necessary to comply with the IRC provisions for required minimum distributions.
When you elect i4LIFE® Advantage, you will receive a Death Benefit. The Earnings Optimizer Death Benefit is available in conjunction with i4LIFE® Advantage, however, the Earnings Optimizer Death Benefit must be elected at the time the contract is
purchased, regardless of when i4LIFE® Advantage is elected. An additional charge for i4LIFE® Advantage will apply. 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® Advantage began (if premium taxes have been
deducted from the Contract Value). See The Contracts – i4LIFE® Advantage Death Benefit.
Access Period. The
Access Period begins on the Periodic Income Commencement Date and is a defined period of time during which we pay variable, periodic Regular Income Payments and provide a Death Benefit. During this period, you may surrender the contract and make
withdrawals from your Account Value (defined below). The Lifetime Income Period begins immediately at the end of the Access Period, the remaining Account Value is used to make Regular Income Payments for the rest of your life (or the Secondary
Life if applicable). During the Lifetime Income Period, you will no longer be able to make withdrawals, including Advisory Fee Withdrawals, or surrenders or receive a Death Benefit. If your Account Value is reduced to zero because of Regular
Income Payments or market loss, your Access Period ends.
The minimum and maximum Access Periods are established
at the time you elect i4LIFE® Advantage. The current Access Period requirements are outlined in the following
chart:
| Minimum Access Period | Maximum Access Period | |
| i4LIFE® Advantage | 5 years | The length of time between your age and age 115 for nonqualified contracts; age 100 for qualified contracts |
| i4LIFE® Advantage with the Earnings Optimizer Death Benefit |
Longer of 20 years or the difference between your current age and age 90 |
To age 115 for nonqualified contracts; to age 100 for qualified contracts |
Generally, shorter Access Periods will produce a higher
initial Regular Income Payment than longer Access Periods. At any time during the Access Period, you may extend or shorten the length of the Access Period subject to Home Office approval. Additional restrictions may apply if you are under age 59½
when you request a change to the Access Period. Currently, if you extend the Access Period, it must be extended at least 5 years. If you change the Access Period, subsequent Regular Income Payments will be adjusted accordingly, and the Account
Value remaining at the end of the new Access Period will be applied to continue Regular Income Payments for your life. Currently, changes to the Access Period can only be made on Periodic Income Commencement Date anniversaries.
Additional limitations on issue ages and features may be
necessary to comply with the IRC provisions for required minimum distributions. We may reduce or terminate the Access Period for IRA i4LIFE® 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® Advantage is effective (or your initial Purchase Payment if i4LIFE® Advantage is purchased at contract issue), less any applicable premium taxes. During the Access Period, the Account Value on a Valuation Date will equal the total value of all of the Contractowner's Accumulation Units
plus the Contractowner's value in the fixed account, and will be reduced by Regular Income Payments made as well as any withdrawals taken. You will have access to your Account Value during the Access Period. 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.
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Regular Income Payments during the Access Period. i4LIFE® Advantage
provides for variable, periodic Regular Income Payments for as long as an Annuitant (or Secondary Life, if applicable) is living.
When you elect i4LIFE® Advantage, you will make several choices that will impact the amount of your Regular Income Payments:
| • | the date you will receive the initial Regular Income Payment; |
| • | the frequency of the payments (monthly, quarterly, semi-annually or annually); |
| • | the frequency the payment is recalculated; |
| • | the assumed investment return (AIR); and |
| • | the date the Access Period ends and the Lifetime Income Period begins. |
If you do not choose a payment frequency, the default is
a monthly payment frequency. In most states, you may also elect to have Regular Income Payments from nonqualified contracts recalculated only once each year rather than recalculated at the time of each payment. This results in level Regular Income
Payments between recalculation dates. Qualified contracts are only recalculated once per year, on December 31st (if not a Valuation Date, then on the
first Valuation Date of the calendar year).
Once Regular Income Payments begin, they will continue
until the death of the Annuitant or Secondary Life, if applicable.
AIR rates of 3%, 4%, 5%, or 6% may be available for
Regular Income Payments under i4LIFE® Advantage. Certain states limit the availability of 5% or 6% AIR. See
your financial professional for availability. The higher the AIR you choose, the higher your initial Regular Income Payment will be and the higher the return must be to increase subsequent Regular Income Payments.
Regular Income Payments must begin within one year of
the date you elect i4LIFE® Advantage and will continue until the death of the Annuitant or Secondary Life, if
applicable.
For information regarding income tax consequences of
Regular Income Payments, see Federal Tax Matters.
The initial Regular Income Payment is calculated from
the Account Value on a date no more than 14 days prior to the date you select to begin receiving Regular Income Payments. This calculation date is called the Periodic Income Commencement Date, and is the same date the Access Period begins. The
amount of the initial Regular Income Payment is determined by dividing the Contract Value (or Purchase Payment if elected at contract issue), less applicable premium taxes by 1,000 and multiplying the result by an annuity factor. The annuity factor
is based upon:
| • | the age and sex of the Annuitant and Secondary Life, if applicable; |
| • | the length of the Access Period selected; |
| • | the frequency of the Regular Income Payments; |
| • | the AIR selected; and |
| • | the Individual Annuity Mortality table specified in your contract. |
The annuity factor used to determine the Regular Income
Payments reflects the fact that, during the Access Period, you have the ability to withdraw the entire Account Value and that a Death Benefit will be paid to your Beneficiary upon your death. These benefits during the Access Period result in a
slightly lower Regular Income Payment, during both the Access Period and the Lifetime Income Period, than would be payable if this access was not permitted and no lump-sum Death Benefit was payable. (The Contractowner must elect an Access Period of
no less than the minimum Access Period which is currently set at 5 years.) The annuity factor also reflects the requirement that there be sufficient Account Value at the end of the Access Period to continue your Regular Income Payments for the
remainder of your life (and/or the Secondary Life if applicable), during the Lifetime Income Period, with no further access or Death Benefit.
The amount of your Regular Income Payment will be
impacted by the length of the Access Period you have chosen. For example, if a 70-year old male makes a $100,000 initial Purchase Payment, elects monthly payments, a 4% AIR, and a 20-year Access Period, the initial Regular Income Payment will be
$513.71 per month ($6,164.52 annually). Using the same assumptions, but with a 30-year Access Period, the initial Regular Income Payment will be $450.93 per month ($5,411.16 annually).
The Account Value will vary with the actual net
investment return of the Subaccounts selected and the interest credited on the fixed account, which then determines the subsequent Regular Income Payments during the Access Period. Each subsequent Regular Income Payment (unless the levelized option
is selected) is determined by dividing the Account Value on the applicable Valuation Date by 1,000 and multiplying this result by an annuity factor revised to reflect the declining length of the Access Period. As a result of this calculation, the
actual net returns in the Account Value are measured against the AIR to determine subsequent Regular Income Payments. If the actual net investment return (annualized) for the contract exceeds the AIR, the Regular Income Payment will increase at a
rate approximately equal to the amount of such excess. Conversely, if the actual net investment return for the contract is less than the AIR, the Regular Income Payment will decrease. For example, if net investment return is 3% higher (annualized)
than the AIR, the Regular Income Payment for the next year will increase by approximately 3%. Conversely, if actual net investment return is 3% lower than the AIR, the Regular Income Payment will decrease by approximately 3%.
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Withdrawals made during the Access Period will also
reduce the Account Value that is available for Regular Income Payments, and subsequent Regular Income Payments will be recalculated and could be increased or reduced, based on the Account Value following the withdrawal. Advisory Fee Withdrawals
less than 1.25% of your Account Value will not trigger a recalculation of your Regular Income Payments.
For a joint life option, if either the Annuitant or
Secondary Life dies during the Access Period, Regular Income Payments will be recalculated using a revised annuity factor based on the single surviving life, if doing so provides a higher Regular Income Payment. On
a joint life option, the Secondary Life spouse must be either the primary Beneficiary or joint owner in order to receive the remaining payments after the first spouse’s death.
For nonqualified contracts, if the Annuitant and
Secondary Life, if applicable, both die during the Access Period, the annuity factor will be revised for a non-life contingent Regular Income Payment and Regular Income Payments will continue until the Account Value is fully paid out and the Access
Period ends. For qualified contracts, if the Annuitant and Secondary Life, if applicable, both die during the Access Period, i4LIFE® Advantage will terminate.
Regular Income Payments during the Lifetime Income Period. The Lifetime Income Period begins at the end of the Access Period if either the Annuitant or Secondary Life is living. Your earlier elections regarding the frequency of Regular Income Payments, AIR and the frequency
of the recalculation do not change. The initial Regular Income Payment during the Lifetime Income Period is determined by dividing the Account Value on the last Valuation Date of the Access Period by 1,000 and multiplying the result by an annuity
factor revised to reflect that the Access Period has ended. The annuity factor is based upon:
| • | the age and sex of the Annuitant and Secondary Life (if living); |
| • | the frequency of the Regular Income Payments; |
| • | the AIR selected; and |
| • | the Individual Annuity Mortality table specified in your contract. |
The impact of the length of the Access Period and any
withdrawals made during the Access Period will continue to be reflected in the Regular Income Payments during the Lifetime Income Period. To determine subsequent Regular Income Payments, the contract is credited with a fixed number of Annuity Units
equal to the initial Regular Income Payment (during the Lifetime Income Period) divided by the Annuity Unit value (by Subaccount). Subsequent Regular Income Payments are determined by multiplying the number of Annuity Units per Subaccount by the
Annuity Unit value. Your Regular Income Payments will vary based on the value of your Annuity Units. If your Regular Income Payments are adjusted on an annual basis, the total of the annual payment is transferred to Lincoln Life's general account
to be paid out based on the payment mode you selected. Your payment(s) will not be affected by market performance during that year. Your Regular Income Payment(s) for the following year will be recalculated at the beginning of the following year
based on the current value of the Annuity Units.
Regular Income Payments will continue for as long as the
Annuitant or Secondary Life, if applicable, is living, and will continue to be adjusted for investment performance of the Subaccounts your Annuity Units are invested in (and the fixed account if applicable). Regular Income Payments vary with
investment performance.
During the Lifetime Income Period, there is no longer an
Account Value; therefore, no withdrawals are available and no Death Benefit is payable. In addition, transfers are not allowed from a fixed annuity payment to a variable annuity payment.
i4LIFE® Advantage Death Benefit
When you elect i4LIFE® Advantage, the Death Benefit option that you previously elected will become the Death Benefit election under i4LIFE® Advantage. 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® Advantage began (if premium taxes had been deducted from the Contract Value).
i4LIFE® Advantage Account Value Death Benefit. The i4LIFE® Advantage Account Value Death Benefit is only available
during the Access Period and is equal to the Account Value as of the Valuation Date on which we approve the payment of the death claim.
Earnings Optimizer Death Benefit. The Earnings Optimizer Death Benefit is available in conjunction with i4LIFE® Advantage, however, the Earnings Optimizer Death Benefit must be elected at the time the contract is
purchased, regardless of when i4LIFE® Advantage
is elected. Refer to the description of Earnings Optimizer Death Benefit in the Death Benefit section of this prospectus. All other provisions of this section will apply to Earnings Optimizer Death Benefit with i4LIFE® Advantage.
General Death Benefit Provisions. These Death Benefit options are only available during the Access Period and will terminate when the Account Value equals zero, because the Access Period terminates.
On a joint life option, the Secondary Life spouse must be
either the primary Beneficiary or joint owner in order to receive the remaining payments after the first spouse’s death.
For nonqualified contracts, upon the death of the
Contractowner, joint owner or Annuitant, the Contractowner (or Beneficiary) may elect to terminate the contract and receive full payment of the Death Benefit or may elect to continue the contract and receive Regular Income Payments. Upon the death
of the Secondary Life, who is not also an owner, only the surrender value is paid.
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If you are the owner of an IRA annuity contract, and
there is no Secondary Life, and you die during the Access Period, the i4LIFE® Advantage will terminate. A
spouse Beneficiary may start a new i4LIFE® Advantage program.
If a death occurs during the Access Period, the value of
the Death Benefit will be determined as of the Valuation Date we approve the payment of the claim. Approval of payment will occur upon our receipt of all the following:
| 1. | an original certified death certificate or any other proof of death satisfactory to us; and |
| 2. | written authorization for payment; and |
| 3. | all required claim forms, fully completed (including selection of a settlement option). |
Notwithstanding any provision of this contract to the
contrary, the payment of Death Benefits provided under this contract must be made in compliance with Code Section 72(s) or 401(a)(9) as applicable, as amended from time to time. Death Benefits may be taxable. See Federal Tax Matters.
Upon notification to us of the death, Regular Income
Payments may be suspended until the death claim is approved. Upon approval, a lump sum payment for the value of any suspended payments will be made as of the date the death claim is approved, and Regular Income Payments will continue, if
applicable.
