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Overview
Product Information
GFLB
GMIB
GMAB
GMWB
Death Benefits
Investment Story

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Overview

Main Points:

Lincoln has three major lines of annuities: American Legacy III and Choice Plus II, and Multi-Fund.
Lincoln moved into the second leading seller of advisor-sold VAs in Q4 2007, up from 4th in Q3 2007 (source: VARDs)
Lincoln’s i4Life rider offers special tax treatment on nonqualified funds – a in-depth discussion of this rider is included at the end of this document.
They also offer an A-Share annuity; much like an A-Share mutual fund, the client will pay an upfront sales charge and the annuity will be completely liquid thereafter. This product is the most popular among regional firms.

Living benefits (see living benefit sections for additional information)
Lifetime Income Advantage:

Guarantees: The protected value is stepped up to 200% of the original protected value plus premiums received within 90 days of election, less withdrawals, after the later of 10 years or age 70 (the 200% guarantee will not occur if any withdrawals were made prior to 59 ½ for single and 65 for joint; also if there were excess withdrawals, or if cumulative withdrawals greater than 10% of the original amount were taken).
Flexibility: May be terminated after 7 years
Fees: 0.75% for single/ 0.90% for joint
Asset allocation:
Allocation portfolios subadvised by Wilshire

Investment story (see investment section for additional information)
ChoicePlus II line has funds managed by Delaware Trust, Franklin Templeton, Janus, and Alliance Bernstein
Despite the multiple subadvisors offered under the Choice line, American Funds continues to be the most popular; the top three funds for net flows Q4 are their Growth, Growth-Income, and International.

Core products (see product section for additional information)

B-share – Choice Plus II -1.30% M&E
C-share – Choice Plus II Access – 1.55% M&E
L-share – Choice Plus II Advance –1.60% M&E
X-share – Choice Plus II Bonus –1.50% M&E

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Share class / B / C / L / X
Product / ChoicePlus II Assurance
Sales in millions

Agency

/ $99 / $2 / $36 / $54
Banks / $3 / $1 / $5 / $4
IBD / $118 / $20 / $268 / $98
Regionals / $22 / $4 / $24 / $8
Wires / $89 / $17 / $248 / $77
Total / $330 / $43 / $581 / $241

Fees

M+E

/ 1.30% / 1.65% / 1.60% / 1.50%
Average subaccount* / 1.02%
Annual fee / $35; waived over $50,000 or contract year 16+
CDSC / 7-year deposit based / NA / 4-year deposit based / 9-year deposit based
Per year / 7,7,6,6,5,4,3,0 / NA / 7,7,6,6,0 / 8.5,8.5,8,7,6,5,4,3,2,0

Basic Contract Info

Bonus

/ Quarterly credit equal to 0.0875 of CV beginning in year 8 for all money held for longer than 7 years. (L SHARE). Quarterly bonus of 0.10% of Purchase Pmts invested for 7+ years. (C-share) / $0-$99K 3%
$100-$999k 4%
1 mil + 5%
Standard death benefit / Account Value (0.00%)
Guaranteed Return of Principal (0.05%) Withdrawals adjusted proportionally
Max issue age / 85 (Q&NQ) / 85 (Q&NQ) / 85 (Q&NQ) / 85 (Q&NQ)
Max annuitization age / Annuitant’s 99th birthday
Minimum payment / $25,000 / $25,000 / $25,000 / $25,000
Nonqualified stretch
Free withdrawals / Greater of 10% of account value or 10% of purchase payments (non-cumulative, limited to 4 withdrawals per contract year) 100% withdrawals available on C-shjare
Investment Options – see Investment section for additional information

Number of subaccounts

/ 52 (multi manager) / 52 (multi manager) / 52 (multi manager) / 52 (multi manager)
Fixed accounts / 1-10 year MVA accounts
Sub fee range / 0.50% - 1.41%
Asset allocation
Gross Compensation -- upfront compensation and trail (may be vary by firm, age, and/or premium amounts)

Option A

/ 6.5% upfront;
no trail / 1.75% upfront; 1.00% trail yrs 2+ / 4.75% upfront; 1.00%
trail yrs 5+ / 6.25% Upfront;
no trail

Option B

/ 5.35% Upfront, 0.25% trail yrs 2+ / 3.75% upfront; 0.40%
trail yrs 2-4; 1.0% yrs 2+ / 5.10% upfront; 0.25%
trail yrs 2+
Option C / 1.0% upfront; 1% trail yrs 2+ / 2.4% upfront; 1.0 trail yrs 2+ / 3.75% upfront; 0.25% trail yrs 2-9, 1.00% after
Option D / 5% Upfront; 0.25% trail yrs 2-7;
0.4% after
Optional benefits - see Living Benefit and Death Benefit sections for additional information

