LINCOLN LIFE & ANNUITY VAR ANN SEP ACCT L GROUP VAR ANN III, 497, 1999-08-10

LINCOLN LIFE & ANNUITY VAR ANN SEP ACCT L GROUP VAR ANN III
497, 1999-08-10

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Variable Annuity III
Lincoln Life & Annuity Variable Annuity Account L
Group Variable Annuity Contracts

Home Office and Servicing Office:
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202
(800) 893-7168

This Prospectus describes group annuity contracts and individual certificates
issued by Lincoln Life & Annuity Company of New York (LLANY), a subsidiary of
The Lincoln National Life Insurance Company (Lincoln Life). They are for use
with qualified and non-qualified retirement plans. Generally, neither the
contractowner nor the individual participant pays federal income tax on the
contract's growth until it is paid out. The contract is designed to accumulate
account value and, as permitted by the plan for which the contractowner pur-
chases the contract, to provide retirement income that a participant cannot
outlive or for an agreed upon time. These benefits may be a variable or fixed
amount or a combination of both. If a participant dies before the annuity com-
mencement date, we pay the beneficiary or the plan a death benefit.

If the contractowner gives certain rights to plan participants, we issue active
life certificates to them. Participants choose whether account value accumu-
lates on a variable or a fixed (guaranteed) basis or both. If a participant al-
locates contributions to the fixed account, we guarantee principal and a mini-
mum interest rate.

All contributions for benefits on a variable basis will be placed in Lincoln
Life & Annuity Variable Annuity Account L (variable annuity account [VAA]). The
VAA is a segregated investment account of LLANY. If a participant puts all or
some contributions into one or more of the contract's subaccounts, the partici-
pant takes all the investment risk on the account value and the retirement in-
come. If the selected subaccounts make money, account value goes up; if they
lose moneay, it goes down. How much it goes up or down depends on the perfor-
mance of the selected subaccounts. We do not guarantee how any of the
subaccounts or their funds will perform. Also, neither the U.S. Government nor
any federal agency insures or guarantees investment in the contract.

The available subaccounts, and the funds in which they invest, are listed be-
low. The contractowner decides which of these subaccounts are available under
the contract for participant allocations. For more information about the in-
vestment objectives, policies and risks of the funds please refer to the Pro-
spectuses for the funds.

Balanced Account -- American Century Variable Portfolios, Inc.: VP Balanced

Small Cap Growth Account -- Baron Capital Funds Trust: Baron Capital Asset Fund
Insurance Shares

Index Account Dreyfus Stock Index Fund

Small Cap Account -- Dreyfus Variable Investment Fund: Small Cap Portfolio

Growth I Account -- Fidelity Variable Insurance Products Fund: Growth Portfolio
Initial Class

Equity-Income Account -- Fidelity Variable Insurance Products Fund: Equity-In-
come Portfolio Initial Class

Asset Manager Account -- Fidelity Variable Insurance Products Fund II: Asset
Manager Portfolio Initial Class

Global Growth Account -- Janus Aspen Series: Worldwide Growth Portfolio

Mid Cap Growth I Account -- Lincoln National Aggressive Growth Fund, Inc.

Social Awareness Account -- Lincoln National Social Awareness Fund, Inc.

Mid Cap Value Account -- Neuberger Berman Advisers Management Trust: Partners
Portfolio

International Stock Account -- T. Rowe Price International Series, Inc.

On August 6, 1999 we (i) closed the Growth II Account and replaced VP Capital
Appreciation with the Lincoln National Aggressive Growth Fund and (ii) closed
the Socially Responsible Account and replaced the Calvert Social Balanced Port-
folio with the Lincoln National Social Awareness Fund.

This Prospectus gives you information about the contracts and certificates that
contractowners and participants should know before investing. Please review the
Prospectuses for the funds, and keep them for reference.

Neither the SEC nor any state securities commission has approved the contracts
or determined that this Prospectus is accurate and complete. Any representation
to the contrary is a criminal offense.

A Statement of Additional Information (SAI) has more information about the con-
tracts and certificates, and its terms are made part of this Prospectus. For a
free copy, write: Lincoln Life & Annuity Company of New York, TDA Client Serv-
ices, P.O. Box 1337, Syracuse, NY 13201-1337, or call 1-800-893-7168, or e-mail
[email protected]. The SAI and other information about LLANY and Account L
are also available on the SEC's web site (http://www.sec.gov). There is a table
of contents for the SAI on the last page of this Prospectus.

May 1, 1999 as revised August 6, 1999

1
<PAGE>

Table of contents

<TABLE>
<CAPTION>
Page
- ------------------------------------------------
<S> <C>
Special terms 2
- ------------------------------------------------
Expense tables 3
- ------------------------------------------------
Summary 5
- ------------------------------------------------
Condensed financial information 7
- ------------------------------------------------
Investment results 7
- ------------------------------------------------
Financial statements 7
- ------------------------------------------------
Lincoln Life & Annuity Company of New York 7
- ------------------------------------------------
Fixed side of the contract 7
- ------------------------------------------------
Variable annuity account (VAA) 8
- ------------------------------------------------
Investments of the VAA 9
- ------------------------------------------------
Description of the funds 9
- ------------------------------------------------
Charges and other deductions 11
- ------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Page
- -----------------------------
<S> <C>
The contracts 12
- -----------------------------
Annuity payouts 16
- -----------------------------
Federal tax matters 17
- -----------------------------
Qualified retirement
plans 19
- -----------------------------
Voting rights 20
- -----------------------------
Distribution of the
contracts 21
- -----------------------------
Return privilege 21
- -----------------------------
State regulation 21
- -----------------------------
Records and reports 21
- -----------------------------
Other information 21
- -----------------------------
Variable Annuity III
Statement of Additional
Information Table of
Contents 22
- -----------------------------
</TABLE>
Special terms

Account or variable annuity account (VAA) -- The segregated investment ac-
count, Account L, into which LLANY sets aside and invests the assets for the
variable side of the contract offered in this Prospectus.

Account value -- At a given time before the annuity commencement date, account
value in the VAA is the value of all accumulation units for a contract and ac-
count value in the fixed account is the value of the fixed side of the con-
tract.

Accumulation unit -- A measure used to calculate account value for the vari-
able side of the contract.

Annuitant -- The person on whose life the annuity benefit payments made after
an annuity commencement date are based.

Annuity commencement date -- The date on which Lincoln Life makes the first
annuity payout to the annuitant.

Annuity payout -- An amount paid at regular intervals after the annuity com-
mencement date under one of several options available to the annuitant and/or
any other payee. This amount may be paid on a variable or fixed basis, or a
combination of both.

Annuity unit -- A measure used to calculate the amount of each annuity payout
for the variable side of the contract after an annuity commencement date.

Beneficiary -- The person the participant chooses to receive any death benefit
paid if the participant dies before the annuity commencement date.

Contractowner -- The party named on the group annuity contract (for example,
an employer, a retirement plan trust, an association, or other entity allowed
by law).

Contributions -- Amounts paid into the contract.

Death benefit -- An amount payable to a designated beneficiary if a partici-
pant dies before his or her annuity commencement date.

LLANY (we, us our) -- Lincoln Life & Annuity Company of New York.

Participant -- An employee or other person affiliated with the contractowner
on whose behalf we maintain an account under the contract.

Participation year -- A period beginning with one participation anniversary
and ending the day before the next participation anniversary, except for the
first participation year which begins with the participation date.

Plan -- The retirement program that an employer offers to its employees for
which a contract is used to accumulate funds.

Subaccount -- The portion of the VAA that reflects investments in accumulation
and annuity units of a class of a particular fund available under the con-
tracts. There is a separate subaccount which corresponds to each fund.

Valuation date -- Each day the New York Stock Exchange (NYSE) is open for
trading.

Valuation period -- The period starting at the close of trading (currently
4:00 p.m. New York time) on each day that the NYSE is open for trading (valua-
tion date) and ending at the close of such trading on the next valuation date.