If a lump sum settlement is elected, the proceeds will
be mailed within seven days of approval by us of the claim subject to the laws, regulations and tax code governing payment of Death Benefits. This payment may be postponed as permitted by the Investment Company Act of 1940.
Withdrawals. You may
request a withdrawal at any time prior to or during the Access Period. Any withdrawal will reduce your Account Value. All withdrawals except Advisory Fee Withdrawals less than 1.25% of your Account Value will trigger a recalculation of Regular
Income Payments. Withdrawals may have tax consequences. See Federal Tax Matters.
Surrender. At any time
prior to or during the Access Period, you may surrender the contract by withdrawing the surrender value. If the contract is surrendered, the contract terminates and no further Regular Income Payments will be made.
Termination. For IRA
contracts, you may terminate i4LIFE® 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. Upon termination, the i4LIFE® Advantage charge will end and the Base Contract Expense for the Account Value Death Benefit will resume. If
you have elected Earnings Optimizer Death Benefit, that charge will also resume. Your Contract Value upon termination will be equal to the Account Value on the Valuation Date we terminate i4LIFE® Advantage.
For nonqualified contracts, you may not terminate i4LIFE® Advantage once you have elected it.
Annuity Payouts
When you apply for a contract, you may select any
Annuity Commencement Date permitted by law, which is usually on or before the Annuitant's 99th birthday. Your broker-dealer may recommend that you
annuitize at an earlier age.
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. The
rates used to purchase any of the annuity options discussed below are shown in the contract. Lincoln Defined Outcome Funds are not available Subaccount options for annuitization.
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. Advisory Fee Withdrawals are not allowed after your contract is annuitized or during the Lifetime Income Period under i4LIFE® Advantage.
Annuity Options
The annuity options outlined below do not apply to
Contractowners who have elected i4LIFE® Advantage.
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. The Annuitant must be under age 81 to elect this option.
Life Annuity with Payouts Guaranteed for Designated
Period. This option guarantees periodic payouts during a designated period, usually 10 or 20 years, and then continues throughout the lifetime of the Annuitant. The designated period is selected by the
Contractowner.
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Joint Life Annuity. This
option offers a periodic payout during the joint lifetime of the Annuitant and a designated joint Annuitant. The payouts continue during the lifetime of the survivor. However, under a joint life annuity, if both Annuitants die before the
date set for the first payout, no payouts will be made. Only one payment would be made if both deaths occur before the second scheduled payout, and so on.
Joint Life Annuity with Guaranteed Period. This option guarantees periodic payouts during a designated period, usually 10 or 20 years, and continues during the joint lifetime of the Annuitant and a designated joint Annuitant. The payouts continue during the
lifetime of the survivor. The designated period is selected by the Contractowner.
Joint Life and Two Thirds to Survivor Annuity. This option provides a periodic payout during the joint lifetime of the Annuitant and a designated joint Annuitant. When one of the joint Annuitants dies, the survivor receives two thirds of the periodic payout made
when both were alive.
Joint Life and Two-Thirds Survivor Annuity with Guaranteed
Period. This option provides a periodic payout during the joint lifetime of the Annuitant and a joint Annuitant. When one of the joint Annuitants dies, the survivor receives two-thirds of the periodic payout made
when both were alive. This option further provides that should one or both of the Annuitants die during the elected guaranteed period, usually 10 or 20 years, full benefit payment will continue for the rest of the guaranteed period.
Unit Refund Life Annuity.
This option offers a periodic payout during the lifetime of the Annuitant with the guarantee that upon death a payout will be made of the value of the number of Annuity Units (see Variable Annuity Payouts) equal to the excess, if any, of:
| • | the total amount applied under this option divided by the Annuity Unit value for the date payouts begin, minus |
| • | the Annuity Units represented by each payout to the Annuitant multiplied by the number of payouts paid before death. |
The value of the number of Annuity Units is computed on
the date the death claim is approved for payment by the Home Office.
Life Annuity with Cash Refund. Fixed annuity benefit payments that will be made for the lifetime of the Annuitant with the guarantee that upon death, should (a) the total dollar amount applied to purchase this option be greater than (b) the fixed
annuity benefit payment multiplied by the number of annuity benefit payments paid prior to death, then a refund payment equal to the dollar amount of (a) minus (b) will be made.
Under the annuity options listed above, you may not make
withdrawals. Other options, with or without withdrawal features, may be made available by us. You may pre-select an Annuity Payout option as a method of paying the Death Benefit to a Beneficiary. If you do, the Beneficiary cannot change this payout
option. You may change or revoke in writing to our Home Office, any such selection, unless such selection was made irrevocable. If you have not already chosen an Annuity Payout option, the Beneficiary may choose any Annuity Payout option. At death,
options are only available to the extent they are consistent with the requirements of the contract as well as Sections 72(s) and 401(a)(9) of the tax code, if applicable.
General Information
Any previously selected Death Benefit in effect before the
Annuity Commencement Date will no longer be available on and after the Annuity Commencement Date. You may change the Annuity Commencement Date, change the annuity option or change the allocation of the investment
among Subaccounts up to 30 days before the scheduled Annuity Commencement Date, upon written notice to the Home Office. You must give us at least 30 days’ notice before the date on which you want payouts to begin. We may require proof of age,
sex, or survival of any payee upon whose age, sex, or survival payments depend.
Unless you select another option, the Contract
automatically provides for a life annuity with Annuity Payouts guaranteed for 10 years (on a fixed, variable or combination fixed and variable basis, in proportion to the account allocations at the time of annuitization) except when a joint life
payout is required by law. Under any option providing for guaranteed period payouts, the number of payouts which remain unpaid at the date of the Annuitant’s death (or surviving Annuitant’s death in case of joint life Annuity) will be paid to you
or your Beneficiary as payouts become due after we are in receipt of:
| • | proof, satisfactory to us, of the death; |
| • | written authorization for payment; and |
| • | all claim forms, fully completed. |
Variable Annuity Payouts
Variable Annuity Payouts will be determined using:
| • | the Contract Value on the Annuity Commencement Date, less any applicable premium taxes; |
| • | the annuity tables contained in the Contract; |
| • | the annuity option selected; and |
| • | 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 |
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| 2. | Credit the Contract with a fixed number of Annuity Units equal to the first periodic payout divided by the Annuity Unit value; and |
| 3. | Calculate the value of the Annuity Units each period thereafter. |
Annuity Payouts assume an investment return of 3%, 4%,
5% or 6% per year, as applied to the applicable mortality table. Some of these assumed interest rates may not be available in your state; therefore, please check with your financial professional. 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
net investment rate is less than the assumed rate, annuity payments will decrease. The higher the assumed interest rate, the less likely future annuity payments are to increase, or the payments will increase more slowly than if a lower assumed rate
was used. There is a more complete explanation of this calculation in the SAI.
Fixed Side of the Contract
You may allocate Purchase Payments to the fixed side of
the contract, if available. Allocations made to the fixed side of the contract are added to your Contract Value. Certain charges related to the contract and the charges for the riders are deducted from your Contract Value. Therefore, a portion of
those charges may be deducted from the fixed account. See the Charges and Other Deductions section of this prospectus for more information. Since amounts in the fixed account make up part of your Contract Value, those amounts may be used to
calculate benefits under the riders. See the riders section in this prospectus for more information.
Purchase Payments and Contract Value allocated to the
fixed side of the contract become part of our general account, and do not participate in the investment experience of the VAA. The general account is subject to regulation and supervision by the Indiana
Department of Insurance as well as the insurance laws and regulations of the jurisdictions in which the contracts are distributed.
In reliance on certain exemptions, exclusions and rules,
we have not registered interests in the general account as a security under the Securities Act of 1933 and have not registered the general account as an investment company under the 1940 Act. Accordingly, neither the general account nor any
interests in it are regulated under the 1933 Act or the 1940 Act. These disclosures, however, may be subject to certain provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses. This
prospectus is generally intended to serve as a disclosure document only for aspects of the contract involving the VAA, and therefore contains only selected information regarding the fixed side of the contract. Complete details regarding the fixed
side of the contract are in the contract.
We guarantee an annual effective interest rate of not
less than 0.15% per year on amounts held in a fixed account.
ANY INTEREST IN EXCESS OF 0.15% (OR THE GUARANTEED MINIMUM
INTEREST RATE STATED IN YOUR CONTRACT) WILL BE DECLARED IN ADVANCE AT OUR SOLE DISCRETION. CONTRACTOWNERS BEAR THE RISK THAT NO INTEREST IN EXCESS OF THE MINIMUM INTEREST RATE WILL BE DECLARED.
Your contract may not offer a fixed account or if
permitted by your contract, we may discontinue accepting Purchase Payments or transfers into the fixed side of the contract at any time. At this time, the fixed account is available for dollar cost averaging only. Please contact your financial
professional for further information.
Small Contract Surrenders
We may surrender your contract, in accordance with the
laws of your state if:
| • | 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; |
| • | no Purchase Payments have been received for two (2) full, consecutive Contract Years; and |
| • | the annuity benefit at the Annuity Commencement Date would be less than $20.00 per month (these requirements may differ in some states). |
At least 60 days before we surrender your contract, we
will send you a letter at your last address we have on file, to inform you that your contract will be surrendered. You will have the opportunity to make additional Purchase Payments to bring your Contract Value above the minimum level to avoid
surrender.
Delay of Payments
Contract proceeds from the VAA will be paid within seven
days, except:
| • | when the NYSE is closed (other than weekends and holidays); |
| • | times when market trading is restricted or the SEC declares an emergency, and we cannot value units or the funds cannot redeem shares; or |
| • | when the SEC so orders to protect Contractowners. |
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If, pursuant to SEC rules, an underlying money market
fund suspends payment of redemption proceeds in connection with a liquidation of the fund, we will delay payment of any transfer, partial withdrawal, surrender, loan, or Death Benefit from the money market subaccount until the fund is liquidated.
Payment of contract proceeds from the fixed account may be delayed for up to six months.
Due to federal laws designed to counter terrorism and
prevent money laundering by criminals, we may be required to reject a Purchase Payment and/or deny payment of a request for transfers, withdrawals, surrenders, or Death Benefits, until instructions are received from the appropriate regulator. We
also may be required to provide additional information about a Contractowner's account to government regulators.
Reinvestment Privilege
You may elect to make a reinvestment purchase with any
part of the proceeds of a surrender/withdrawal, including Advisory Fee Withdrawals, and we will recredit that portion of the surrender/withdrawal charges attributable to the amount returned.
This election must be made by your written authorization
to us on an approved Lincoln reinvestment form and received in our Home Office within 30 days of the date of the surrender/withdrawal, and the repurchase must be of a Contract covered by this prospectus. Lincoln reserves the right to not reinstate certain riders that were in effect prior to the surrender/withdrawal. In the case of a qualified retirement plan, a representation must be made that the proceeds being used to make the purchase have
retained their tax-favored status under an arrangement for which the Contracts offered by this prospectus are designed. The number of Accumulation Units which will be credited when the proceeds are reinvested will be based on the value of the
Accumulation Unit(s) on the next Valuation Date. This computation will occur following receipt of the proceeds and request for reinvestment at the Home Office. You may utilize the reinvestment privilege only once. For tax reporting purposes, we
will treat a surrender/withdrawal and a subsequent reinvestment purchase as separate transactions (and a Form 1099 may be issued, if applicable). Any taxable distribution that is reinvested may still be reported as taxable. You should consult a tax
advisor before you request a surrender/withdrawal or subsequent reinvestment purchase.
Amendment of Contract
We reserve the right to amend the Contract to meet the
requirements of the 1940 Act or other applicable federal or state laws or regulations. You will be notified in writing of any changes, modifications or waivers. Any changes are subject to prior approval of your state’s insurance department (if
required).
Distribution of the Contracts
Lincoln Financial Distributors, Inc. (“LFD”) serves as
Principal Underwriter of this contract. LFD is affiliated with Lincoln Life and is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934 and is a member of FINRA (Financial Industry Regulatory Authority). The
Principal Underwriter has entered into selling agreements with Lincoln Financial Advisors Corporation and/or Lincoln Financial Securities Corporation (collectively “LFN”), also affiliates of ours. The Principal Underwriter has also entered into
selling agreements with broker-dealers that are unaffiliated with us (“Selling Firms”). While the Principal Underwriter has the legal authority to make payments to broker-dealers which have entered into selling agreements, we will make such
payments on behalf of the Principal Underwriter in compliance with appropriate regulations. We also pay on behalf of LFD certain of its operating expenses related to the distribution of this and other of our contracts. The Principal Underwriter may
also offer “non-cash compensation”, as defined under FINRA’s rules, which includes among other things, merchandise, gifts, marketing support, sponsorships, seminars, entertainment and travel expenses.
The investment firm/professional providing services for
this product is compensated directly by advisory fees paid by the Contractowner. Lincoln is not a party to this arrangement. You may ask your financial professional how he/she will personally be compensated, in whole or in part, for the sale of the
contract to you or for any alternative proposal that may have been presented to you. You may wish to take such compensation payments into account when considering and evaluating any recommendation made to you in connection with the purchase of a
contract. The following paragraphs describe how payments are made by us and the Principal Underwriter to various parties.