Living benefits

/ GMWB: SmartSecurity Advantage 7% Option (0.45%)
GFLB: SmartSecurity Advantage 5% Option (0.65% single, 0.80% spousal)
GFLB: Lifetime Income Advantage (0.75% single, 0.90% joint)
GMIB: I4Life Advantage (0.50%)
GMIB: I4Later Advantage (0.50%)
Death benefits / Earnings Enhancement Benefit (0.50%)
Enhanced GMDB (0.30%)
I4Life advantage Guarantee of Principal (0.45%)
I4Life Advantage Account Value (0.40%)
GFLB: Lifetime Income Advantage
Launched February 19, 2008
Guarantees before the first withdrawal
Guaranteed growth of Protected Value / 5% compounded growth on an annual step-up in any year a withdrawal is not taken for 15 years since election or the last annual step-up. Does not apply to any premiums that have not been in the contract for at least one year, except for those received within the first 90 days)
Step-up of Protected Value / Annual step up
Vesting / Not Applicable
Impact of sub pays / Benefit Amount is increased dollar-for-dollar by the amount of the sub-pay.
Guaranteed Protected Value after 10 years (assuming no withdrawals and initial guarantee of $100,000 with no additional premiums): / The Protected Value is stepped-up to 200% of the original Protected Value, plus premiums received within 90 days of election less any withdrawals, after the later of 10 years or age 70.
The 200% will not occur if any withdrawal was made prior to age 59 ½ (single) or 65 (joint), if an excess withdrawal was taken, or if cumulative withdrawals greater than 10% of the original amount were taken.
Guaranteed AV after 10 years (assuming no withdrawals and initial guarantee of $100,000 with no additional premiums): / For an additional 15 bps, provides guaranteed account value after 7 years; must elected at the same time as the original benefit, but client has right to cancel after 7 years and received a stepped up value equal to the account value (plus any additional premiums within 90 days of election)
Limited to three asset allocation portfolios: Moderate, Conservative, Franklin Income Securities
Guarantees at the first withdrawal
The maximum Guaranteed Withdrawal Amount is based on the higher of the Protected Value and: / Net Purchase Payments
Maximum Guaranteed Lifetime Withdrawal percentage: / 5% for life starting at 59 ½ for single; 65 for joint
(After 3 years, annual income amount can double if client is confined to a nursing home for at least 90 consecutive days)
Guarantees after the first withdrawal

Step-up opportunities

/ Automatic annual step ups
Excess withdrawals – treatment of withdrawals in excess of the maximum annual withdrawal amount / Excess withdrawals will reduce the income amount proportionally
Impact of sub pays / Sub pays increase guaranteed amount dollar for dollar
Fees
Annual cost: / 75bps for single; 90bps for joint life
Fee increase / Fee may increase on step up pre or post withdrawal
Election / Available at issue or post issue for ages 0-80
Revocable: / Can be cancelled once every 5 years & re-elected after 1 year.
Asset Allocation

Portfolios required

/ 25% must be invested in a bond portfolio (there are four options); the remaining 75% can be in any of the other available portfolios; if you elect 100% to the asset allocation fund, the percentage restrictions do not apply; if you add the guarantee after 7 yrs, you must allocate to the asset allocation portfolio
Benefit Valuation Model / No
GFLB: Smart Security Advantage (5% option):
Guarantees before the first withdrawal
Guaranteed growth of Protected Value / Not Applicable
Step-up of Protected Value / Annual auto resets for up to 10 contract yrs. Client can elect to re-start auto step-up program for another 10yrs (ages 0-81)
Vesting / Not Applicable
Impact of sub pays / Benefit Amount is increased dollar-for-dollar by sub-pay.
Guaranteed Protected Value after 10 years (assuming no withdrawals and initial guarantee of $100,000 with no additional premiums): / $100,000
Guaranteed AV after 10 years (assuming no withdrawals and initial guarantee of $100,000 with no additional premiums): / Not Applicable
Guarantees at the first withdrawal
The maximum Guaranteed Withdrawal Amount is based on the higher of the Protected Value and: / Net Purchase Payments
Maximum Guaranteed Lifetime Withdrawal percentage: / 5% for Life Opt. - Guarantees Sys. W/D’s over annuitant’s lifetime, regardless of account performance. (Over 2 lives if spousal is elected)
Guarantees after the first withdrawal