2
<PAGE>

Expense Tables

Contractowner transaction expenses
Contract fee:

Annual administration charge (per participant): $25

The Annual Administration Charge may be paid by an employer on behalf of
participants. It is not charged during the annuity period.

We may reduce or waive this charge in certain situations. See Charges and other
deductions.

- --------------------------------------------------------------------------------
Account L annual expenses for Variable Annuity III subaccounts:
(as a percentage of average account value):

<TABLE>
<S> <C>
Mortality and expense risk charge* 1.00%
</TABLE>

* Before January 1, 1998, the mortality and expense risk charge was 1.20%.

Annual expenses of the funds for the year ended December 31, 1998:
(as a percentage of each fund's average net assets):

<TABLE>
<CAPTION>
Management 12b-1 Other Total
fees+ fees+ expenses= expenses
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. American Century--VP Balanced/1/ 0.97% 0.00% 0.00% 0.97%
- ----------------------------------------------------------------------------------
2. Baron Capital Funds Trust: Baron Capital 1.00 0.25 0.20 1.45
Asset Fund Insurance Shares/2/
- ----------------------------------------------------------------------------------
3. Dreyfus Stock Index Fund 0.25 0.00 0.01 0.26
- ----------------------------------------------------------------------------------
4. Dreyfus VIF: Small Cap Portfolio 0.75 0.00 0.02 0.77
- ----------------------------------------------------------------------------------
5. Fidelity VIP--Growth Portfolio Initial 0.59 0.00 0.09 0.68
Class/3/
- ----------------------------------------------------------------------------------
6. Fidelity VIP--Equity-Income Portfolio 0.49 0.00 0.09 0.58
Initial Class/3/
- ----------------------------------------------------------------------------------
7. Fidelity VIP II--Asset Manager Initial 0.54 0.00 0.10 0.64
Class/3/
- ----------------------------------------------------------------------------------
8. Janus Aspen Series: Worldwide Growth 0.65 0.00 0.07 0.72
Portfolio/4/
- ----------------------------------------------------------------------------------
9. Lincoln National Aggressive Growth Fund 0.73 0.00 0.08 0.81
- ----------------------------------------------------------------------------------
10. Lincoln National Social Awareness Fund 0.34 0.00 0.04 0.38
- ----------------------------------------------------------------------------------
11. Neuberger Berman AMT: Partners 0.78 0.00 0.06 0.84
Portfolio/5/
- ----------------------------------------------------------------------------------
12. T. Rowe Price International Series 1.05 0.00 0.00 1.05
- ----------------------------------------------------------------------------------
</TABLE>

/1/ American Century Investment Management, Inc. voluntarily waived a portion
of its management fee from October 1, 1998 through November 16, 1998. In the
absence of the waiver, the average ratio of operating expenses to average net
assets would have been 1.48% for the year ended December 31, 1998. The
annualized fee schedule for the fund, effective November 17, 1998, is as fol-
lows: 1.50% on the first $250 million; $1.20% on the next $250 million; and
1.10% thereafter.

/2/ The Adviser is contractually obligated to reduce its fee to the extent re-
quired to limit Baron Capital Asset Fund's total operating expenses to 1.5% for
the first $250 million of assets in the Fund, 1.35% for Fund assets over $250
million, and 1.25% for Fund assets over $500 million. Without the expense limi-
tations, total operating expenses for the Fund for the period October 1, 1998
through December 31, 1998 would have been 7.62%.

/3/ A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or FMR on behalf of certain
funds, have entered into arrangements with their custodian whereby credits re-
alized as a result of uninvested cash balances were used to reduce custodian
expenses. Including these reductions, the total operating expenses presented in
the table would have been: VIP Equity-Income Portfolio Initial Class 0.57%, VIP
Growth Portfolio Initial Class 0.66% and VIP II Asset Manager Portfolio Initial
Class 0.63%.

/4/ All expenses are stated with contractual waivers and fee reductions by Ja-
nus Capital. Fee reductions for the Worldwide Growth Portfolio reduce the Man-
agement Fee to the level of the corresponding Janus retail fund. Other waivers,
if applicable, are first applied against the Management Fee and then against
Other Expenses. Janus Capital has agreed to continue the waivers and fee reduc-
tions until at least the next annual renewal of the advisory agreement. Without
these waivers, the total operating expenses for the Portfolio would have been
0.74%.

/5/ Neuberger Berman Advisers Management Trust is divided into portfolios
("Portfolios") each of which invests all of its net investable assets in a cor-
responding series ("Series") of Advisers Managers Trust. The figures reported
under "Management Fees" include the aggregate of the administration fees paid
by the Portfolio and the management fees paid by its corresponding Series. Sim-
ilarly, "Other Expenses" includes all other expenses of the Portfolio and its
corresponding Series.

3
<PAGE>

Examples
(expenses of the subaccounts and the funds):

If you surrender your contract at the end of the time period shown, you would
pay the following expenses on a $1,000 investment, assuming a 5% annual return:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. American Century--VP Balanced $30 $ 92 $156 $328
- ----------------------------------------------------------------------------------------
2. Baron Capital Funds Trust: Baron Capital Asset Fund
Insurance Shares 35 106 179 373
- ----------------------------------------------------------------------------------------
3. Dreyfus Stock Index Fund 23 70 121 258
- ----------------------------------------------------------------------------------------
4. Dreyfus VIF: Small Cap Portfolio 28 86 146 309
- ----------------------------------------------------------------------------------------
5. Fidelity VIP--Growth Portfolio Initial Class 27 83 142 300
- ----------------------------------------------------------------------------------------
6. Fidelity VIP--Equity Income Portfolio Initial Class 26 80 137 291
- ----------------------------------------------------------------------------------------
7. Fidelity VIP II--Asset Manager Initial Class 27 82 140 297
- ----------------------------------------------------------------------------------------
8. Janus Aspen Series: Worldwide Growth Portfolio 27 84 144 304
- ----------------------------------------------------------------------------------------
9. Lincoln National Aggressive Growth Fund 28 87 148 313
- ----------------------------------------------------------------------------------------
10. Lincoln National Social Awareness Fund 24 74 127 271
- ----------------------------------------------------------------------------------------
11. Neuberger Berman AMT: Partners Portfolio 29 88 150 316
- ----------------------------------------------------------------------------------------
12. T. Rowe Price International Series 31 94 160 336
- ----------------------------------------------------------------------------------------
</TABLE>

If you do not surrender your contract, you would pay the following expenses on
a $1,000 investment, assuming a 5% annual return:

For more information, see Charges and other deductions in this Prospectus, and
in the Prospectuses for the funds. Premium taxes may also apply, although they
do not appear in the examples. These examples should not be considered a repre-
sentation of past or future expenses. Actual expenses may be more or less than
those shown.

4
<PAGE>

Summary

What kind of contract is this? It is a group variable annuity contract between
the contractowner and LLANY. It may provide for a fixed annuity and/or a vari-
able annuity. This Prospectus describes the variable side of the contract. See
The Contracts.

What is the variable annuity account (VAA)? It is a separate account we estab-
lished under New York insurance law, and registered with the SEC as a unit in-
vestment trust. VAA assets are allocated to one or more subaccounts, according
to your investment choices. VAA assets are not chargeable with liabilities
arising out of any other business which LLANY may conduct. See The Variable an-
nuity account.

What are the contract's investment choices? Based on instructions, the VAA ap-
plies contributions to buy fund shares in one or more of the investment funds
of the subaccounts: American Century Variable Portfolios, Inc.: VP Balanced;
Baron Capital Funds Trust: Baron Capital Asset Fund; Dreyfus Stock Index Fund;
Dreyfus Variable Investment Fund: Small Cap Portfolio; Fidelity Variable Insur-
ance Products Fund: Growth Portfolio; Fidelity Variable Insurance Products
Fund: Equity-Income Portfolio; Fidelity Variable Insurance Products Fund II:
Asset Manager Portfolio; Janus Aspen Series: Worldwide Growth Portfolio; Lin-
coln National Aggressive Growth Fund, Inc.; Lincoln National Social Awareness
Fund, Inc.; Neuberger Berman Advisers Management Trust: Partners Portfolio; and
T. Rowe Price International Series, Inc. In turn, each fund holds a portfolio
of securities consistent with its investment policy. On August 6, 1999 we (i)
closed the Growth II Account and replaced VP Capital Appreciation with the Lin-
coln National Aggressive Growth Fund and (ii) closed the Socially Responsible
Account and replaced the Calvert Social Balanced Portfolio with the Lincoln Na-
tional Social Awareness Fund. See The variable annuity account and The Funds
for a description of the subaccounts.