Compensation Paid to LFN.
No commissions are paid in connection with the sale of this contract. However, Lincoln Life pays for the operating and other expenses of LFN, including the following sales expenses: financial professional training allowances; compensation and
bonuses for LFN's management team; advertising expenses; and all other expenses of distributing the contracts. LFN financial professionals and their managers are also eligible for various cash benefits, such as bonuses, insurance benefits and
financing arrangements. In addition, LFN financial professionals who meet certain productivity, persistency and length of service standards and/or their managers may be eligible for additional compensation. Sales of the contracts may help LFN
financial professionals and/or their managers qualify for such benefits. LFN financial professionals 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.
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Compensation Paid to Unaffiliated Selling Firms. No commissions are paid in connection with the sale of this contract. LFD also acts as wholesaler of the contracts and performs certain marketing and other functions in support of the distribution and servicing of
the contracts. LFD may pay certain Selling Firms or their affiliates additional amounts for, among other things: (1) “preferred product” treatment of the contracts in their marketing programs, which may include marketing services and increased
access to financial professionals; (2) sales incentives relating to the contracts; (3) costs associated with sales conferences and educational seminars for their financial professionals; (4) other sales expenses incurred by them; and (5)
inclusion in the financial products the Selling Firm offers.
Lincoln Life may provide loans to broker-dealers or
their affiliates to help finance marketing and distribution of the contracts, and those loans may be forgiven if aggregate sales goals are met. In addition, we may provide staffing or other administrative support and services to broker-dealers who
distribute the contracts. LFD, as wholesaler, may make bonus payments to certain Selling Firms based on aggregate sales of our variable insurance contracts (including the contracts) or persistency standards.
These additional types of compensation are not offered
to all Selling Firms. The terms of any particular agreement governing compensation may vary among Selling Firms and the amounts may be significant. The prospect of receiving, or the receipt of, additional compensation may provide Selling Firms
and/or their financial professionals with an incentive to favor sales of the contracts over other variable annuity contracts (or other investments) with respect to which a Selling Firm receives lower levels of or no additional compensation. You may
wish to take such payment arrangements into account when considering and evaluating any recommendation relating to the contracts. Additional information relating to compensation paid in 2020 is contained in the SAI.
Compensation Paid to Other Parties. Depending on the particular selling arrangements, there may be others whom LFD compensates for the distribution activities. For example, LFD may compensate certain “wholesalers”, who control access to certain selling
offices, for access to those offices or for referrals, and that compensation may be separate from the compensation paid for sales of the contracts. LFD may compensate marketing organizations, associations, brokers or consultants which provide
marketing assistance and other services to broker-dealers who distribute the contracts, and which may be affiliated with those broker-dealers. Other incentives or payments described above are not charged directly to Contractowners or the VAA. All
compensation is paid from our resources, which include fees and charges imposed on your contract.
Contractowner Questions
The obligations to purchasers under the Contracts are
those of Lincoln Life. This prospectus provides a general description of the material features of the Contract. Contracts, endorsements and riders may vary as required by state law. Questions about your Contract should be directed to us at
1-888-868-2583.
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 advisor about the
application of tax rules found in the Internal Revenue Code (“Code”), Treasury Regulations and applicable IRS guidance to your individual situation.
Nonqualified Annuities
This part of the discussion describes some of the
Federal income tax rules applicable to nonqualified annuities. A nonqualified annuity is a contract not issued in connection with a qualified retirement plan, such as an IRA or a section 403(b) plan, receiving special tax treatment under the Code.
We may not offer nonqualified annuities for all of our annuity products.
Tax Deferral On Earnings
Under the Code, you are generally not subject to tax on
any increase in your Contract Value until you receive a contract distribution. However, for this general rule to apply, certain requirements must be satisfied:
| • | An individual must own the Contract (or the Code must treat the Contract as owned by an individual). |
| • | The investments of the VAA must be “adequately diversified” in accordance with Treasury regulations. |
| • | Your right to choose particular investments for a Contract must be limited. |
| • | The Annuity Commencement Date must not occur near the end of the Annuitant’s life expectancy. |
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Contracts Not Owned By An Individual
If a contract is owned by an entity (rather than an
individual) the Code generally does not treat it as an annuity contract for Federal income tax purposes. This means that the entity owning the Contract pays tax currently on the excess of the Contract Value over the investment in the Contract.
Examples of contracts where the owner pays current tax on the Contract’s earnings, Large Account Credits if applicable, are Contracts issued to a corporation or a trust. Some exceptions to the rule are:
| • | 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; |
| • | 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; |
| • | Contracts acquired by an estate of a decedent; |
| • | Certain qualified contracts; |
| • | Contracts purchased by employers upon the termination of certain qualified plans; and |
| • | 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.” Treasury 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 investment in the Contract. Although we do not control the investments of the underlying investment options, we expect that the
underlying investment options will comply with the Treasury regulations so that the VAA will be considered “adequately diversified.”
Restrictions
The Code limits your right to choose particular
investments for the Contract. Because the IRS has issued little guidance specifying those limits, the limits are uncertain and your right to allocate Contract Values among the Subaccounts may exceed those limits. If so, you would be treated as the
owner of the assets of the VAA and thus subject to current taxation on the income, Large Account Credits and gains, if applicable, from those assets. We do not know what limits may be set by the IRS in any guidance that it may issue and whether any
such limits will apply to existing Contracts. We reserve the right to modify the Contract without your consent in an attempt to prevent you from being considered as the owner of the assets of the VAA for purposes of the Code.
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 may lose a portion of its deduction for otherwise deductible interest expenses. However, this rule does not apply to a contract owned by an entity
engaged in a trade or business that covers the life of one individual who is either (i) a 20% Owner of the entity, or (ii) an officer, director, or employee of the trade or business, at the time first covered by the Contract. This rule also does
not apply to a contract owned by an entity engaged in a trade or business that covers the joint lives of the 20% Owner or the entity and the Owner’s spouse at the time first covered by the Contract.
Age At Which Annuity Payouts Begin
The Code does not expressly identify a particular age by
which Annuity Payouts must begin. However, those rules do require that an annuity contract provide for amortization, through Annuity Payouts, of the contract’s Purchase Payments, Large Account Credits and earnings. As long as annuity payments begin
or are scheduled to begin on a date on which the Annuitant’s remaining life expectancy is enough to allow for a sufficient Annuity Payout period, the Contract should be treated as an annuity. If the annuity contract is not treated as an annuity,
you would be currently taxed on the excess of the Contract Value over the investment in the contract.
Tax Treatment Of Payments
We make no guarantees regarding the tax treatment of any
Contract or of any transaction involving a Contract. However, the rest of this discussion assumes that your Contract will be treated as an annuity under the Code and that any increase in your Contract Value will not be taxed until there is a
distribution from your Contract.
Taxation Of Withdrawals And Surrenders
You will pay tax on withdrawals to the extent your
Contract Value exceeds your investment 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). You will pay tax on a
surrender to the extent the amount you receive exceeds your investment in the Contract. In certain circumstances, your Purchase Payments and investment in the Contract are reduced by amounts received from your Contract that were not included in
income. Surrender and reinstatement of your Contract will generally be taxed as a withdrawal.
Payment of Investment Advisory Fees
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On August 6, 2019, the IRS issued a private letter
ruling (the “PLR”) to Lincoln that addressed the treatment of investment advisory fees (“Advisory Fee Withdrawals”) paid out of the cash value of a non-qualified annuity contract. The PLR concluded that if a Contractowner authorizes payment of
investment advisory fees out of the cash value of the non-qualified annuity contract, the payment of those fees will not be treated as a distribution to the Contractowner. In order for this treatment to apply, the investment advisory fees must be
determined based on an arms-length transaction between the Contractowner and the financial professional, and cannot exceed an amount equal to an annual rate of 1.50% of the non-qualified annuity contract’s cash value. The fees can only compensate
the financial professional for investment advice provided to the Contractowner with respect to the non-qualified annuity contract, and cannot compensate the financial professional for any other services. Effective for tax year 2019 and beyond, if
you have authorized Lincoln to pay fees from the cash value of your non-qualified annuity contract directly to your financial professional's firm, Lincoln will not treat the payment of such fees as a distribution from your contract if all the
conditions mentioned above are satisfied.
Taxation Of Annuity Payouts, including Regular Income
Payments
The Code imposes tax on a portion of each Annuity Payout
(at ordinary income tax rates) and treats a portion as a nontaxable return of your investment 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 investment in
the Contract, you will pay tax on the full amount of your Annuity Payouts. If Annuity Payouts end because of the Annuitant’s death and before the total amount in the Contract has been distributed, the amount not received will generally be
deductible. If withdrawals, other than Regular Income Payments, are taken from i4LIFE® Advantage during the Access Period, they are taxed subject to an exclusion ratio that is determined based on the amount of the payment.
Taxation Of Death Benefits
We may distribute amounts from your Contract because of
the death of a Contractowner or an Annuitant. The tax treatment of these amounts depends on whether the Contractowner or the Annuitant dies before or after the Annuity Commencement Date.
Death prior to the Annuity Commencement Date:
| • | If the Beneficiary receives Death Benefits under an Annuity Payout option, they are taxed in the same manner as Annuity Payouts. |
| • | 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:
| • | If Death Benefits are received in accordance with the existing Annuity Payout option following the death of a Contractowner who is not the Annuitant, they are excludible from income in the same manner as the Annuity Payout prior to the death of the Contractowner. |
| • | If Death Benefits are received in accordance with the existing Annuity Payout option following the death of the Annuitant (whether or not the Annuitant is also the Contractowner), the Death Benefits are excludible from income if they do not exceed the investment in the Contract not yet distributed from the Contract. All Annuity Payouts in excess of the investment in the Contract not previously received are includible in income. |
| • | If Death Benefits are received in a lump sum, the Code imposes tax on the amount of Death Benefits which exceeds the amount of Purchase Payments not previously received. |
Additional Taxes Payable On Withdrawals, Surrenders, Or
Annuity Payouts
The Code may impose a 10% additional tax on any
distribution from your Contract which you must include in your gross income. The 10% additional tax does not apply if one of several exceptions exists. These exceptions include withdrawals, surrenders, or Annuity Payouts that:
| • | you receive on or after you reach 59½, |
| • | you receive because you became disabled (as defined in the Code), |
| • | you receive from an immediate annuity, |
| • | a Beneficiary receives on or after your death, or |
| • | you receive as a series of substantially equal periodic payments based on your life or life expectancy (non-natural owners holding as agent for an individual do not qualify). |
Unearned Income Medicare Contribution
Congress enacted the “Unearned Income Medicare
Contribution” as a part of the Health Care and Education Reconciliation Act of 2010. This tax, which affects individuals whose modified adjusted gross income exceeds certain thresholds, is a 3.8% tax on the lesser of (i) the individual's “unearned
income,” or (ii) the dollar amount by which the individual's modified adjusted gross income exceeds the applicable threshold. Unearned income includes the taxable portion of distributions that you take from your annuity contract. If you take a
distribution from your Contract that may be subject to the tax, we will include a Distribution Code “D” in Box 7 of the Form 1099-R issued to report the distribution. Please consult your tax advisor to determine whether your annuity distributions
are subject to this tax.
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Special Rules If You Own More Than One Annuity Contract
In certain circumstances, you must combine some or all
of the nonqualified annuity contracts you own in order to determine the amount of an Annuity Payout, a surrender, or a withdrawal that you must include in income. For example, if you purchase two or more deferred annuity contracts from the same
life insurance company (or its affiliates) during any calendar year, the Code treats all such contracts as one contract. Treating two or more contracts as one contract could affect the amount of a surrender, a withdrawal or an Annuity Payout that
you must include in income and the amount that might be subject to the additional tax described previously.
Loans and Assignments
Except for certain qualified contracts, the Code treats
any amount received as a loan under your Contract, and any assignment or pledge (or agreement to assign or pledge) of any portion of your Contract Value, as a withdrawal of such amount or portion.
Gifting A Contract
If you transfer ownership of your Contract to a person
other than to your spouse (or to your former spouse incident to divorce), and receive a payment less than your Contract’s value, you will pay tax on your Contract Value to the extent it exceeds your investment in the Contract not previously
received. The new owner’s investment in the Contract would then be increased to reflect the amount included in income.
Charges for Additional Benefits
Your Contract automatically includes a basic Death
Benefit and may include other optional riders. Certain enhancements to the basic Death Benefit may also be available to you. The cost of the basic Death Benefit and any additional benefit are deducted from your Contract. It is possible that the tax
law may treat all or a portion of the Death Benefit and other optional rider charges, if any, as a contract withdrawal.