Step-up opportunities

/ 5% Opt: Annual auto resets for up to 10 contract yrs. Client can elect to re-start auto step-up program for another 10yrs (ages 0-81)
Excess withdrawals – treatment of withdrawals in excess of the maximum annual withdrawal amount / Withdrawals in excess of the Max Withdrawal Amt will cause the Benefit Amount to be recalculated. In down markets, the new Benefit Amount may be based on the CV after the withdrawal. The new Max Withdrawal Amount would be 7% or 5% of the new Benefit Amount.
Note: Only 5% option is RMD friendly. Excess withdrawals will eliminate fee waiver provision outlined above.
Impact of sub pays / Withdrawal Amt increases by applicable % of sub-pay. 5% option Sub pays limited to $100k cumulatively (reserves right under 7% opt.)
Guarantees at death

Death benefit

/ Single: Beneficiary will continue to receive benefit pmts until remaining benefit amount is received (Spousal beneficiary may add rider to new contract)
Joint: If beneficiary is surviving spouse guaranteed income will continue over their life (can replace joint benefit with single version by stepping down). Non-Spousal beneficiary may continue to receive benefit payments until remaining benefit amount is received.
Fees
Annual cost: / 5% Opt: 0.65% of Remaining Benefit Amt ~ Max 1.50%
0.80% for Joint option ~ Max. 1.50%
Fee increase / 5% Opt: Fee can be increased if you restart the auto step-up for another ten years.
Elections and cancellations
Election / Available at issue or post issue for ages 0-80
Revocable: / Can be cancelled once every 5 years & re-elected after 1 year.
Asset Allocation

Portfolios required

/ Reserves the right to limit allocations to the following portfolios to 35%: of Account Value/ Purchase Payments: Global Growth, Global Growth & Income, Global Small Cap, International and New World.
Benefit Valuation Model / No
GMWB Smart Security Advantage (7% option)
Guarantees before the first withdrawal
Guaranteed growth of Protected Value / Not Applicable
Step-up of Protected Value / 7% Opt: On any contract anniversary beginning with 5th contract anniversary, benefit amount can be stepped up to AV. Step-ups may not occur within 5 yrs of each other.
Vesting / Not Applicable
Impact of sub pays / Benefit Amount is increased dollar-for-dollar by sub-pay.
Guaranteed Protected Value after 10 years (assuming no withdrawals and initial guarantee of $100,000 with no additional premiums): / $100,000
Guaranteed AV after 10 years (assuming no withdrawals and initial guarantee of $100,000 with no additional premiums): / Not Applicable
Guarantees at the first withdrawal
The maximum Guaranteed Withdrawal Amount is based on the higher of the Protected Value and: / Net Purchase Payments
Maximum Guaranteed Lifetime Withdrawal percentage: / 7% Opt - Guaranteed Sys. Withdrawals over a minimum of 14.2 yrs regardless of account performance.
Guarantees after the first withdrawal

Step-up opportunities

/ 7% Opt: On any contract anniversary beginning with 5th contract anniversary, benefit amount can be stepped up to AV. Step-ups may not occur within 5 yrs of each other.
Excess withdrawals – treatment of withdrawals in excess of the maximum annual withdrawal amount / Withdrawals in excess of the Max Withdrawal Amt will cause the Benefit Amount to be recalculated. In down markets, the new Benefit Amount may be based on the CV after the withdrawal. The new Max Withdrawal Amount would be 7% or 5% of the new Benefit Amount.
Note: Only 5% option is RMD friendly. Excess withdrawals will eliminate fee waiver provision outlined above.
Impact of sub pays / Withdrawal Amt increases by applicable % of sub-pay. 5% option Sub pays limited to $100k cumulatively (reserves right under 7% opt.)
Guarantees at death

Death benefit

/ Single: Beneficiary will continue to receive benefit pmts until remaining benefit amount is received (Spousal beneficiary may add rider to new contract)
Joint: If beneficiary is surviving spouse guaranteed income will continue over their life (can replace joint benefit with single version by stepping down). Non-Spousal beneficiary may continue to receive benefit payments until remaining benefit amount is received.
Fees
Annual cost: / 7% Opt: 0.45% of Remaining Benefit Amt ~ Max 0.95%
Waived at later of 5th rider anniversary or 5 yrs from last step-up.
Fee increase / 7% Opt: Fee can be increased upon step-up.
Elections and cancellations
Election / Available at issue or post issue for ages 0-80
Revocable: / Can be cancelled once every 5 years & re-elected after 1 year.
Asset Allocation