Who invests contributions? American Century Investment Management, Inc. is the
investment advisor of American Century VP Balanced, Bethesda, MD. BAMCO, Inc.
is advisor to the Baron fund. The investment advisor of the Dreyfus funds is
The Dreyfus Corporation, New York, NY. The investment advisor of the Fidelity
funds is Fidelity Management & Research Company, Boston, MA. Janus Capital Cor-
poration is the advisor to the Janus fund. Lincoln Investments, Inc. is the in-
vestment adviser of the Lincoln funds; Neuberger Berman Management Incorporated
is the investment advisor to the Neuberger Berman fund. Putnam Investments, is
sub-advisor to the Lincoln National Aggressive Growth Fund and Vantage Invest-
ment Advisors is sub-advisor to the Lincoln National Social Awareness Fund. T.
Rowe Price-Fleming International, Inc. is investment advisor of the T. Rowe
Price International Series. See Description of the funds.

How does the contract work? If we approve the application, we will send the
contractowner a contract. When participants make contributions, they buy accu-
mulation units. If the contractowner decides to purchase retirement income pay-
ments for a participant, we convert accumulation units to annuity units. Re-
tirement income payments will be based on the number of annuity units received
and the value of each annuity unit on payout days. See The Contracts.

What are the charges under the contract? We charge an annual administration
charge of $25 per participant account.

We will deduct any applicable premium tax from contributions or account value
at the time the tax is incurred or at another time we choose.

We apply an annual charge totaling 1.00% to the daily net asset value of the
VAA. See Charges and other deductions.

We may charge additional fees to establish a systematic withdrawal option. We
may waive these charges in certain situations.

The funds' investment management fees, 12b-1 fees, expenses and expense limita-
tions, if applicable, are more fully described in the Prospectuses for the
funds.

What contributions are necessary, and how often? Contributions by or on behalf
of participants may be in any amount unless the contractowner or the plan has a
minimum amount. See The Contracts--contributions.

How will annuity payouts be calculated? If a participant decides to annuitize,
the contractowner may select an annuity option and start receiving retirement
income payments from the contract as a fixed option or variable option or a
combination of both. See Annuity payout options. Remember that participants in
the VAA benefit from any gain, and take a risk of any loss, in the value of the
securities in the funds' portfolios.

What happens if a participant dies before he or she annuitizes? The beneficiary
has options as to how the death benefit is paid. See Death benefits and annuity
period.

May participants transfer account value between subaccounts, and between the
VAA and the fixed account? Before the annuity commencement date, yes, subject
to certain restrictions. A participant may not transfer more than 20% of his or
her fixed account holdings to the VAA per year, unless the participant intends
to liquidate their fixed account value. This liquidation must be over a 5-year
schedule. Transfers may also be subject to the terms of the plan. See The fixed
account and The Contracts--Transfers between subaccounts on or before the annu-
ity commencement date.

May a participant withdraw account value? Yes, during the accumulation period,
subject to contract requirements and to the restrictions of any plan for which
the

5
<PAGE>

contractowner purchased the contract. See Surrenders and withdrawals. Special
limits apply to withdrawals from the fixed account. See The fixed account. The
contractowner must also approve participant withdrawals under Section 401(a)
plans, plans subject to Title I of ERISA. Certain charges may apply. See
Charges and other deductions. A portion of withdrawal proceeds may be taxable.
In addition, a 10% Internal Revenue Service (IRS) tax penalty may apply to dis-
tributions before age 59 1/2. A withdrawal also may be subject to 20% withhold-
ing. See Federal tax matters.

Do participants get a free look at their certificates? A participant under a
Section 403(b) or 408 plan and certain non-qualified plans can cancel the ac-
tive life certificate within ten days (in some states longer) of the date the
participant receives the certificate. The participant needs to give notice to
our home and servicing office. We will refund the participant's contributions
less withdrawals, or for the variable side of the contract if greater, the par-
ticipant's account balance on the day we receive the written notice. See Return
privilege.

6
<PAGE>

Condensed financial information

The financial data included below should be read along with the financial
statements of the VAA and the related data included in the SAI.

Accumulation unit values
(For an accumulation unit outstanding throughout the period)
<TABLE>
<CAPTION>
1997 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Asset Manager Account*
. Beginning of period unit value................................. 17.769 20.583
. End of period unit value....................................... 20.583 23.445
. End of period number of units (000's omitted).................. 1,420 1,535
- -------------------------------------------------------------------------------
Balanced Account*
. Beginning of period unit value................................. 16.989 18.551
. End of period unit value....................................... 18.551 21.263
. End of period number of units (000's omitted).................. 439 510
- -------------------------------------------------------------------------------
Equity-Income Account*
. Beginning of period unit value................................. 10.389 19.985
. End of period unit value....................................... 19.985 22.087
. End of period number of units (000's omitted).................. 889 1,176
- -------------------------------------------------------------------------------
Global Growth Account**
. Beginning of period unit value ................................ 10.000
. End of period unit value....................................... 12.520
. End of period number of units (000's omitted).................. 25
- -------------------------------------------------------------------------------
Growth I Account*
. Beginning of period unit value................................. 24.529 28.328
. End of period unit value....................................... 28.328 39.122
. End of period number of units (000's omitted).................. 1,819 2,095
- -------------------------------------------------------------------------------
Growth II Account*+
. Beginning of period unit value................................. 15.617 14.063
. End of period unit value....................................... 14.063 13.623
. End of period number of units (000's omitted).................. 683 618
- -------------------------------------------------------------------------------
Index Account*
. Beginning of period unit value................................. 24.091 29.827
. End of period unit value....................................... 29.827 37.861
. End of period number of units (000's omitted).................. 814 1,129
- -------------------------------------------------------------------------------
International Stock Account*
. Beginning of period unit value................................. 12.108 12.504
. End of period unit value ...................................... 12.504 14.342
. End of period number of units (000's omitted).................. 475 546
- -------------------------------------------------------------------------------
Mid Cap Growth I Account**
. Beginning of period unit value................................. 10.000
. End of period unit value ...................................... 12.455
. End of period number of units (000's omitted).................. 6
- -------------------------------------------------------------------------------
Mid Cap Value Account**
. Beginning of period unit value................................. 10.000
. End of period unit value ...................................... 11.861
. End of period number of units (000's omitted).................. 10
- -------------------------------------------------------------------------------
Small Cap Account*
. Beginning of period unit value................................. 15.523 17.632
. End of period unit value ...................................... 17.632 16.856
. End of period number of units (000's omitted).................. 966 1,187
- -------------------------------------------------------------------------------
Small Cap Growth Account**
. Beginning of period unit value................................. 10.000
. End of period unit value ...................................... 13.217
. End of period number of units (000's omitted).................. 25
- -------------------------------------------------------------------------------
Social Awareness Account**
. Beginning of period unit value................................. 10.000
. End of period unit value ...................................... 12.791
. End of period number of units (000's omitted).................. 14
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Socially Responsible Account*+
. Beginning of period unit value.................................. 14.528 16.873
. End of period unit value ....................................... 16.873 19.423
. End of period number of units (000's omitted)................... 69 103
- --------------------------------------------------------------------------------
Pending Allocation Account*
. Beginning of period unit value.................................. 11.328 11.894
. End of period unit value ....................................... 11.894 12.545
. End of period number of units (000's omitted)................... 2 3
- --------------------------------------------------------------------------------
</TABLE>

*The Sub-Account indicated commenced operations on January 31, 1997.
**The Sub-Account indicated commenced operation on October 1, 1998.