Special Considerations for Same-Sex Spouses
In 2013, the U.S. Supreme Court held that same-sex
spouses who are married under state law are treated as spouses for purposes of federal law. You are strongly encouraged to consult a tax advisor before electing spousal rights under the Contract.
Qualified Retirement Plans
We have designed the Contracts for use in connection
with certain types of retirement plans that receive favorable treatment under the Code. Contracts issued to or in connection with a qualified retirement plan are called “qualified contracts.” We issue Contracts for use with various types of
qualified retirement 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 retirement plans. Persons planning to use the Contract in connection with a qualified retirement plan should obtain advice from a competent tax advisor.
Types of Qualified Contracts and Terms of Contracts
Qualified retirement plans may include the following:
| • | Individual Retirement Accounts and Annuities (“Traditional IRAs”) |
| • | Roth IRAs |
| • | Traditional IRA that is part of a Simplified Employee Pension Plan (“SEP”) |
| • | SIMPLE 401(k) plans (Savings Incentive Matched Plan for Employees) |
| • | 401(a) / (k) plans (qualified corporate employee pension and profit-sharing plans) |
| • | 403(a) plans (qualified annuity plans) |
| • | 403(b) plans (public school system and tax-exempt organization annuity plans) |
| • | H.R. 10 or Keogh Plans (self-employed individual plans) |
| • | 457(b) plans (deferred compensation plans for state and local governments and tax-exempt organizations) |
Our individual variable annuity products are not
available for use with any of the foregoing qualified retirement plan accounts, with the exception of Traditional IRA, SEP IRA, and Roth IRA arrangements. We will amend contracts to be used with a qualified retirement plan as generally necessary to
conform to the Code’s requirements for the type of plan. However, the rights of a person to any qualified retirement 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 retirement plans to the extent such terms and conditions contradict the contract, unless we consent.
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The Setting Every Community Up for Retirement Enhancement
(SECURE) Act of 2019
The Setting Every Community Up for Retirement
Enhancement (SECURE) Act (the “SECURE Act”) was enacted on December 20, 2019. The SECURE Act made a number of significant changes to the rules that apply to qualified retirement plans and IRA’s, including the following:
| • | Increased the required beginning date measuring age from 70½ to 72 for any participant or IRA owner who did not attain age 70½ prior to January 1, 2020. As a result, required minimum distributions are generally required to begin by April 1 of the year following the year in which a participant or IRA owner reached age 72. |
| • | Eliminated the age 70½ limit for making contributions to an IRA. Beginning in 2020, an IRA owner can make contributions to his or her IRA at any age. |
| • | Changed the required minimum distribution rules that apply after the death of a participant or IRA owner. |
| • | Created the “Qualified Birth or Adoption” exception to the 10% additional tax on early distributions. |
Tax Treatment of Qualified Contracts
The Federal income tax rules applicable to qualified
retirement plans and qualified contracts vary with the type of plan and contract. For example:
| • | Federal tax rules limit the amount of Purchase Payments or contributions that can be made, and the tax deduction or exclusion that may be allowed for the contributions. These limits vary depending on the type of qualified retirement plan and the participant’s specific circumstances (e.g., the participant’s compensation). |
| • | Minimum annual distributions are required under some qualified retirement plans once you reach age 72 or retire, if later as described below. |
| • | Loans are allowed under certain types of qualified retirement plans, but Federal income tax rules prohibit loans under other types of qualified retirement 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. |
Please note that qualified retirement plans such as
403(b) plans, 401(k) plans and IRAs generally defer taxation of contributions and earnings until distribution. As such, an annuity does not provide any additional tax deferral benefit beyond the qualified retirement plan itself.
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 contributions 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 contributions to the Contract. 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 your “required beginning date”. Prior to the SECURE Act, the required beginning date was April 1 of the year following the year you attain age 70½ or retired. If you did not attain 70½ prior
to January 1, 2020, then your required beginning date will be April 1 of the year following the year in which you attain age 72 or retire. If you own a traditional IRA, your required beginning date under prior law was April 1 of the year following
the year in which you attained age 70½. If you did not attain age 70½ prior to January 1, 2020, then your required beginning date will be April 1 of the year following the year in which you attain age 72. 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 required minimum distribution exceeds the actual distribution from the qualified
plan.
Treasury regulations applicable to required minimum
distributions include a rule that may impact the distribution method you have chosen and the amount of your distributions. Under these regulations, the presence of an enhanced Death Benefit, or other benefit which could provide additional value to
your Contract, may require you to take additional distributions. An enhanced Death Benefit is any Death Benefit that has the potential to pay more than the Contract Value or a return of investment in the Contract. Annuity contracts inside Custodial
or Trusteed IRAs will also be subject to these regulations. Please contact your tax advisor regarding any tax ramifications.
Additional Tax on Early Distributions from Qualified
Retirement Plans
The Code may impose a 10% additional tax on an early
distribution from a qualified contract that must be included in income. The Code does not impose the additional tax if one of several exceptions applies. The exceptions vary depending on the type of qualified
41
contract you purchase. For example, in the case of an IRA, the 10%
additional tax will not apply to any of the following withdrawals, surrenders, or Annuity Payouts:
| • | Distribution received on or after the Annuitant reaches 59½, |
| • | Distribution received on or after the Annuitant’s death or because of the Annuitant’s disability (as defined in the Code), |
| • | Distribution received as a series of substantially equal periodic payments based on the Annuitant’s life (or life expectancy), |
| • | Distribution received as reimbursement for certain amounts paid for medical care, or |
| • | Distribution received for a “qualified birth or adoption” event. |
These exceptions, as well as certain others not
described here, generally apply to taxable distributions from other qualified retirement plans. However, the specific requirements of the exception may vary.
Unearned Income Medicare Contribution
Congress enacted the “Unearned Income Medicare
Contribution” as a part of the Health Care and Education Reconciliation Act of 2010. This tax affects individuals whose modified adjusted gross income exceeds certain thresholds, is a 3.8% tax on the lesser of (i) the individual’s “unearned
income,” or (ii) the dollar amount by which the individual’s modified adjusted gross income exceeds the applicable threshold. Distributions that you take from your Contract are not included in the calculation of unearned income because your
Contract is a qualified plan contract. However, the amount of any such distribution is included in determining whether you exceed the modified adjusted gross income threshold. Please consult your tax advisor to determine whether your annuity
distributions are subject to this tax.
Transfers and Direct Rollovers
As a result of the 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 advisor before you move or attempt to move any funds.
The IRS issued Announcement 2014-32 confirming its
intent to apply the one-rollover-per-year limitation of 408(d)(3)(B) on an aggregate basis to all IRAs that an individual owns. This means that an individual cannot make a tax-free IRA-to-IRA rollover if he or she has made such a rollover involving
any of the individual’s IRAs in the current tax year. If an intended rollover does not qualify for tax-free rollover treatment, contributions to your IRA may constitute excess contributions that may exceed contribution limits. This
one-rollover-per-year limitation does not apply to direct trustee-to-trustee transfers.
Direct Conversions and Recharacterizations
The Pension Protection Act of 2006 (PPA) permits direct
conversions from certain qualified, retirement, 403(b) or 457(b) plans to Roth IRAs (effective for distributions after 2007). You are also permitted to recharacterize your traditional IRA contribution as a Roth IRA contribution, and to
recharacterize your Roth IRA contribution as a traditional IRA contribution. The deadline for the recharacterization is the due date (including extensions) for your individual income tax return for the year in which the contribution was made. Upon
recharacterization, you are treated as having made the contribution originally to the second IRA account. The recharacterization does not count toward the one-rollover-per-year limitation described above.
Effective for tax years beginning after December 31,
2017, pursuant to the Tax Cuts and Jobs Act (Pub. L. No. 115-97), recharacterizations are no longer allowed in the case of a conversion from a non-Roth account or annuity to a Roth IRA. This limitation applies to conversions made from pre-tax
accounts under an IRA, qualified retirement plan, 403(b) plan, or 457(b) plan. Roth IRA conversions made in 2017 may be recharacterized as a contribution to a traditional IRA if the recharacterization is completed by October 15, 2018.
There are special rules that apply to conversions and
recharacterizations, and if they are not followed, you may incur adverse Federal income tax consequences. You should consult your tax advisor before completing a conversion or recharacterization.
Death Benefit and IRAs
Pursuant to Treasury 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.
42
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 in writing prior to the distribution that tax is not to be withheld. In certain circumstances, Federal income tax rules may require us to withhold tax. At the time a
withdrawal, surrender, or Annuity Payout is requested, we will give you an explanation of the withholding requirements.
Certain payments from your Contract may be considered
eligible rollover distributions (even if such payments are not being rolled over). Such distributions may be subject to special tax withholding requirements. The Federal income tax withholding rules require that we withhold 20% of the eligible
rollover distribution from the payment amount, unless you elect to have the amount directly transferred to certain qualified plans or contracts. The IRS requires that tax be withheld, even if you have requested otherwise. Such tax withholding
requirements are generally applicable to 401(a), 403(a) or (b), HR 10, and 457(b) governmental plans and contracts used in connection with these types of plans.
Our Tax Status
Under the Code, we are not required to pay tax on
investment income and realized capital gains of the VAA. We do not expect that we will incur any Federal income tax liability on the income and gains earned by the VAA. However, the Company does expect, to the extent permitted under the Code, to
claim the benefit of the foreign tax credit as the owner of the assets of the VAA. Therefore, we do not impose a charge for Federal income taxes. If there are any changes in the Code that require us to pay tax on some or all of the income and gains
earned by the VAA, we may impose a charge against the VAA to pay the taxes.
Changes in the Law
The above discussion is based on the Code, related
regulations, and interpretations existing on the date of this prospectus. However, Congress, the IRS, and the courts may modify these authorities, sometimes retroactively.
Additional Information
Voting Rights
As required by law, we will vote the fund shares held in
the VAA at meetings of the shareholders of the funds. The voting will be done according to the instructions of Contractowners who have interests in any Subaccounts which invest in classes of the funds. If the 1940 Act or any regulation under it
should be amended or if present interpretations should change, and if as a result we determine that we are permitted to vote the fund shares in our own right, we may elect to do so.
The number of votes which you have the right to cast
will be determined by applying your percentage interest in a Subaccount to the total number of votes attributable to the Subaccount. In determining the number of votes, fractional shares will be recognized.
Each underlying fund is subject to the laws of the state
in which it is organized concerning, among other things, the matters which are subject to a shareholder vote, the number of shares which must be present in person or by proxy at a meeting of shareholders (a “quorum”), and the percentage of such
shares present in person or by proxy which must vote in favor of matters presented. Because shares of the underlying fund held in the VAA are owned by us, and because under the 1940 Act we will vote all such shares in the same proportion as the
voting instructions which we receive, it is important that each Contractowner provide their voting instructions to us. For funds un-affiliated with Lincoln, even though Contractowners may choose not to provide voting instruction, the shares of a
fund to which such Contractowners would have been entitled to provide voting instruction will be voted by us in the same proportion as the voting instruction which we actually receive. For funds affiliated with Lincoln, shares of a fund to which
such Contractowners would have been entitled to provide voting instruction will, once we receive a sufficient number of instructions we deem appropriate to ensure a fair representation of Contractowners eligible to vote, be voted by us in the same
proportion as the voting instruction which we actually receive. As a result, the instruction of a small number of Contractowners could determine the outcome of matters subject to shareholder vote. All shares voted by us will be counted when the
underlying fund determines whether any requirement for a minimum number of shares be present at such a meeting to satisfy a quorum requirement has been met. Voting instructions to abstain on any item to be voted on will be applied proportionately
to reduce the number of votes eligible to be cast.
Whenever a shareholders meeting is called, we will
provide or make available to each person having a voting interest in a Subaccount proxy voting material, reports and other materials relating to the funds. Since the funds engage in shared funding, other persons or entities besides Lincoln Life may
vote fund shares. See Investments of the Variable Annuity Account.
Return Privilege
Within the free-look period after you receive the
Contract, you may cancel it for any. A Contract canceled under this provision will be void. Except as explained in the following paragraph, we will return the Contract Value as of the Valuation Date on which we receive the cancellation request,
plus any premium taxes which had been deducted. There are no additional Investment Requirements during
43
the free-look period other than as required under an elected optional
benefit. A purchaser who participates in the VAA is subject to the risk of a market loss on the Contract Value during the free-look period.
For Contracts written in those states whose laws require
that we assume this market risk during the free-look period, a Contract may be canceled, subject to the conditions explained before, except that we will return the greater of the Purchase Payment(s) or Contract Value as of the Valuation Date we
receive the cancellation request, plus any premium taxes that had been deducted. IRA purchasers will also receive the greater of Purchase Payments or Contract Value as of the Valuation Date on which we receive the cancellation request.
State Regulation
As a life insurance company organized and operated under
Indiana law, we are subject to provisions governing life insurers and to regulation by the Indiana Commissioner of Insurance. Our books and accounts are subject to review and examination by the Indiana Department of Insurance at all times. A full
examination of our operations is conducted by that Department at least every five years.