Portfolios required

GMIB: I For Life Advantage and I For Later Advantage

Before Annuitization
Additional Information / Lincoln applied for and received a private letter ruling from the IRS allowing them to provide exclusionary treatment for the income provided by this product. The impact of tax treatment is dependant upon a variety of factors:
1. The age of the covered person; 2. The cost basis; 3. The length of the access period; 4. The projected earnings in the contract (client must choose an Assumed Investment Retrun (AIR) of 3%, 4%, 5%, or 6%. This percentage is what the client feels the subaccount performance will meet or exceed on an annual basis. The higher the AIR, the higher the initial income will be. If the subaccounts underperform the chosen AIR the income will decline)
Growth of Protected Value / I For Later: 1. 5% simple interest on the purchase payments or the last step-up credited every three years and, 2. A step up on every 3rd anniversary. (5% simple interest is capped at 200% of purchase payments or most recent step up.)
I For Life: Not applicable
Withdrawals
Dollar-for-dollar withdrawals / I For Life: Income is determined upon election based upon the following factors: 1. Length of access period 2. Age and sex of covered person 3. Frequency of the income payments 4. Assumed investment return 5. Annuity Mortality Table. (The assumed investment return can range from
Excess withdrawals / I For Life: During the access period additional liquidity is available. Additional withdrawals will cause the income to be recalculated.
Annuitization

Waiting period to annuitize

/ I For Life has what is called an access period. This is the period of time that must pass before the contract is annuitized and is also the period of time that additional liquidity is available. Currently this can range from 5 yrs to 115 years minus the clients age (example: 65 year old has a max access period of 50 years). The longer the access period the lower the amount of income.
Annuitization / At the end of the access period they enter what is called the Lifetime Income Period. This is when the contract is actually annuitized and at this point income will be based on: The contract is credited with a fixed number of annuity units equal to the initial regular payment divided by the annuity unit value.
Fees
Annual cost: / I For Later and GIB: 0.50% on Income Base (max 1.5%)
I For Life: 0.35% On Income Base (max
Elections and cancellations
Election / I For Life: Elected at issue or post issue for ages 59.5-85. Must wait minimum of 1 year before election if I For Later was purchased.
I For Later: Elected at issue or post issue for ages 59.5-85.
Additional info: The I for Later benefit is the accumulation portion of their GMIB. When the income is set to be turned on the I4Life benefit would be added to the contract.
Revocable: /

I For Life can not be revoked on a non-qualified contract

Asset Allocation

Portfolios required

/ None

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Highest Value
Feature name / Enhanced GMDB
Guarantees / Greater of: Highest Anniversary Value to age 80, net Purchase Payments, or Contract Value.
Withdrawals / Proportional Reductions
Fees / 0.30% of contract value
Elections and cancellations / May be terminated prior to annuitization
Asset allocation / NA
Other
Feature name / I4Life Advantage Guarantee of Principal
Guarantees / Greater of: contract value or purchase payments.
Withdrawals / Dollar for Dollar reduction on all regular income payments, withdrawals, and applicable charges.
Fees / 0.45% of contract value
Elections and cancellations / Available at the time I4Life is added. Can revoke during the access period and can not be added back.
Asset allocation / NA
Greater of: (Combination)
Feature name / I4Life Advantage EGMDB
Guarantees / During the access period it is the greater of: Contract Value, Accumulated Benefit Enhancement, or the highest contract anniversary prior to owner’s 81st birthday. Following the access period equal to the remaining guaranteed regular income payments, if any.
Withdrawals / Dollar for dollar reduction for regular income payments, withdrawals, and applicable charges.
Fees / 0.70% of contract value
Elections and cancellations / Available at time I4Life Advantage is added. Can revoke during the access period.
Asset allocation / NA
Other
Feature name / I4Life Advantage Account Value
Guarantees / After the access period the DB is equal to the remaining guaranteed regular income payments, if any.
Withdrawals / NA
Fees / 0.40% of contract value
Elections and cancellations / Available at time I4Life Advantage is added. Not revocable
Asset allocation / NA
Earnings and Beneficiary Protection --
Feature name / Estate Enhancement Benefit Rider
Guarantees / Greater of: HAV to age 81, net purchase payments, or contract value plus an amount equal to 40% (25% for ages 70-75) of earnings capped at 200% of purchase payments.
Withdrawals / Adjusted Proportionally
Fees / 0.50% of Contract Value
Elections and cancellations / Available at inception, not revocable
Asset allocation / NA

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Asset allocation

ForLincoln’s new Lifetime Income Advantage Benefit, there are only three allowable asset allocation portfolio selections: LVIP Moderate and Conservative Profile portfolios, both fund of funds, and Franklin Income Securities portfolio
For all their other living benefits, including the SmartSecurity, and i4Life Advantage, they restrict the funds choices available: no more than 35% in a list of 27 funds, some of which are global tech, international value, and small cap funds. The other 65% can be any of the other portfolios.
They also have Target Maturity Portfolios, subadvised by Wilshire Associates, Inc and became available June 4, 2007. The target maturity dates include 2010, 2020, 2030, and 2040, all fund of funds.

Investment options