+The Sub-Account indicated was closed on August 6, 1999.

Investment results

At times, the VAA may compare its investment results to various unmanaged indi-
ces 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. Total returns include the reinvestment of all distributions,
which are reflected in changes in unit value. See the SAI for further informa-
tion.

Financial Statements

The financial statements for the VAA and the statutory-basic financial state-
ments of LLANY are located in the SAI. For a free copy of the SAI, complete and
mail the enclosed card, or call 1-800-893-7168, or e-mail at
[email protected].

Lincoln Life & Annuity Company of New York

LLANY is a life insurance company founded in New York on June 6, 1996. LLANY is
a subsidiary of Lincoln Life. Lincoln Life is one of the largest stock life in-
surance companies in the United States. Lincoln Life is owned by Lincoln Na-
tional Corp. (LNC) which is also organized under Indiana law. LNC's primary
businesses are insurance and financial services.

Fixed side of the contract

Contributions allocated to the fixed account become part of LLANY's general ac-
count, and do not participate in the investment experience of the VAA. The gen-
eral account is subject to regulation and supervision by the New York Insurance
Department as well as the insurance laws and regulations of the jurisdictions
in which the contracts are distributed.

In reliance on certain exemptions, exclusions and rules, LLANY has not regis-
tered interests in the general account as a security under the Securities Act
of 1933

7
<PAGE>

and has not registered the general account as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests in it are
subject to regulation under the 1933 Act or the 1940 Act. LLANY has been ad-
vised that the staff of the SEC has not made a review of the disclosures which
are included in this Prospectus which relate to our general account and to the
fixed side of the contract. These disclosures, however, may be subject to cer-
tain provisions of the federal securities laws relating to the accuracy and
completeness of statements made in the Prospectus. This Prospectus is gener-
ally intended to serve as a disclosure document only for aspects of the con-
tract involving the VAA, and therefore contains only selected information re-
garding the fixed side of the contract. Complete details regarding the fixed
side of the contract can be found in the contract.

Contributions allocated to the fixed account are guaranteed to be credited
with a minimum interest rate, specified in the contract, of at least 3.0%. A
contribution allocated to the fixed side of the contract is credited with in-
terest beginning on the next calendar day following the date of receipt if all
participant data is complete. LLANY may vary the way in which it credits in-
terest to the fixed side of the contract from time to time.

ANY INTEREST IN EXCESS OF 3.0% WILL BE DECLARED IN ADVANCE IN "LLANY'S" SOLE
DISCRETION. PARTICIPANTS BEAR THE RISK THAT NO INTEREST IN EXCESS OF 3.0% WILL
BE DECLARED.

Special limits apply to transfers and withdrawals from the fixed account. Dur-
ing any one calendar year a participant may make one withdrawal from the fixed
account, OR one transfer to the VAA from the fixed account, of up to 20% of
their fixed account balance. Participants who want to liquidate their entire
fixed account balance, or transfer it to the VAA, however, may make one with-
drawal or transfer request for five consecutive calendar years from their
fixed account, according to the following percentages:

<TABLE>
<CAPTION>
Year Request Received Percentage of Fixed
By LLANY Account Available
- ------------------------------------------------------------------------------
<S> <C>
1 20%
2 25%
3 33.33%
4 50%
5 100%
</TABLE>

The five consecutive withdrawals may not be made more frequently than twelve
months apart. We reserve the right to require that any participant stating
their intention to liquidate their fixed account balance stop con-tributions
to the contract. The above liquidation schedule is also subject to the same
conditions as other withdrawals.

Notwithstanding these limits, under certain conditions a participant may with-
draw part or all of his or her fixed account balance. These conditions include
the participant reaching age 59 1/2, or the participant's death or disability.
There may be other conditions allowing the total withdrawal of a fixed account
balance. See Withdrawals.

If a participant's plan permits loans, then during the participant's accumula-
tion period, the participant may apply for a loan by completing a loan appli-
cation that we provide. The participant's account balance in the fixed account
secures the loan. Loans are subject to restrictions imposed by the IRC, Title
I of the Employee Retirement Income Security Act of 1974 (ERISA), and the par-
ticipant's plan. For plans subject to Title I of ERISA, the initial amount of
a participant loan cannot exceed the lesser of 50% of the participant's vested
account balance in the fixed account or $50,000 and must be at least $1,000.
For plans not subject to Title I of ERISA, a participant may borrow up to
$10,000 of his or her vested account balance. A participant may have only one
loan outstanding at a time and may not take more than one loan in any six-
month period. Amounts serving as collateral for the loan are not subject to
the minimum interest rate under the contract and will accrue interest at a
rate below the loan interest rate provided in the contract. More information
about loans and loan interest rates is in the contract, the active life cer-
tificates, the annuity loan agreement and is available from us.

Variable annuity account (VAA)

On July 24, 1996, the VAA was established as an insurance company separate ac-
count under New York law. It is registered with the SEC as a unit investment
trust under the provisions of the 1940 Act. The SEC does not supervise the VAA
or LLANY. The VAA is a segregated investment account, meaning that its assets
may not be charged with liabilities resulting from any other business that we
may conduct. Income, gains and losses, whether realized or not, from assets
allocated to the VAA are, in accordance with the applicable annuity contracts,
credited to or charged against the VAA. They are credited or charged without
regard to any other income, gains or losses of LLANY. The VAA satisfies the
definition of a separate account under the federal securities laws. We do not
guarantee the investment performance of the VAA. Any investment gain or loss
depends on the investment performance of the funds. You assume the full in-
vestment risk for all amounts placed in the VAA.

The VAA is used to support other annuity contracts offered by LLANY in addi-
tion to the contracts described in this Prospectus. The other annuity con-
tracts supported by the VAA invest in the same funds as the contracts de-
scribed in this Prospectus. These other annuity contracts may have different
charges that could affect the performance of the subaccount.

8
<PAGE>

Investments of the VAA

The contractowner decides which of the subaccounts available under the con-
tract will be available for participant allocations. There is a separate
subaccount which corresponds to each fund. Participant allocations may be
changed 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 con-
tracts. The funds are required to redeem fund shares at net asset value on our
request. We reserve the right to add, delete, or substitute funds.

Each fund, described below, is an investment vehicle for insurance company
separate accounts. Certain funds offered as part of this contract have similar
investment objectives and policies to other portfolios managed by the fund's
advisor. The investment results of the funds, however, may be higher or lower
than the results of other portfolios that are managed by the adviser. There
can be no assurance, and no representation is made, that the investment re-
sults of any of the funds will be comparable to the investment results of any
other portfolio managed by the adviser.

Description of the funds

Following are brief summaries of the investment objectives and policies of the
funds, and a description of their managers. Each fund is subject to certain
investment policies and restrictions which may not be changed without a major-
ity vote of shareholders of that fund. More detailed information can be ob-
tained from the current Prospectus for the fund which is included in this
booklet. There is no assurance that any of the funds will achieve its stated
objective.

1. American Century Variable Portfolios, Inc.--American Century VP Balanced
seeks capital growth and current income. Its investment team intends to
maintain approximately 60% of the portfolio's assets in common stocks that
are considered by its manager to have better than average prospects for ap-
preciation and the balance in bonds and other fixed income securities.
American Century Investment Management, Inc. is the investment manager of
this portfolio.

2. Baron Capital Funds Trust, Baron Capital Asset Fund seeks capital apprecia-
tion through investments in securities of small sized companies with market
capitalizations of $100 million to $1.5 billion, with undervalued assets or
favorable growth prospects. BAMCO, Inc. serves as the Fund's investment ad-
visor.