Records and Reports
As presently required by the 1940 Act and applicable
regulations, we are responsible for maintaining all records and accounts relating to the VAA. We have entered into an agreement with State Street Bank and Trust Company, 801 Pennsylvania Ave, Kansas City, MO 64105, to provide accounting services to
the VAA. We will mail to you, at your last known address of record at the Home Office, at least semi-annually after the first Contract Year, reports containing information required by that Act or any other applicable law or regulation.
A written (or electronic, if elected) confirmation of
each transaction will be provided to you on the next Valuation Date, except for the following transactions, which are mailed quarterly:
| • | deduction of any account fee or rider charges; |
| • | crediting of Large Account Credits, if applicable; |
| • | any rebalancing event under Investment Requirements or the portfolio rebalancing service; |
| • | any transfer or withdrawal under any applicable additional service: dollar cost averaging or AWS; and |
| • | Regular Income Payments from i4LIFE® Advantage. |
COVID-19
The health, economic and business conditions
precipitated by the worldwide COVID-19 pandemic during 2020 adversely affected, and during 2021 are expected to continue to adversely affect, our earnings as well as our business, results of operations and financial condition. As a result of the
pandemic and ensuing conditions, we have experienced and expect to continue to experience higher level of claims, which adversely affect our earnings. We may also experience an increase in activity such as surrenders of policies, missed premium
payments or 401(k) hardship withdrawals due to changes in consumer behavior as a result of financial stress. Because the vast majority of our employees continue to work from home, along with many of our vendors and customers, and such conditions
may continue well into 2021, our business operations may be adversely impacted, among other things, due to privacy incidents, cybersecurity incidents, technological issues or operational disruptions on the part of our vendors, and we may experience
distribution disruptions as we continue to sell our products virtually.
Other Information
You may elect to receive your prospectus, prospectus
supplements, quarterly statements, and annual and semiannual reports electronically over the Internet, if you have an e-mail account and access to an Internet browser. Once you select eDelivery, via the Internet Service Center, all documents
available in electronic format will no longer be sent to you in hard copy. You will receive an e-mail notification when the documents become available online. It is your responsibility to provide us with your current e-mail address. You can resume
paper mailings at any time without cost, by updating your profile at the Internet Service Center, or contacting us. To learn more about this service, please log on to www.LincolnFinancial.com, select service centers and continue on through the
Internet Service Center.
Legal Proceedings
In the ordinary course of its business and otherwise,
the Company or its separate accounts and Principal Underwriter may become or are involved in various pending or threatened regulatory or legal proceedings, including purported class actions, arising from the conduct of its business. In some
instances, the proceedings include claims for unspecified or substantial punitive damages and similar types of relief in addition to amounts for alleged contractual liability or requests for equitable relief.
After consultation with legal counsel and a review of
available facts, it is management’s opinion that the proceedings, after consideration of any reserves and rights to indemnification, ultimately will be resolved without materially affecting the consolidated financial
44
position of the Company, or the financial position of its separate
accounts or Principal Underwriter. However, given the large and indeterminate amounts sought in certain of these proceedings and the inherent difficulty in predicting the outcome of such proceedings, it is reasonably possible that an adverse
outcome in certain matters could be material to the Company's operating results for any particular reporting period. Please refer to the Statement of Additional Information for possible additional information regarding legal proceedings.
45
Appendix A— Funds Available Under The Contract
The following is a list of funds currently available
under the Contract. More information about the funds is available in the Fund’s prospectus, which may be amended from time to time and can be found online at www.lfg.com/VAprospectus. You can also request this information at no cost by calling
1-888-868-2583 or by sending an email request to [email protected].
The current expenses and performance information below
reflects fees and expenses of the Fund, but do not reflect the other fees and expenses that your Contract may charge. Expenses would be higher and performance would be lower if these other charges were included. Each fund’s past performance is not
necessarily an indication of future performance.
| Investment Objective | Fund and Adviser/Sub-adviser1 |
Current Expenses | Average Annual Total Returns (as of 12/31/2020) |
||
| 1 year | 5 year | 10 year | |||
| Seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the Alerian Energy Infrastructure Index. A master-feeder fund. | ALPS/Alerian Energy Infrastructure Portfolio - Class III | 1.30%2 | -25.12% | 0.40% | N/A |
| Maximize total return. | ALPS/Red Rocks Global Opportunity Portfolio - Class III | 2.38%2 | 9.25% | 12.51% | N/A |
| Long-term capital growth and current income by investing approximately 60% of its assets in equity securities and the remainder in bonds and other fixed-income securities. | American Century VP Balanced Fund - Class II | 1.11%2 | 12.27% | 9.32% | 8.60% |
| Long-term capital growth, income is secondary objective. | American Century VP Large Company Value Fund - Class II | 0.89%2 | 2.49% | 8.86% | 9.79% |
| High total return (including income and capital gains) consistent with preservation of capital over the long term. | American Funds Asset Allocation Fund - Class 4 |
0.80% | 12.16% | 10.31% | 9.74% |
| Seeks to provide a level of current income that exceeds the average yield on U.S. stocks generally and to provide a growing stream of income over the years. | American Funds Capital Income Builder® - Class 4 | 0.78%2 | 4.11% | 5.84% | N/A |
| Long-term growth of capital. | American Funds Global Growth Fund - Class 4 |
1.06% | 30.17% | 15.96% | 12.62% |
| Long-term capital growth. | American Funds Global Small Capitalization Fund - Class 4 |
1.24% | 29.39% | 14.15% | 9.17% |
| Growth of capital. | American Funds Growth Fund - Class 4 |
0.86% | 51.71% | 22.44% | 16.57% |
| Long-term growth of capital and income. | American Funds Growth-Income Fund - Class 4 |
0.80% | 13.25% | 13.65% | 12.47% |
| Long-term growth of capital. | American Funds International Fund - Class 4 |
1.05% | 13.66% | 10.45% | 6.43% |
| To provide current income and preservation of capital. | American Funds Mortgage Fund - Class 4 |
0.77%2 | 6.38% | 2.82% | N/A |
| Long-term capital appreciation. | American Funds New World Fund® - Class 4 |
1.09%2 | 23.29% | 13.05% | 6.33% |
A-1
| Investment Objective | Fund and Adviser/Sub-adviser1 |
Current Expenses | Average Annual Total Returns (as of 12/31/2020) |
||
| 1 year | 5 year | 10 year | |||
| To produce income exceeding the average yield on U.S. stocks generally and to provide an opportunity for growth of principal consistent with sound common stock investing. | American Funds Washington Mutual Investors Fund - Class 4 |
0.77%2 | 8.47% | 10.58% | 10.68% |
| High total investment return. | BlackRock Global Allocation V.I. Fund - Class III | 1.01%2 | 20.71% | 9.17% | 6.61% |
| Capital appreciation. | ClearBridge Variable Aggressive Growth Portfolio - Class II | 1.05% | 17.73% | 9.47% | 12.71% |
| Long-term growth of capital. | ClearBridge Variable Large Cap Growth Portfolio - Class II | 1.01% | 30.41% | N/A | N/A |
| Long-term growth of capital. | ClearBridge Variable Mid Cap Portfolio - Class II | 1.10% | 15.10% | 10.33% | 10.76% |
| Total return. | Columbia VP Commodity Strategy Fund - Class 2 | 0.95% | -1.55% | 0.80% | N/A |
| High total return through current income and, secondarily, through capital appreciation. | Columbia VP Emerging Markets Bond Fund - Class 2 | 0.99% | 7.16% | 6.66% | N/A |
| Total return, consisting of current income and capital appreciation. | Columbia VP Strategic Income Fund - Class 2 | 0.94%2 | 6.62% | 6.16% | 5.03% |
| Long-term capital appreciation. | Delaware VIP® Emerging Markets Series - Service Class3 | 1.53%2 | 24.69% | 15.33% | 4.82% |
| Capital appreciation. | Delaware VIP® Small Cap Value Series - Service Class3 | 1.08% | -2.18% | 8.74% | 8.38% |
| To provide a high level of current income. | Eaton Vance VT Floating-Rate Income Fund - Initial Class | 1.20% | 2.01% | 4.23% | 3.42% |
| Income and capital growth consistent with reasonable risk. A fund of funds. | Fidelity® VIP Balanced Portfolio - Service Class 2 | 0.73% | 22.13% | 12.47% | 10.10% |
| Long-term capital appreciation. | Fidelity® VIP Contrafund® Portfolio - Service Class 2 | 0.86% | 30.23% | 15.89% | 13.23% |
| To achieve capital appreciation. | Fidelity® VIP Growth Portfolio - Service Class 2 | 0.87% | 43.55% | 21.02% | 16.96% |
| Long-term growth of capital. | Fidelity® VIP Mid Cap Portfolio - Service Class 2 | 0.87% | 17.87% | 10.79% | 9.22% |
| High level of current income, and may also seek capital appreciation. | Fidelity® VIP Strategic Income Portfolio - Service Class 2 | 0.92% | 7.16% | 6.01% | 4.57% |
| To provide capital appreciation. | First Trust Capital Strength Portfolio – Class I | 1.10%2 | N/A | N/A | N/A |
| To provide total return. | First Trust Dorsey Wright Tactical Core Portfolio – Class I | 1.30%2 | 11.09% | 7.92% | N/A |
| To provide capital appreciation. | First Trust International Developed Capital Strength Portfolio – Class I | 1.20%2 | N/A | N/A | N/A |
| To maximize current income, with a secondary objective of capital appreciation. | First Trust Multi Income Allocation Portfolio - Class I | 1.10%2 | 2.49% | 5.73% | N/A |
| To provide total return by allocating among dividend-paying stocks and investment grade bonds. | First Trust/Dow Jones Dividend & Income Allocation Portfolio - Class I | 1.20%2 | 7.81% | 9.44% | N/A |
A-2
| Investment Objective | Fund and Adviser/Sub-adviser1 |
Current Expenses | Average Annual Total Returns (as of 12/31/2020) |
||
| 1 year | 5 year | 10 year | |||
| Capital appreciation, with income as a secondary goal, by allocating its assets among equity and fixed income investments through a variety of investment strategies. | Franklin Allocation VIP Fund - Class 4 | 0.92%2 | 11.75% | 8.80% | 7.48% |
| To maximize income while maintaining prospects for capital appreciation. | Franklin Income VIP Fund - Class 4 |
0.82%2 | 0.58% | 6.83% | 5.88% |
| Long-term capital appreciation; preservation of capital is also an important consideration. | Franklin Rising Dividends VIP Fund - Class 4 | 1.00% | 15.85% | 14.65% | 12.25% |
| Long-term total return. | Franklin Small Cap Value VIP Fund - Class 4 | 1.03% | 5.13% | 10.68% | 9.10% |
| Long-term capital growth. | Franklin Small-Mid Cap Growth VIP Fund - Class 4 | 1.20%2 | 55.01% | 19.41% | 13.93% |
| Long-term capital appreciation. | Guggenheim VT Long Short Equity | 1.73% | 4.93% | 2.19% | 2.89% |
| To seek long-term capital appreciation with less risk than traditional equity funds. | Guggenheim VT Multi-Hedge Strategies | 1.86%2 | 7.39% | 2.01% | 2.38% |
| Capital appreciation. | Invesco Oppenheimer V.I. International Growth Fund - Series II Shares | 1.25%2 | 21.04% | 8.92% | 7.57% |
| To seek capital growth and income through investments in equity securities, including common stocks, preferred stocks and securities convertible into common and preferred stocks. | Invesco V.I. Comstock Fund - Series II Shares | 1.01% | -1.09% | 8.30% | 9.18% |
| To seek to provide reasonable current income and long-term growth of income and capital. | Invesco V.I. Diversified Dividend Fund - Series II Shares | 0.96% | -0.13% | 7.35% | 9.71% |
| Both capital appreciation and current income. | Invesco V.I. Equity and Income Fund - Series II Shares | 0.82%2 | 9.65% | 8.61% | 8.29% |
| Long-term growth of capital. | Invesco V.I. International Growth Fund - Series II Shares | 1.17% | 13.74% | 8.55% | 6.46% |
| Capital appreciation. | Invesco V.I. Main Street Small Cap Fund®- Series II Shares | 1.05%2 | 19.64% | 12.59% | 11.85% |
| Total return. | Ivy VIP Asset Strategy Portfolio - Class II advised by Delaware Management Company |
1.02% | 13.88% | 8.61% | 6.15% |
| Capital growth and appreciation. | Ivy VIP Energy Portfolio - Class II advised by Delaware Management Company |
1.38% | -36.83% | -12.74% | -8.42% |
| To seek to provide total return through a combination of high current income and capital appreciation. | Ivy VIP High Income Portfolio - Class II advised by Delaware Management Company |
0.97% | 6.03% | 7.42% | 6.52% |
| Growth of capital. | Ivy VIP Mid Cap Growth Portfolio - Class II advised by Delaware Management Company |
1.10%2 | 49.00% | 22.57% | 15.22% |
A-3
| Investment Objective | Fund and Adviser/Sub-adviser1 |
Current Expenses | Average Annual Total Returns (as of 12/31/2020) |
||
| 1 year | 5 year | 10 year | |||
| Growth of capital. | Ivy VIP Science and Technology Portfolio - Class II advised by Delaware Management Company |
1.16% | 35.36% | 20.80% | 17.09% |
| Growth of capital. | Ivy VIP Small Cap Growth Portfolio - Class II advised by Delaware Management Company |
1.15%2 | 37.66% | 15.59% | 11.15% |
| To maximize total return by investing primarily in a diversified portfolio of intermediate- and long-term debt securities. | JPMorgan Insurance Trust Core Bond Portfolio - Class 2 | 0.81% | 7.68% | 4.04% | 3.61% |
| To provide returns that track those of the Nasdaq-100® Index (“Index”) up to a cap, while providing a buffer against losses. A fund of funds. | Lincoln Nasdaq-100 Buffer Fund Jun - Service Class5 | 1.20%2 | N/A | N/A | N/A |
| To provide returns that track those of the S&P 500 PriceReturn Index (“Index”) up to a cap, while providing a buffer against losses. A fund of funds. | Lincoln S&P 500 Buffer Fund May - Service Class5 | 1.05%2 | N/A | N/A | N/A |
| To provide returns that track those of the S&P 500 PriceReturn Index (“Index”) up to a cap, while providing a buffer against losses. A fund of funds. | Lincoln S&P 500 Ultra Buffer Fund May - Service Class5 | 1.05%2 | N/A | N/A | N/A |
| To seek high current income and the opportunity for capital appreciation to produce a high total return. | Lord Abbett Series Fund Bond Debenture Portfolio - Class VC | 0.91% | 7.30% | 7.41% | 6.44% |
| To seek high level of income consistent with preservation of capital. | Lord Abbett Series Fund Short Duration Income Portfolio - Class VC | 0.86% | 3.13% | 2.99% | N/A |
| A balance between a high level of current income and growth of capital, with an emphasis on growth of capital. A fund of funds. | LVIP American Balanced Allocation Fund - Service Class | 0.94%2 | 15.97% | 9.49% | 7.58% |
| A balance between a high level of current income and growth of capital, with a greater emphasis on growth of capital. A fund of funds. | LVIP American Growth Allocation Fund - Service Class | 0.96%2 | 16.79% | 10.37% | 8.24% |
| Current income, consistent with the preservation of capital. A fund of funds. | LVIP American Preservation Fund - Service Class | 0.85%2 | 5.44% | 2.56% | N/A |
| Capital appreciation. | LVIP Baron Growth Opportunities Fund - Service Class | 1.18%2 | 34.08% | 18.73% | 15.04% |
| Total return through a combination of current income and long-term capital appreciation. | LVIP BlackRock Global Real Estate Fund - Service Class | 1.06%2 | -2.45% | 4.41% | 4.95% |
| To maximize real return, consistent with preservation of real capital and prudent investment management. | LVIP BlackRock Inflation Protected Bond Fund - Service Class | 0.74% | 5.02% | 3.16% | 2.38% |
| Maximum current income (yield) consistent with a prudent investment strategy. | LVIP Delaware Bond Fund - Service Class3 | 0.72% | 9.48% | 4.62% | 3.92% |
A-4
| Investment Objective | Fund and Adviser/Sub-adviser1 |
Current Expenses | Average Annual Total Returns (as of 12/31/2020) |
||
| 1 year | 5 year | 10 year | |||
| Total return. | LVIP Delaware Diversified Floating Rate Fund - Service Class3 | 0.88%2 | 1.12% | 1.94% | 1.30% |
| Maximum long-term total return consistent with reasonable risk. | LVIP Delaware Diversified Income Fund - Service Class3 | 0.84%2 | 10.69% | 5.22% | 4.10% |
| Total return and, as a secondary objective, high current income. | LVIP Delaware High Yield Fund - Service Class3 |
1.04%2 | 6.89% | 7.44% | 5.67% |
| Maximum total return, consistent with reasonable risk. | LVIP Delaware Limited-Term Diversified Income Fund - Service Class3 |
0.83%2 | 4.12% | 2.51% | 1.83% |
| To maximize long-term capital appreciation. | LVIP Delaware Mid Cap Value Fund - Service Class3 |
0.79% | 0.16% | 9.26% | 9.18% |
| Maximum long-term total return, with capital appreciation as a secondary objective. | LVIP Delaware REIT Fund - Service Class3 | 1.13%2 | -10.64% | 2.26% | 6.99% |
| Long-term capital appreciation. | LVIP Delaware SMID Cap Core Fund - Service Class3 | 1.10%2 | 10.74% | 9.90% | 11.54% |
| To maximize long-term capital appreciation. | LVIP Delaware Social Awareness Fund - Service Class3 | 0.80% | 19.27% | 13.68% | 12.89% |
| Long-term capital appreciation. | LVIP Delaware U.S. Growth Fund - Service Class3 | 1.03% | 43.69% | 16.37% | 15.51% |
| Long-term capital appreciation. | LVIP Delaware Value Fund - Service Class3 | 0.99%2 | 0.13% | 8.56% | 11.00% |
| Long-term capital appreciation. | LVIP Dimensional International Core Equity Fund - Service Class | 0.87%2 | 6.61% | 6.95% | N/A |
| Long-term capital appreciation. | LVIP Dimensional U.S. Core Equity 1 Fund - Service Class | 0.75%2 | 16.00% | 13.80% | 12.45% |
| Long-term capital appreciation. | LVIP Dimensional U.S. Core Equity 2 Fund - Service Class | 0.74%2 | 15.05% | 12.87% | N/A |
| Current income consistent with the preservation of capital. | LVIP Global Income Fund - Service Class | 0.95%2 | 6.52% | 3.91% | 2.37% |
| Current income while (i)maintaining a stable value of your shares (providing stability of net asset value) and (ii) preserving the value of your initial investment (preservation of capital). | LVIP Government Money Market Fund - Service Class | 0.67% | 0.21% | 0.62% | 0.32% |
| A high level of current income; capital appreciation is the secondary objective. | LVIP JPMorgan High Yield Fund - Service Class | 0.93%2 | 5.30% | 6.71% | 5.45% |
| To provide investment results over a full market cycle that, before fees and expenses, are superior to an index that tracks global equities. | LVIP Loomis Sayles Global Growth Fund - Service Class | 1.12% | 34.32% | N/A | N/A |
| Long-term capital appreciation. | LVIP MFS International Growth Fund - Service Class | 1.04%2 | 14.25% | 12.16% | 7.50% |
| Capital appreciation. | LVIP MFS Value Fund - Service Class | 0.92% | 3.40% | 9.93% | 10.66% |
| Long-term capital appreciation as measured by the change in the value of fund shares over a period of three years or longer. | LVIP Mondrian International Value Fund - Service Class | 1.03% | -5.21% | 4.39% | 3.92% |
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| Investment Objective | Fund and Adviser/Sub-adviser1 |
Current Expenses | Average Annual Total Returns (as of 12/31/2020) |
||
| 1 year | 5 year | 10 year | |||
| To seek a high level of current income consistent with preservation of capital. | LVIP PIMCO Low Duration Bond Fund - Service Class | 0.79%2 | 3.83% | 2.32% | N/A |
| To match as closely as practicable, before fees and expenses, the performance of the Barclays Capital U.S. Aggregate Index. | LVIP SSGA Bond Index Fund - Service Class | 0.59%2 | 7.23% | 3.86% | 3.24% |
| A high level of current income, with some consideration given to growth of capital. A fund of funds. | LVIP SSGA Conservative Index Allocation Fund - Service Class | 0.76%2 | 11.91% | 7.19% | 5.66% |
| A high level of current income, with some consideration given to growth of capital. A fund of funds. | LVIP SSGA Conservative Structured Allocation Fund - Service Class | 0.82% | 9.40% | 6.50% | 5.27% |
| To maximize long-term capital appreciation. | LVIP SSGA Developed International 150 Fund - Service Class | 0.65%2 | -4.34% | 4.67% | 3.71% |
| To maximize long-term capital appreciation. | LVIP SSGA Emerging Markets 100 Fund - Service Class | 0.69%2 | 2.40% | 6.46% | 0.08% |
| A balance between current income and growth of capital, with a greater emphasis on growth of capital. | LVIP SSGA Emerging Markets Equity Index Fund - Service Class | 0.75%2 | 16.91% | N/A | N/A |
| To approximate as closely as practicable, before fees and expenses, the performance of a broad market index of non-U.S. foreign securities. | LVIP SSGA International Index Fund - Service Class |
0.62%2 | 7.58% | 7.07% | 4.93% |
| To maximize long-term capital appreciation. | LVIP SSGA Large Cap 100 Fund - Service Class | 0.61%2 | 2.72% | 10.68% | 11.03% |
| Seek to approximate as closely as practicable, before fees and expenses, the performance of a broad market index that emphasizes stocks of mid-sized U.S. companies. | LVIP SSGA Mid-Cap Index Fund - Service Class | 0.59%2 | 12.90% | 11.68% | N/A |
| A balance between a high level of current income and growth of capital, with a greater emphasis on growth of capital. A fund of funds. | LVIP SSGA Moderate Index Allocation Fund - Service Class | 0.76% | 13.55% | 8.76% | 6.84% |
| A balance between a high level of current income and growth of capital, with an emphasis on growth of capital. A fund of funds. | LVIP SSGA Moderate Structured Allocation Fund - Service Class | 0.79% | 9.59% | 7.75% | 6.30% |
| A balance between high level of current income and growth of capital, with a greater emphasis on growth of capital. A fund of funds. | LVIP SSGA Moderately Aggressive Index Allocation Fund - Service Class | 0.76% | 13.99% | 9.46% | 7.16% |
| A balance between high level of current income and growth of capital, with a greater emphasis on growth of capital. A fund of funds. | LVIP SSGA Moderately Aggressive Structured Allocation Fund - Service Class | 0.81% | 9.01% | 8.11% | 6.45% |
| The highest total return over time consistent with an emphasis on both capital growth and income. | LVIP SSGA Nasdaq-100 Index Fund - Service Class | 0.70%2 | N/A | N/A | N/A |
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| Investment Objective | Fund and Adviser/Sub-adviser1 |
Current Expenses | Average Annual Total Returns (as of 12/31/2020) |
||
| 1 year | 5 year | 10 year | |||
| To approximate as closely as practicable, before fees and expenses, the total rate of return of common stocks publicly traded in the United States, as represented by the S&P 500 Index. | LVIP SSGA S&P 500 Index Fund - Service Class4 | 0.48% | 17.74% | 14.66% | 13.32% |
| To provide investment results that, before fees and expenses, correspond generally to the price and yield performance of an index that tracks the short-term U.S. corporate bond market. | LVIP SSGA Short-Term Bond Index Fund - Service Class | 0.61%2 | 3.40% | N/A | N/A |
| To approximate as closely as practicable, before fees and expenses, the performance of the Russell 2000® Index, which emphasizes stocks of small U.S. companies. | LVIP SSGA Small-Cap Index Fund - Service Class | 0.63%2 | 18.90% | 12.45% | 10.45% |
| To maximize long-term capital appreciation. | LVIP SSGA Small-Mid Cap 200 Fund - Service Class | 0.65%2 | 5.72% | 8.47% | 7.99% |
| Long-term capital growth. | LVIP T. Rowe Price Growth Stock Fund - Service Class | 0.92%2 | 36.13% | 18.81% | 16.37% |
| To maximize capital appreciation. | LVIP T. Rowe Price Structured Mid-Cap Growth Fund - Service Class | 0.98%2 | 31.37% | 18.37% | 14.70% |
| Total return consistent with the preservation of capital. A fund of funds. | LVIP Vanguard Bond Allocation Fund - Service Class | 0.63% | 5.42% | 3.32% | N/A |
| Long-term capital appreciation. A fund of funds. | LVIP Vanguard Domestic Equity ETF Fund - Service Class | 0.57%2 | 19.53% | 14.58% | N/A |
| Long-term capital appreciation. A fund of funds. | LVIP Vanguard International Equity ETF Fund - Service Class | 0.60%2 | 10.61% | 8.72% | N/A |
| Capital growth. | LVIP Wellington Capital Growth Fund - Service Class | 0.96%2 | 42.67% | 22.45% | 17.18% |
| Long-term capital appreciation. | LVIP Wellington SMID Cap Value Fund - Service Class | 1.08%2 | 1.52% | 7.55% | 8.63% |
| Maximize total return. | LVIP Western Asset Core Bond Fund - Service Class | 0.76% | 8.73% | N/A | N/A |
| Capital appreciation. | MFS® VIT Growth Series - Service Class | 0.98% | 31.54% | 19.98% | 16.50% |
| Capital appreciation. | MFS® VIT II International Intrinsic Value Portfolio - Service Class | 1.15%2 | 20.21% | 12.42% | 10.87% |
| Total return. | MFS® VIT Total Return Series - Service Class | 0.86%2 | 9.52% | 8.58% | 8.07% |
| Total return. | MFS® VIT Utilities Series - Service Class | 1.04% | 5.62% | 11.10% | 8.93% |
| To seek both capital appreciation and current income. | Morgan Stanley VIF Global Infrastructure Portfolio - Class II | 1.12%2 | -1.43% | 8.48% | 9.17% |
| Maximum real return, consistent with preservation of real capital and prudent investment management. A fund of funds. | PIMCO VIT All Asset Portfolio - Advisor Class | 1.38%2 | 7.91% | 7.85% | 4.55% |
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| Investment Objective | Fund and Adviser/Sub-adviser1 |
Current Expenses | Average Annual Total Returns (as of 12/31/2020) |
||
| 1 year | 5 year | 10 year | |||
| Balanced investment composed of a well-diversified portfolio of stocks and bonds which produce both capital growth and current income. | Putnam VT George Putnam Balanced Fund - Class IB | 0.93% | 15.41% | 11.52% | 9.92% |
| Capital appreciation. | Putnam VT Global Health Care Fund - Class IB | 1.02% | 16.28% | 9.01% | 13.74% |
| High current income consistent with what the manager believes to be prudent risk. | Putnam VT Income Fund - Class IB | 0.82% | 5.73% | 5.01% | 4.72% |
| Capital growth and current income. | Putnam VT Large Cap Value Fund - Class IB | 0.82% | 5.80% | 11.25% | 11.60% |
| To seek positive total return. | Putnam VT Multi-Asset Absolute Return Fund - Class IB | 1.19%2 | -7.38% | -0.53% | N/A |
| Long-term capital growth. | Templeton Foreign VIP Fund - Class 4 | 1.21%2 | -1.34% | 3.20% | 2.31% |
| High current income consistent with preservation of capital; capital appreciation is a secondary objective. | Templeton Global Bond VIP Fund - Class 4 | 0.84%2 | -5.35% | 0.56% | 1.46% |