3. Dreyfus Stock Index Fund is a non-diversified index fund that seeks to pro-
vide investment results that correspond to the price and yield performance
of publicly traded common stocks in the aggregate, as represented by the
Standard & Poor's 500 Composite Stock Price Index. The Fund is neither
sponsored by nor affiliated with Standard & Poor's Corporation. The Dreyfus
Corporation acts as the Fund manager and Mellon Equity Associates, an af-
filiate of Dreyfus located at 500 Grant Street, Pittsburgh, Pennsylvania
15258, is the Fund index manager.

4. Dreyfus Variable Investment Fund--Small Cap Portfolio seeks to maximize
capital appreciation investing primarily in common stocks of domestic and
foreign issuers. The Small Cap Portfolio seeks out companies that have the
potential for significant growth. Under normal market conditions, the Port-
folio will invest at least 65% of its total assets in companies with market
capitalization of less than $1.5 billion, at the time of purchase. The
Portfolio manager seeks companies believed to be characterized by new or
innovative products or services which should enhance prospects for growth
in future earnings. The Portfolio may also invest in special situations
such as corporate restructurings, mergers or acquisitions. The Dreyfus Cor-
poration serves as the Portfolio's investment adviser.

5. Fidelity Variable Insurance Products Fund (VIP)--Growth Portfolio seeks
long-term capital appreciation. The Portfolio normally purchases common
stocks. Fidelity Management & Research Company ("FMR") is the manager of
this portfolio.

6. Fidelity Variable Insurance Products Fund (VIP)--Equity-Income Portfolio
seeks reasonable income by investing primarily in income-producing equity
securities, with some potential for capital appreciation, seeking a yield
that exceeds the composite yield on the securities comprising the Standard
and Poor's 500 Index (S&P 500). FMR is the investment manager of this port-
folio.

7. Fidelity Variable Insurance Products Fund II (VIP II)--Asset Manager Port-
folio seeks high total return with reduced risk over the long term by allo-
cating its assets among domestic and foreign stocks, bonds and short-term
money market instruments. FMR is the investment manager of this portfolio.

8. Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth of
capital in a manner consistent with the preservation of capital by invest-
ing primarily in common stocks of foreign and domestic issuers. The Fund
has flexibility to invest on a worldwide basis in companies and other orga-
nizations of any size, regardless of country of organization or place of
principal business activity. The Fund normally invests in issuers from at
least five different countries, including the United States, but may at
times invest in fewer than five countries or even a single country. Janus
Capital Corporation serves as the Fund's investment advisor.

9. Lincoln National Aggressive Growth Fund, Inc. seeks to maximize capital ap-
preciation by investing

9
<PAGE>

in a diversified portfolio of equity securities of small and medium-sized
companies which have a dominant position within their respective industries,
are undervalued or have a potential for growth in earnings. The fund invests
in companies with market capitalizations of between $250 million and $5 bil-
lion at the time of purchase. Lincoln Investment is the fund's investment
advisor, and Putnam Investments is the fund's investment sub-advisor.

10. Lincoln National Social Awareness Fund, Inc. seeks long-term capital ap-
preciation by investing primarily in a portfolio of common stock and secu-
rities convertible into common stock, which adhere to certain specific so-
cial criteria. Lincoln Investment Management, Inc. (Lincoln Investment) is
the fund's investment advisor and Vantage Investment Advisors is the
fund's investment sub-advisor.

11. Neuberger Berman Advisers Management Trust Partners Portfolio seeks capi-
tal growth by investing mainly in common stocks of mid- to large-capitaliza-
tion established companies. Neuberger Berman Management Incorporated serves
as the Fund's investment advisor. Neuberger Berman, LLC serves as the Port-
folio's investment sub-advisor.

12. T. Rowe Price International Series, Inc.--T. Rowe Price International Stock
Portfolio seeks long-term growth of capital through investments primarily in
common stocks of established, non-U.S. companies. Rowe Price-Fleming
International, Inc. is the investment manager of this portfolio.

Fidelity VIP--Money Market Portfolio seeks to obtain as high a level of cur-
rent income as is consistent with preserving capital and providing liquidity.
For more information about the Portfolio, into which initial contributions are
invested pending "LLANY's" receipt of a complete order, See The contracts.

On August 6, 1999 we (i) closed the Growth II Account and replaced VP Capital
Appreciation with the Lincoln National Aggressive Growth Fund and (ii) closed
the Socially Responsible Account and replaced the Calvert Social Balanced
Portfolio with the Lincoln National Social Awareness Fund.

Some advisors (or their affiliate) may pay compensation to LLANY (or an affil-
iate) for administration, distribution, or other expenses. Currently these ad-
visors include American Century, BAMCO, FRM, Janus and Neuberger Berman. The
amount of compensation is usually based on assets of the Portfolio from con-
tracts that we issue or administer, and some advisors may pay us more than
others.

Sale of shares by the funds
We will purchase shares of the funds at net asset value and direct them to the
appropriate subaccounts of the VAA. We will redeem shares of the appropriate
funds to pay annuity payouts, death benefits, surrender/withdrawal proceeds or
for other purposes described in the contract. If a participant wants to trans-
fer all or part of his or her account balance from one subaccount to another,
we redeem shares held in the first and purchase shares of the other. The
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 LLANY and may be sold to other insurance companies for investment of assets
of the subaccounts established by those insurance companies to fund variable
annuity and variable life insurance contracts.

When a fund sells shares both to variable annuity and to variable life insur-
ance separate accounts, it is engaging in mixed funding. When a fund sells
shares to separate accounts of unaffiliated life insurance companies, it is
engaging in shared funding.

The funds may engage in mixed and shared funding. Due to differences in re-
demption rates or tax treatment, or other considerations, the interests of
various contract owners participating in a fund could conflict. The funds' Di-
rectors or Trustees will monitor for the existence of any material conflicts,
and determine what action, if any, should be taken. See the Prospectuses for
the funds.

10
<PAGE>

Reinvestment of dividends and capital gain distributions
All dividend and capital gain distributions of the funds are automatically re-
invested in shares of the distributing funds at their net asset value on the
date of distribution. Dividends are not paid out to contractowners as addi-
tional units, but are reflected as changes in unit values.

Addition, deletion or substitution of investments
We reserve the right, within the law, to make additions, deletions and substi-
tutions for the funds in which the VAA participates. (We may substitute shares
of other funds for shares already purchased, or to be purchased in the future,
under the contract. This substitution might occur if shares of a fund should
no longer be available, or if investment in any fund's shares should become
inappropriate, in the judgment of our management, for the purposes of the con-
tract.) We cannot substitute shares without approval by the SEC. We will also
notify contractowners and participants.

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 will incur cer-
tain costs and expenses for distribution and administration of the contracts
and for providing the benefits payable thereunder. More particularly, our ad-
ministrative services include: processing applications and enrollment forms
and issuing the contracts and active life certificates, processing purchases
and redemptions of fund shares as required, maintaining records, administering
payout annuity options, furnishing accounting and valuation services (includ-
ing the calculation and monitoring of daily subaccount values), reconciling
and depositing cash receipts, providing contract confirmations, providing
toll-free inquiry services and furnishing telephone fund transfer services.
The risks we assume include: the risk that annuitants receiving payout annui-
ties under the contract will live longer than we assumed when we calculated
our guaranteed rates (these rates cannot be changed); the risk that death ben-
efits paid will exceed actual participant account balances (less outstanding
loans); and the risk that our costs in providing the services will exceed our
revenues from contract charges which we cannot change. The amount of a charge
may not necessarily correspond to the costs associated with providing the
services or benefits indicated by the description of the charge.

Deductions from the VAA for Variable Annuity III
We deduct from the VAA an amount, computed daily, which is equal to an annual
rate of 1.00% (1.20% before January 1, 1998) of the daily net asset value. The
charge is a mortality and expense risk charge. It is assessed during the accu-
mulation period and during the annuity period, even though during the annuity
period, we bear no mortality risk on annuity options that do not have life
contingencies.

Annual administration charge
During the accumulation period, we currently deduct $25 (or the balance of the
participant's account, if less) per year from each participant's account bal-
ance on the last business day of the month in which a participant anniversary
occurs. We also deduct the charge from a participant's account balance if the
participant's account is totally withdrawn. The charge may be increased or
decreased.