| Long-term capital appreciation by investing primarily in global resource securities. A fund of funds. | VanEck VIP Global Resources Fund - Class S Shares | 1.38% | 18.83% | 5.93% | -3.83% |
| Long-term total return. | Virtus Newfleet Multi-Sector Intermediate Bond Series - Class A Shares | 0.93% | 6.53% | 5.97% | 4.97% |
| 1 | The name of the adviser or sub-adviser is not listed if the name is incorporated into the name of the fund or the fund company. |
| 2 | This fund is subject to an expense reimbursement or fee waiver arrangement. As a result, this funds annual expenses reflect temporary expense reductions. See the fund prospectus for additional information. |
| 3 | Investments in Delaware VIP Series, Delaware Funds, LVIP Delaware Funds or Lincoln Life accounts managed by Macquarie Investment Management Advisers, a series of Macquarie Investments Management Business Trust, are not and will not be deposits with or liabilities of Macquarie Bank Limited ABN 46008 583 542 and its holding companies, including their subsidiaries or related companies, and are subject to investment risk, including possible delays in prepayment and loss of income and capital invested. No Macquarie Group company guarantees or will guarantee the performance of the series or funds or accounts, the repayment of capital from the series or funds or account, or any particular rate of return. |
| 4 | The index to which this fund is managed is a product of S&P Dow Jones Indices LLC (“SPDJI”) and has been licensed for use by one or more of the portfolio’s service providers (licensee). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (S&P); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by the licensees. S&P®, S&P GSCI® and the index are trademarks of S&P and have been licensed for use by SPDJI and its affiliates and sublicensed for certain purposes by the licensee. The Index is not owned, endorsed, or approved by or associated with any additional third party. The licensee’s products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, or their third party licensors, and none of these parties or their respective affiliates or third party licensors make any representation regarding the advisability of investing in such products, nor do they have any liability for any errors, omissions, or interruptions of the Index. |
| 5 | Buffer funds employ a strategy to provide buffer protection, which includes a capped upside return risk and an outcome period risk. These strategies could limit the upside participation of the fund in rising equity markets relative to other funds and provide limited protection in the event of a market downturn. This may conflict with your investment objectives by limiting your ability to maximize growth of your Contract Value and the value. |
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Appendix B — Investment Requirements
If you elect the Earnings Optimizer Death Benefit, you
will be subject to Investment Requirements. These Investment Requirements will apply for the entire time your contract is in force. This means you will be limited in your choice of Subaccount investments and in how much you can invest in certain
Subaccounts. This also means you will not be able to allocate Contract Value to all of the Subaccounts that are available to Contractowners who have not elected this Death Benefit. We impose Investment Requirements to reduce the risk of investment
losses that may require us to use our own assets to make guaranteed payments under a rider.
We have divided the Subaccounts of your contract into
groups and have specified the maximum percentages of Contract Value that must be in each group at the time you purchase the rider. Some investment options are not available to you if you purchase this rider. The Investment Requirements may not be
consistent with an aggressive investment strategy. You should consult with your financial professional to determine if the Investment Requirements are consistent with your investment objectives.
You can select the percentages of Contract Value (or
Account Value if i4LIFE® Advantage is in effect) to allocate to individual Subaccounts within each group, but
the total investment for all Subaccounts within the group must comply with the specified maximum percentages for that group.
In accordance with these Investment Requirements, you
agree to be automatically enrolled in the portfolio rebalancing option under your contract and thereby authorize us to automatically rebalance your Contract Value on a periodic basis. On each quarterly anniversary of the effective date of the
rider, we will rebalance your Contract Value. If your allocation instructions include Lincoln Defined Outcome Funds, the Contract Value within those funds will not be rebalanced. The remaining percentages of your other variable funds will be
prorated for the quarterly portfolio rebalancing program since the Lincoln Defined Outcome Funds are not rebalanced. Any reallocation of Contract Value among the Subaccounts made by you prior to a rebalancing date will become your allocation
instructions for rebalancing purposes. Confirmation of the rebalancing will appear on your quarterly statement. If we rebalance Contract Value from the Subaccounts and your allocation instructions do not comply with the Investment Requirements,
then the portion of the rebalanced Contract Value that does not meet the Investment Requirements will be allocated to the LVIP PIMCO Low Duration Bond Fund as the default investment option, or any other Subaccount that we may designate for that
purpose. These investments will become your allocation instructions until you tell us otherwise.
We may change the list of Subaccounts in a group, change
the number of groups, change the minimum or maximum percentages of Contract Value allowed in a group, change the investment options that are or are not available to you, or change the rebalancing frequency at any time in our sole discretion. You
will be notified at least 30 days prior to the date of any change. We may make such modifications at any time when we believe these modifications are necessary to protect our ability to provide the guarantees under these riders. Our decision to
make modifications will be based on several factors, including the general market conditions and the style and investment objectives of the Subaccount investments.
At the time you receive notice of a change to the
Investment Requirements, you may:
| 1. | submit your own reallocation instructions for the Contract Value, before the effective date specified in the notice, so that the Investment Requirements are satisfied; or |
| 2. | take no action and be subject to the quarterly rebalancing as described above. If this results in a change to your allocation instructions, then these will be your new allocation instructions until you tell us otherwise. |
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At this time, the Subaccount groups are as follows:
| Group 1 – Unlimited Subaccounts | Group 2 – Unavailable Subaccounts These funds are not available if you have elected the Earnings Optimizer Death Benefit |
|
| You may allocate 100% of your Contract Value or Account Value among any Subaccount not listed Group 2 – Unavailable Subaccounts | ALPS/Alerian Energy Infrastructure Portfolio ALPS/Red Rocks Listed Global Opportunity Portfolio American Funds New World Fund® Columbia VP Commodity Strategy Fund Columbia VP Emerging Markets Bond Fund Columbia VP Strategic Income Fund Delaware VIP® Emerging Markets Series Eaton Vance VT Floating-Rate Income Fund First Trust Dorsey Wright Tactical Core Portfolio First Trust Multi Income Allocation Portfolio Guggenheim VT Long Short Equity Guggenheim VT Multi-Hedge Strategies Ivy VIP Asset Strategy Portfolio Ivy VIP Energy Portfolio Ivy VIP Science and Technology Portfolio LVIP BlackRock Global Real Estate Fund LVIP Delaware REIT Fund LVIP Global Income Fund LVIP Loomis Sayles Global Growth Fund LVIP SSGA Emerging Markets 100 Fund LVIP SSGA Emerging Markets Equity Index Fund MFS® VIT Utilities Series Morgan Stanley VIF Global Infrastructure Portfolio PIMCO VIT All Asset Portfolio Putnam VT Global Health Care Fund Putnam VT Multi-Asset Absolute Return Fund Templeton Global Bond VIP Fund VanEck VIP Global Hard Asset Fund |
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The SAI includes additional information about the
Contract, Lincoln Life, and the VAA. The SAI is dated the same date as this prospectus. We will provide the SAI without charge upon request. You may obtain a free copy of the SAI and submit inquiries by:
| • | Mailing: The Lincoln National Life Insurance Company, PO Box 7835, Fort Wayne, IN 46801-7835 |
| • | Visiting: www.lfg.com/VAprospectus |
| • | Emailing: [email protected] |
| • | Calling: 1-888-868-2583 |
You may also obtain reports and other information about
the VAA on the SEC’s website at www.sec.gov, and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following email address: [email protected]. The SEC file numbers and the Contract’s
contract identifier number are listed below.
SEC File Nos. 333-252653; 811-08517
EDGAR Contract Identifier C000226821
EDGAR Contract Identifier C000226821
[THIS PAGE INTENTIONALLY LEFT BLANK]
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Dated June 4, 2021
Relating to Prospectus Dated June 4, 2021 for
Lincoln Investor Advantage® Pro Advisory
Lincoln Life Variable Annuity Account N,
Registrant
The Lincoln National Life Insurance Company,
Depositor
The SAI provides you with additional information
about Lincoln Life, the VAA, and your contract. It is not a prospectus.
A copy of the product prospectus dated June 4,
2021,may be obtained without a charge by writing to the Home Office: Lincoln Life Customer Service, The Lincoln National Life Insurance Company, PO Box 7835, Fort Wayne, IN 46801-7835, by calling: 1-888-868-2583, or by emailing:
[email protected] and requesting a copy of the Lincoln Investor Advantage® Pro Advisory product
prospectus.
TABLE OF CONTENTS OF THE SAI
Special Terms
The special terms used in this SAI are the ones
defined in the prospectus.
General Information and History
The Lincoln National Life Insurance Company
The Lincoln National Life Insurance Company
(Lincoln Life or Company), organized in 1905, is an Indiana-domiciled insurance company, engaged primarily in the direct issuance of life insurance contracts and annuities. Lincoln Life is wholly owned by Lincoln National Corporation (LNC), a
publicly held insurance and financial services holding company incorporated in Indiana. Lincoln Life is obligated to pay all amounts promised to Contractowners under the contracts.
Our Financial Condition. Depending on when you purchased your contract, you may be permitted to make allocations to the fixed account, which is part of our general account. See The Fixed Side of the Contract. In
addition, any guarantees under the contract that exceed your Contract Value, such as those associated with Death Benefit options and Living Benefit Riders are paid from our general account (not the VAA). Therefore, any amounts that we may
pay under the contract in excess of Contract Value are subject to our financial strength and claims-paying ability and our long-term ability to make such payments. We issue other types of insurance policies and financial products in
addition to the contract. We also pay our obligations under these products from our assets in the general account. Moreover, unlike assets held in the VAA, the assets of the general account are subject to the general liabilities of the
Company and, therefore, to the Company’s general creditors. In the event of an insolvency or receivership, payments we make from our general account to satisfy claims under the contract would generally receive the same priority as our other
Contractowner obligations.
The general account is subject to regulation and
supervision by the Indiana Insurance Department as well as the insurance laws and regulations of the jurisdictions in which the contracts are distributed. The laws and regulations applicable to us regulate the investments we can make with
assets held in our general account. In general, those laws and regulations determine the amount and type of investments which we can make with general account assets.
In addition, state insurance regulations require
that insurance companies calculate and establish on their financial statements, a specified amount of reserves in order to meet the contractual obligations to pay the claims of our Contractowners. In order to meet our claims-paying
obligations, we regularly monitor our reserves to ensure we hold sufficient amounts to cover actual or expected contract and claims payments. However, it is important to note that there is no guarantee that we will always be able to meet our
claims paying obligations, and that there are risks to purchasing any insurance product.
State insurance regulators also require insurance
companies to maintain a minimum amount of capital in excess of liabilities, which acts as a cushion in the event that the insurer suffers a financial impairment, based on the inherent risks in the insurer’s operations. These risks include
those associated with losses that we may incur as the result of defaults on the payment of interest or principal on assets held in our general account, which include bonds, mortgages, general real estate investments, and stocks, as well as
the loss in value of these investments resulting from a loss in their market value.
How to Obtain More Information. We encourage both existing and prospective Contractowners to read and understand our financial statements. We prepare our financial statements on both a statutory basis and according to
Generally Accepted Accounting Principles (GAAP). Our audited GAAP financial statements, as well as the financial statements of the VAA, are located in the SAI. Instructions on how to obtain a free copy of the SAI, are provided on the last
page of this prospectus. You may obtain our audited statutory financial statements and any unaudited statutory financial statements that may be available by visiting our website at www.LincolnFinancial.com.
You also will find on our website information on
ratings assigned to us by one or more independent rating organizations. These ratings are opinions of an operating insurance company’s financial capacity to meet the obligations of its insurance and annuity contracts based on its financial
strength and/or claims-paying ability. Additional information about rating agencies is included in the SAI.
Lincoln Financial Group is the marketing name for
Lincoln National Corporation (NYSE:LNC) and its affiliates. Through its affiliates, Lincoln Financial Group offers annuities, life, group life and disability insurance, 401(k) and 403(b) plans, and comprehensive financial planning and
advisory services.
Variable Annuity Account (VAA)
On November 3, 1997, the VAA was established as an
insurance company separate account under Indiana law. It is registered with the SEC as a unit investment trust under the provisions of the Investment Company Act of 1940 (1940 Act). The VAA is a segregated investment account. Income, gains
and losses credited to, or charged against, the VAA reflect the VAA’s own investment experience
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and not the investment experience of Lincoln Life’s other assets.
The assets of the VAA may not be used to pay any liabilities of Lincoln Life other than those arising from the contracts supported by the VAA. Lincoln Life is obligated to pay all amounts promised to Contractowners under the contracts.
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.
Investment Results
At times, the VAA may compare its investment
results to various unmanaged indices or other variable annuities in reports to shareholders, sales literature and advertisements. The results will be calculated on a total return basis for various periods, with or without surrender charges.
Results calculated without surrender charges will be higher. Total returns include the reinvestment of all distributions, which are reflected in changes in unit value. The money market Subaccount's yield is based upon investment performance
over a 7-day period, which is then annualized.
There can be no assurance that a money market fund
will be able to maintain a stable net asset value of $1.00 per share. During periods of low interest rates, the yield of a money market fund may become extremely low and possibly negative. In addition, if the yield of a Subaccount investing
in a money market fund becomes negative, due in part to Contract fees and expenses, your Contract Value may decline. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The sponsor of a money market fund has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time. If, under SEC rules, a
money market fund suspends payments of redemption proceeds, we will delay payment of any transfer, withdrawal, or benefit from a Subaccount investing in the money market fund until the fund resumes payment. If, under SEC rules, a money market
fund institutes a liquidity fee, we may assess the fee against your Contract Value if a payment is made to you from a Subaccount investing in the money market fund.
The money market yield figure and annual performance
of the Subaccounts are based on past performance and do not indicate or represent future performance.
Capital Markets
In any particular year, our capital may increase
or decrease depending on a variety of factors — the amount of our statutory income or losses (which is sensitive to equity market and credit market conditions), the amount of additional capital we must hold to support business growth, changes
in reserving requirements, our inability to secure capital market solutions to provide reserve relief, such as issuing letters of credit to support captive reinsurance structures, changes in equity market levels, the value of certain
fixed-income and equity securities in our investment portfolio and changes in interest rates.
Advertising & Ratings
We may include in certain advertisements,
endorsements in the form of a list of organizations, individuals or other parties which recommend Lincoln Life or the policies. Furthermore, we may occasionally include in advertisements comparisons of currently taxable and tax deferred
investment programs, based on selected tax brackets, or discussions of alternative investment vehicles and general economic conditions.
Our financial strength is ranked and rated by
nationally recognized independent rating agencies. The ratings do not imply approval of the product and do not refer to the performance of the product, or any separate account, including the underlying investment options. Ratings are not
recommendations to buy our products. Each of the rating agencies reviews its ratings periodically. Accordingly, all ratings are subject to revision or withdrawal at any time by the rating agencies, and therefore, no assurance can be given
that these ratings will be maintained. The current outlook for the insurance subsidiaries is stable for Moody’s, A.M. Best, Standard & Poor’s and Fitch. Our financial strength ratings, which are intended to measure our ability to meet
contract holder obligations, are an important factor affecting public confidence in most of our products and, as a result, our competitiveness. A downgrade of our financial strength rating could affect our competitive position in the
insurance industry by making it more difficult for us to market our products as potential customers may select companies with higher financial strength ratings and by leading to increased withdrawals by current customers seeking companies
with higher financial strength ratings. For more information on ratings, including outlooks, see https://www.lfg.com/public/aboutus/investorrelations/financialinformation/ratings.
About the S&P 500 Index. The S&P 500 Index (hereinafter “Index”) is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Lincoln Variable Insurance Products Trust and its affiliates
(hereinafter “Licensee”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC
(“S&P”) and Dow Jones® is a registered trademark of Dow
Jones Trademark Holdings LLC (“Dow Jones”). The fund(s) are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices
do not make any representation or warranty, express or implied, to the owners of the funds or any member of the public regarding the
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advisability of investing in securities generally or in the funds
particularly or the ability of the Index to track general market performance. S&P Dow Jones Indices only relationship to Licensee with respect to the Index is the licensing of the Index and certain trademarks, service marks and/or trade
names of S&P Dow Jones Indices and/or its licensors. The Index is determined, composed and calculated by S&P Dow Jones Indices without regard to Licensee or the funds. S&P Dow Jones Indices have no obligation to take the needs of
Licensee or the owners of the funds into consideration in determining, composing or calculating the Index. S&P Dow Jones Indices are not responsible for and have not participated in the determination of the prices, and amount of the funds
or the timing of the issuance or sale of the funds or in the determination or calculation of the equation by which the funds are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices have no
obligation or liability in connection with the administration, marketing or trading of the funds. There is no assurance that investment products based on the Index will accurately track index performance or provide positive investment
returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment
advice.
S&P DOW JONES INDICES DO NOT GUARANTEE THE
ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO.
S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR
GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES
AND LICENSEE, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
Non-Principal Risks of Investing In The Contract
Opportunity Cost. Principal
amounts committed to an annuity contract are only available to choose form investment options available on the contract, potentially causing you an opportunity cost.
Dying early. If
you die earlier than expected, you may not receive the full benefit of the future payments.
Divorce. If you
get divorced, you could forfeit some or all of the value of your annuity to your spouse.
Affiliated Funds. We
may have incentive to select affiliated funds because we receive more revenue from an affiliated fund than a non-affiliated fund.
Fund of Funds. In
some fund of funds (or master-feeder) arrangements, you may pay fees and expenses at both fund levels, which can reduce your investment return.
Services
Independent Registered Public Accounting Firm
Ernst & Young LLP, independent registered
public accounting firm, One Commerce Square, 2005 Market Street, Suite 700, Philadelphia, Pennsylvania, 19103, has audited a) the financial statements of each of the subaccounts listed in the appendix to the opinion that comprise Lincoln Life
Variable Annuity Account N, as of December 31, 2020, the related statements of operations and the statements of changes in net assets for each of the periods indicated in the appendix to the opinion; and b) the consolidated financial
statements of The Lincoln National Life Insurance Company as of December 31, 2020 and 2019 and for each of the three years in the period ended December 31, 2020 as set forth in their reports, which are included in this SAI and Registration
Statement. The aforementioned financial statements are included herein in reliance on Ernst & Young LLP's 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 Life. We have entered into an agreement with State Street Bank and Trust Company, 801 Pennsylvania Ave, Kansas City, MO 64105, to
provide accounting services to the VAA. No separate charge against the assets of the VAA is made by us for this service.
B-4
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.
Principal Underwriter
Lincoln Financial Distributors, Inc. (“LFD”), is a
wholly owned subsidiary of Lincoln National Corporation and therefore an affiliate of Lincoln Life, serves as principal underwriter (the “Principal Underwriter”) for the contracts, as described in the prospectus. The Principal Underwriter
offers the contracts to the public on a continuous basis and anticipates continuing to offer the contracts, but reserves the right to discontinue the offering. The Principal Underwriter offers the contracts through sales representatives, who
are associated with Lincoln Financial Advisors Corporation and/or Lincoln Financial Securities Corporation (collectively, “LFN”), our affiliates. The Principal Underwriter also may enter into selling agreements with other broker-dealers
(“Selling Firms”) for the sale of the contracts. Sales representatives of Selling Firms are appointed as our insurance agents. LFD, acting as Principal Underwriter, paid $561,871,495, $532,013,638 and $447,244,121 to LFN and Selling Firms in
2018, 2019 and 2020 respectively, as sales compensation with respect to all the contracts offered under the VAA. The Principal Underwriter retained no underwriting commissions for the sale of the contracts. LFD’s principal business address is
130 North Radnor Chester Road, Radnor, PA, 19087.
Contract Information
Additional Services
Dollar Cost Averaging (DCA)—You may systematically transfer, on a monthly basis or in accordance with other terms we make available, amounts from certain Subaccounts, or the fixed side (if
available) of the contract into the Subaccounts or in accordance with other terms we make available. You may elect to participate in the DCA program at the time of application or at any time before the Annuity Commencement Date by
completing an election form available from us. The minimum amount to be dollar cost averaged is $1,500 over any time period between six and 60 months. We may offer different time periods for new Purchase Payments and for transfers of
Contract Value. State variations may exist. Once elected, the program will remain in effect until the earlier of:
| • | the Annuity Commencement Date; |
| • | the value of the amount being DCA'd is depleted; or |
| • | you cancel the program by written request or by telephone if we have your telephone authorization on file. |
We reserve the right to discontinue or restrict
access to this program at any time.
A transfer made as part of this program is not
considered a transfer for purposes of limiting the number of transfers that may be made, or assessing any charges or Interest Adjustment which may apply to transfers. Upon receipt of an additional Purchase Payment 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. 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 nonqualified 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 Surrender Charge.
B-5
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 (or Account Value under i4LIFE® Advantage), 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. 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.
Please note that all of the services discussed in
this section will stop once we become aware of a pending death claim.
Other Information
Due to differences in redemption rates, tax
treatment or other considerations, the interests of policyholders 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.
Examples of Regular Income Payment Calculations
These examples will illustrate the impact of the
length of the Access Period and the impact of a withdrawal on the Regular Income Payments. These examples assume that the investment return is the same as the assumed investment return (AIR) to make the Regular Income Payment calculations
simpler to understand. The Regular Income Payments will vary based on the investment performance of the underlying funds.
|
Annuitant
|
Male, Age 65 | |
|
Secondary Life
|
Female, Age 63 | |
|
Purchase Payment
|
$200,000.00 | |
|
Regular Income Payment Frequency
|
Annual | |
|
AIR
|
4.0% | |
|
Hypothetical Investment Return
|
4.0% | |
| 20-year Access Period | 30-Year Access Period | |
|
Regular Income Payment
|
$10,493.94 | $9,952.72 |
A 10% withdrawal from the Account Value will
reduce the Regular Income Payments by 10% to $9,444.55 with the 20-year Access Period and $8,957.45 with the 30-year Access Period.
At the end of the 20-year Access Period, the
remaining Account Value of $113,236 (assuming no withdrawals) will be used to continue the $10,493.94 Regular Income Payment during the Lifetime Income Period for the lives of the Annuitant and Secondary Life. At the end of the 30-year Access
Period, the remaining Account Value of $68,154 (assuming no withdrawals) will be used to continue the $9,952.72 Regular Income Payment during the Lifetime Income Period for the lives of the Annuitant and Secondary Life. (Note: the Regular
Income Payments during the Lifetime Income Period will vary based on the investment performance of the underlying funds).
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 funds 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 funds 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.
B-6
Annuity Payments
Variable Annuity Payouts
Variable Annuity Payouts will be determined on the
basis of:
| • | the dollar value of the contract on the Annuity Commencement Date less any applicable premium tax; |
| • | the annuity tables contained in the contract; |
| • | the type of annuity option selected; and |
| • | the investment results of the fund(s) selected. |
In order to determine the amount of variable
Annuity Payouts, we make the following calculation:
| • | first, we determine the dollar amount of the first payout; |
| • | second, we credit the contract with a fixed number of Annuity Units based on the amount of the first payout; and |
| • | 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%, 5% or 6% 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 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:
| • | The net investment factor of the Subaccount for the Valuation Period for which the Annuity Unit value is being determined, and |
| • | 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.
Financial Statements
The December 31, 2020 financial statements of the
VAA and the December 31, 2020 consolidated financial statements of Lincoln Life are incorporated into this SAI by reference to the VAA’s most recent Form N-VPFS (“Form N-VPFS”) filed with the SEC.
B-7
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