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 account value
when incurred, or at another time of our choosing.

The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administrative interpretation or by judicial action. The tax ranges from 0.5%
to 4.0%.

Other charges and deductions
There are deductions from and expenses paid out of the assets of the under-
lying funds that are more fully described in the Prospectuses for the funds.

Loans are subject to loan interest charges. In addition, we may impose a $30
fee to set up a systematic withdrawal option for a participant.

Additional information
The annual administration charge described previously may be reduced or elimi-
nated under a particular contract. However, these charges will be reduced only
to the extent that we anticipate lower distribution and/or administrative ex-
penses, or that we perform fewer sales or administrative services than those
originally contemplated in establishing the levels of those charges. Lower
distribution and/or administrative expenses may be the result of economies as-
sociated with (i) the size of a particular group; (ii) an existing relation-
ship with the contractowner or employer; (iii) the use of mass enrollment pro-
cedures; (iv) the performance of administrative or sales functions by the em-
ployer; or (v) the use by an employer of automated techniques in submitting
contributions or information relating to contributions on behalf of its em-
ployees. In addition, an employer may pay the annual administration charge on
behalf of participants under a contract, or by election impose this charge
only on participants with account balances in the VAA.

11
<PAGE>

The Contracts

Purchase of the contracts
We designed the contracts for employers and other entities to enable partici-
pants and employers to accumulate funds for retirement programs meeting the
requirements of the following Sections of the Internal Revenue Code of 1986,
as amended (tax code) 401(a), 403(b), 408, 457 and other related sections, as
well as for programs offering non-qualified annuities. An employer, associa-
tion or trustee in some circumstances, may apply for a contract by completing
an application and returning it to us. If we accept the application, the
contractowner or an affiliated employer can forward contributions on behalf of
employees who then become participants under the contracts. For plans that
have allocated rights to the participant, we will issue to each participant a
separate active life certificate that describes the basic provisions of the
contract to each participant.

Contributions
Contractowners generally forward contributions to us for investment. Depending
on the plan, the contributions may consist of salary reduction contributions,
employer contributions or post-tax contributions.

Contributions may accumulate on either a guaranteed or variable basis as se-
lected from those available by the contractowner.

Contributions by participants may be in any amount unless there is a minimum
amount set by the contractowner or plan. A contract may require the
contractowner to contribute a minimum annual amount on behalf of all partici-
pants. Annual contributions under qualified plans may be subject to maximum
limits imposed by the tax code. Annual contributions under non-qualified plans
may be limited by the terms of the contract. In the SAI see Tax Law Considera-
tions for a discussion of these limits.

Subject to any restrictions imposed by the plan or the tax code, we will ac-
cept transfers from other contracts and qualified rollover contributions.

Contributions must be in U.S. funds, and all withdrawals and distributions un-
der the contract will be in U.S. funds. If a bank or other financial institu-
tion does not honor the check or other payment method used for a contribution,
we will treat the contribution as invalid. All allocation and subsequent
transfers resulting from the invalid contributions will be reversed and the
party responsible for the invalid contribution must reimburse us for any
losses or expenses resulting from the invalid contribution.

Initial contributions
If we have received a completed enrollment form and all other information nec-
essary for processing a contribution, we will price the initial contribution
for a participant to his or her account no later than two business days after
we receive the contribution.

If we receive contributions without a properly complete enrollment form, we
will notify the contractowner and deposit the contributions to the pending al-
location account. Within two business days of receipt of a properly completed
enrollment form, we will transfer the participant's account balance in the
pending allocation account in accordance with the allocation percentages
elected on the enrollment form. We will allocate all future contributions in
accordance with these percentages until the participant notifies us of a
change. If we do not receive a properly completed enrollment form after we
send three monthly notices, then we will refund the participant's account bal-
ance in the pending allocation account within 105 days of the date of the ini-
tial contribution. The pending allocation account invests in Fidelity VIP--
Money Market Portfolio, which is not available as an investment option under
the contract. We do not impose the mortality and expense risk charges or the
annual administration charge on the pending allocation account. We begin im-
posing these charges when we receive a properly completed enrollment form. The
participant's participation date will be the date we deposited the partici-
pant's contribution into the pending allocation account.

Valuation date
Accumulation units and annuity units will be valued once daily at the close of
trading (currently 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 contributions
The contractowner forwards contributions to us, specifying the amount being
contributed on behalf of each participant and allocation information in accor-
dance with our procedures. Contributions are placed into the VAA's
subaccounts, each of which invests in shares of a fund, and/or the fixed ac-
count, according to written participant instructions and subject to the plan.
The contribution allocation percentage to the subaccounts or the fixed account
can be in any whole percent. A participant may allocate contributions to a
maximum of ten subaccounts, or to a maximum of nine subaccounts and the fixed
account.

Upon allocation to the appropriate subaccount, contributions are converted to
accumulation units. The number of accumulation units credited is determined by
dividing the amount allocated to each subaccount by the value of an accumula-
tion unit for that subaccount on the valuation date on which the contribution
is received by us if received before 4:00 p.m., New York time. If the contri-
bution is received at or after 4:00 p.m., New York time, we will use the accu-
mulation unit value computed on the next

12
<PAGE>

valuation date. The number of accumulation units determined in this way is not
changed by any subsequent change in the value of an accumulation unit. Howev-
er, 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.

Subject to the terms of the plan, a participant may change the allocation of
contributions by notifying us in writing or by telephone in accordance with
our published procedures. The change is effective for all contributions re-
ceived concurrently with the allocation change form and for all future contri-
butions, unless the participant specifies a later date. Changes in the alloca-
tion of future contributions have no effect on amounts a participant may have
already contributed. Such amounts, however, may be transferred between
subaccounts and the fixed account pursuant to the requirements described in
Transfers on or before the annuity commencement date. Allocations of employer
contributions may be restricted by the applicable plan.

Valuation of accumulation units
Contributions allocated to the VAA are converted into accumulation units. This
is done by dividing each contribution by the value of an accumulation unit for
the valuation period during which the contribution is 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. 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 be-
ginning of the valuation period by the net asset value per share of the
fund at end of the valuation period, and adding any dividend or other dis-
tribution 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 of (2) 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 mortality and expense risk charge multiplied by the number of calendar
days in the valuation period.

Transfers on or before the annuity commencement date
Subject to the terms of a plan, a participant may transfer all or a portion of
the participant's account balance from one subaccount to another, and from the
VAA to the fixed account. Transfers and withdrawals from the fixed account are
subject to special limits. During any one calendar year, a participant may
make on transfer from the fixed account to the VAA in an amount of up to 20%
of the fixed account balance if allowed by the terms of the contract. See The
fixed account.

A transfer from a subaccount involves the surrender of accumulation units in
that subaccount, and a transfer to a subaccount involves the purchase of accu-
mulation units in the that subaccount. Subaccount transfers will be done using
accumulation unit values determined at the end of the valuation date on which
we receive the transfer request. There is no charge for a transfer. We do not
require any minimum transfer amount, and do not limit the number of transfers.

A transfer may be made by writing to us or, if a Telephone Exchange Authoriza-
tion form (available from us) is on file with us, by a toll-free telephone
call. In order to prevent unauthorized or fraudulent telephone transfers, we
may require the caller to provide certain identifying information before we
will act upon their instructions. We may also assign the participant a Per-
sonal Identification Number (PIN) to serve as identification. We will not be
liable for following telephone instructions we reasonably believe are genuine.
Telephone requests may be recorded and written confirmation of all transfer
requests will be mailed to the participant on the next valuation date. If the
participant or contractowner determines that a transfer was made in error, the
contractowner or participant must notify us within 30 days of the confirmation
date. Telephone transfers will be processed on the valuation date that they
are received when they are received by us before 4:00 p.m. New York time.

When thinking about a transfer of account value, the participant should con-
sider the inherent risk involved. Frequent transfers based on short-term ex-
pectations may increase the risk that a transfer will be made at an inoppor-
tune time.

Transfers after the annuity commencement date
We do not permit transfers of a participant's account balance after the annu-
ity commencement date.

Death benefit before the annuity commencement date
The payment of death benefits is governed by the applicable plan and the tax
code. The participant may designate a beneficiary during the participant's
lifetime and change the beneficiary by filing a written request with us. Each
change of beneficiary revokes any previous designation.

13
<PAGE>

If the participant dies before the annuity commencement date, the death benefit
paid to the participant's designated beneficiary will be the greater of: (1)
the net contributions; or (2) the participant's account balance less any out-
standing loan (including principal and due and accrued interest), provided
that, if we are not notified of the participant's death within six months of
such death, we pay the beneficiary the amount in (2).

We determine the value of the death benefit as of the date on which the death
claim is approved for payment. This payment will occur when we receive (1)
proof, satisfactory to us, of the death of the participant; (2) written autho-
rization for payment; and (3) all required claim forms, fully completed.

If a death benefit is payable, the beneficiary may elect to receive payment of
the death benefit in either the form of a lump sum settlement or a annuity pay-
out, or as a combination of these two.

If a lump sum settlement is requested, the proceeds will be mailed within seven
days of receipt of satisfactory claim documentation as discussed previously,
subject to the laws and regulations governing payment of death benefits. If no
election is made within 60 days after we receive satisfactory notice of the
participant's death, we will pay a lump sum settlement to the beneficiary at
that time. This payment may be postponed as permitted by the 1940 Act.

Payment will be made in accordance with applicable laws and regulations gov-
erning payment of death benefits.

Under qualified contracts, if the beneficiary is someone other than the spouse
of the deceased participant, the tax code provides that the beneficiary may not
elect an annuity which would commence later than December 31st of the calendar
year following the calendar year of the participant's death. If a non-spousal
beneficiary elects to receive payment in a single lump sum, the tax code pro-
vides that such payment must be received no later than December 31st of the
fourth calendar year following the calendar year of the participant's death.

If the beneficiary is the surviving spouse of the deceased participant, distri-
butions generally are not required under the tax code to begin earlier than De-
cember 31st of the calendar year in which the participant would have attained
age 70. If the surviving spouse dies before the date distributions commence,
then, for purposes of determining the date distributions to the beneficiary
must commence, the date of death of the surviving spouse is substituted for the
date of death of the participant.

Other rules apply to non-qualified annuities. See Federal tax matters.

If there is no living named beneficiary on file with us at the time of a par-
ticipant's death and unless the plan directs otherwise, we will pay the death
benefit to the participant's estate in the form of a lump sum payment, upon re-
ceipt of satisfactory proof of the participant's death, but only if we receive
proof of death no later than the end of the fourth calendar year following the
year of the participant's death. In such case, the value of the death benefit
will be determined as of the end of the valuation period during which we re-
ceive due proof of death, and the lump sum death benefit generally will be paid
within seven days of that date.

Withdrawals
Before the annuity commencement date and subject to the terms of the plan,
withdrawals may be made from the subaccounts of all or part of the partici-
pant's account balance in the subaccounts remaining after deductions for any
applicable (1) annual administration charge (imposed on total withdrawals), (2)
premium taxes, and (3) outstanding loan including loan security. Annuity con-
version amounts are not considered withdrawals.

Special limits apply to withdrawals (and transfers to the VAA) from the fixed
account. See The fixed account.

Notwithstanding such limits, a participant may withdraw 100% of their fixed ac-
count balance at any time provided that we receive satisfactory proof of the
following events: (a) the participant has attained age 59 1/2; (b) the partici-
pant has died; (c) the participant has incurred a disability as defined under
the contract; (d) the participant is separated from service from their employ-
er; or (e) the participant has incurred a financial hardship. A contractowner
has options of (i) choosing to eliminate financial hardship as an event enti-
tling the participant to a 100% withdrawal from the contract; and/or (ii) add-
ing a requirement that the participant be 55 years of age and separated from
service from their employer to be entitled to a 100% withdrawal from the fixed
account. Contractowners choosing one or more of these optional provisions may
receive a different declared interest rate on the fixed account than will hold-
ers of contracts without these provisions.

The account balance available for withdrawal is determined at the end of the
valuation period during which we receive the written withdrawal request. Unless
a request for withdrawal specifies otherwise, withdrawals will be made from all
subaccounts within the VAA and from the fixed account in the same proportion
that the amount of withdrawal bears to the total participant account balance.
Unless prohibited, withdrawal payments will be mailed within seven days after
we receive a valid written request. The payment may be postponed as permitted
by the 1940 Act.

The tax consequences of a withdrawal are discussed later in this booklet. See
Federal tax matters.

Total withdrawals. Only participants with no outstanding loans can make a total
withdrawal. A total withdrawal of a participant's account will occur when (a)
the participant or contractowner requests the liquidation of the participant's
entire account balance, or (b) the amount requested results in a remaining par-
ticipant

14
<PAGE>

account balance of an amount less than or equal to the annual administration
charge, in which case we treat the request as a request for liquidation of the
participant's entire account balance.

Any active life certificate must be surrendered to us when a total withdrawal
occurs. If the contractowner resumes contributions on behalf of a participant
after a total withdrawal, the participant will receive a new participation
date and active life certificate.

Partial withdrawals. A partial withdrawal of a participant's account balance
will occur when less than a total withdrawal is made from a participant's ac-
count.

Systematic withdrawal option. Participants who are at least age 59 1/2, are
separated from service from their employer, or are disabled, and certain
spousal beneficiaries and alternate payees who are former spouses, may be eli-
gible for a Systematic Withdrawal Option ("SWO") under the contract. Payments
are made only from the fixed account. Under the SWO a participant may elect to
withdraw either a monthly amount which is an approximation of the interest
earned between each payment period based upon the interest rate in effect at
the beginning of each respective payment period, or a flat dollar amount with-
drawn on a periodic basis. A participant must have a vested pre-tax account
balance of at least $10,000 in the fixed account in order to select the SWO. A
participant may transfer amounts from the VAA to the fixed account in order to
support SWO payments. These transfers, however, are subject to the transfer
restrictions imposed by any applicable plan. A one-time fee of up to $30 may
be charged to set up the SWO. This charge is waived for total vested pre-tax
account balances of $25,000 or more. More information about SWO, including ap-
plicable fees and charges, is available in the contracts and active life cer-
tificates and from us.

Maximum conservation option. Under certain contracts participants who are at
least age 70 1/2 may ask us to calculate and pay to them the minimum annual
distribution required by Sections 401(a)(9), 403(b)(10) or 408 of the tax
code. The participant must complete the forms we require to elect this option.
We will base our calculation solely on the participant's account value with
us. Participants who select this option are responsible for determining the
minimum distributions amount applicable to their non-LLANY contracts.

Withdrawal restrictions. Withdrawals under Section 403(b) contracts are sub-
ject to the limitations under Section 403(b)(11) of the tax code and regula-
tions thereof and in any applicable plan document. That section provides that
withdrawals of salary reduction contributions deposited and earnings credited
on any salary reduction contributions after December 31, 1988 can only be made
if the participant has (1) died; (2) become disabled; (3) attained age 59 1/2;
(4) separated from service; or (5) incurred a hardship. If amounts accumulated
in a Section 403(b)(7) custodial account are deposited in a contract, these
amounts will be subject to the same withdrawal restrictions as are applicable
to post-1988 salary reduction contributions under the contracts. For more in-
formation on these provisions see Federal tax matters.

Withdrawal requests for a participant under Section 401(a) plans and plans
subject to Title I of ERISA must be authorized by the contractowner on behalf
of a participant. All withdrawal requests will require the contractowner's
written authorization and written documentation specifying the portion of the
participant's account balance which is available for distribution to the par-
ticipant.

For withdrawal requests (other than transfers to other investment vehicles) by
participants under plans not subject to Title I of ERISA and non-401(a) Plans,
the participant must certify to us that one of the permitted distribution
events listed in the tax code has occurred (and provide supporting informa-
tion, if requested) and that we may rely on this representation in granting
the withdrawal request. See Federal tax matters. A participant should consult
his or her tax adviser as well as review the provisions of their plan before
requesting a withdrawal.

A plan and applicable law may contain additional withdrawal or transfer re-
strictions.

Withdrawals may have Federal tax consequences. In addition, early withdrawals,
as defined under Section 72(q) and 72(t) of the tax code, may be subject to a
ten percent excise tax.

Amendment of the 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. The
contractowner will be notified in writing of any changes, modifications or
waivers.

Commissions
We pay commissions of up to 3.5% of contributions to dealers. In some instanc-
es, we may lower commissions on contributions by as much as 3.5% and include a
commission of up to .50% of annual contract values (or an equivalent sched-
ule). These commissions are not deducted from contributions or account value:
they are paid by us.

Ownership
Contractowners have all rights under the contract except those allocated to
participants. According to New York law, the assets of the VAA are held for
the exclusive benefit of all contractowners, participants, and their desig-
nated beneficiaries; and the assets of the VAA are not chargeable with liabil-
ities arising from any other business that we may conduct. Qualified contracts
and active life certificates may not be assigned or transferred except as per-
mitted by ERISA and on written notifica-

15
<PAGE>

tion to us. In addition, a participant, beneficiary, or annuitant may not, un-
less permitted by law, assign or encumber any payment due under the contract.

Contractowner questions
The obligations to purchasers under the contracts are those of LLANY. Ques-
tions about the contract should be directed to us at 1-800-893-7168.

Annuity payouts

As permitted by the plan, the participant, or the beneficiary of a deceased
participant, may elect to convert all or part of the participant's account
balance or the death benefit to a annuity payouts. The contract provides op-
tional forms of payouts of annuities (annuity payout options), each of which
is payable on a variable basis, a fixed basis or a combination of both as
specified. If the contractowner does not give us instructions, we will apply
the participant's account balance in the fixed account to a fixed annuity, and
account balance in the VAA to a variable annuity.

If the participant's account balance or the beneficiary's death benefit is
less than $2,000 or if the amount of the first payout is less than $20, we
have the right to cancel the annuity and pay the participant or beneficiary
the entire amount in a lump sum.

We may maintain variable annuity payout in the VAA, or in another separate ac-
count of LLANY (variable payout division). We do not impose a charge when the
annuity conversion amount is applied to a variable payout division to provide
an annuity payout option. The contract benefits and charges for an annuity
payout option, whether maintained in the VAA or in a variable payout division,
are as described in this Prospectus. The selection of funds available through
a variable payout division may be different from the funds available through
the VAA. If we will maintain a participant's variable annuity payout in a
variable payout division, we will provide a Prospectus for the variable payout
division before the annuity commencement date.

Under qualified plans, any annuity selected must be payable over a period that
does not extend beyond the life expectancy of the participant and the benefi-
ciary. If the beneficiary is not the participant's spouse, the present value
of payouts to be made to the participant must be more than 50% of the present
value of the total payouts to be made to the participant and the beneficiary.

If an annuitant dies before the end of a guaranteed annuity period, the bene-
ficiary, if any, or the annuitant's estate will receive any remaining payouts
due under the annuity option in effect.

Annuity payout options
Note Carefully: Under the Single Life Annuity and Joint Life Annuity options
it would be possible for only one annuity payout to be made if the
annuitant(s) were to die before the due date of the second annuity payout;
only two annuity payouts if the annuitant(s) were to die before the due date
of the third annuity payouts; and so forth.

Single life annuity. Payouts are made monthly during the lifetime of the annu-
itant, and the annuity terminates with the last payout preceding death.

Life annuity with guaranteed period of 10, 15 or 20 years. Payouts are made
monthly during the lifetime of the annuitant with a monthly payout guaranteed
to the beneficiary for the remainder of the selected number of years, if the
annuitant dies before the end of the period selected. Payouts under this annu-
ity option are smaller than a single life annuity without a guaranteed payout
period.

Joint life annuity. Payouts are made monthly during the joint lifetime of the
annuitant and a designated second person.

Non-life annuities. Annuity payouts are guaranteed monthly for the selected
number of years. While there is no right to make any total or partial with-
drawals during the annuity period, an annuitant or beneficiary who has se-
lected this annuity option as a variable annuity may request at any time dur-
ing the payout period that the present value of any remaining installments be
paid in one lump sum. This lump sum payout will be treated as a total with-
drawal during the accumulation period. See Charges and deductions and Federal
tax status.

Additional information
Annuity payout options are only available if consistent with the contract, the
plan, the tax code, and ERISA.

The annuity commencement date is the date on which we make the first annuity
payout to an annuitant. For plans subject to Section 401(a)(9)(B) of the tax
code, a beneficiary must select an annuity commencement date that is not later
than one year after the date of the participant's death. A participant or
contractowner may select an annuity commencement date for the annuitant, which
is shown in the retired life certificate. Selection of an annuity commencement
date may be affected by the distribution restrictions under the tax code and
the minimum distribution requirements under Section 401(a)(9) of the tax code.
See Federal tax status.

You must send us written notice of the selected annuity commencement date, the
annuity payout option (including whether fixed or variable), and the annuity
conversion amount to be converted on behalf of a participant or beneficiary,
at least 30 days before the selected annuity commencement date. If proceeds
become available to a beneficiary in a lump sum, the beneficiary may choose
any annuity payout option.

The annuity conversion amount is either the participant's account balance or a
portion thereof, or the death

16
<PAGE>

benefit plus interest, as of the annuity payout calculation date. For a fixed
annuity, the annuity commencement date is usually one month after the annuity
payout calculation date; subsequent annuity payouts are at one-month intervals
from the annuity commencement date. For a variable annuity, the annuity com-
mencement date is ten business days after the initial annuity payout calcula-
tion date; subsequent monthly payouts have annuity payout calculation dates
which are ten business days prior.

Annuity payout calculation
Fixed annuity payouts are determined by dividing the participant's annuity
conversion amount in the fixed account as of the initial annuity payment cal-
culation date by the applicable annuity conversion factor (in the contract)
for the annuity payout option selected.

Variable annuity payouts will be determined using:

1. The participant's annuity conversion amount in the VAA as of the initial
annuity payout calculation date;

2. The annuity conversion factor in the contract;

3. The annuity payout option selected; and

4. The investment performance of the funds selected.

To determine the amount of annuity payouts, we make this calculation:

1. Determine the dollar amount of the first payout; then

2. Credit the retired life certificate with a specific number of annuity units
equal to the first payout divided by the annuity unit value; and

3. Calculate the value of the annuity units each period thereafter.

We assume an investment return of a specified percentage per year, as applied
to the applicable mortality table. The amount of each annuity payout after the
initial payment will depend upon how the underlying fund(s) perform, relative
to the assumed rate. If the actual net investment rate (annualized) exceeds
the assumed rate, the payment will increase at a rate proportional to the
amount of such excess. Conversely, if the actual rate is less than the assumed
rate, the annuity payouts will decrease. There is a more complete explanation
of this calculation in the SAI.

Federal tax matters

Introduction
The Federal income tax treatment of the contract is complex and sometimes un-
certain. The Federal income tax rules may vary with your particular circum-
stances. This discussion does not include all the Federal income tax rules
that may affect the contractowner, participant and contract. This discussion
also does not address other Federal tax consequences or state or local tax
consequences, associated with the contract. As a result, contractowner and
participant should always consult a tax adviser about the application of tax
rules to their individual situation.

Taxation of nonqualified annuities
This part of the discussion describes some of the Federal income tax rules ap-
plicable to nonqualified annuities. A nonqualified annuity is a contract not
issued in connection with a qualified retirement plan receiving special tax
treatment under the tax code, such as an IRA or a section 403(b) plan.

Tax deferral on earnings
The Federal income tax law generally does not tax any increase in the contract
value the contractowner or participant receives a contract distribution. How-
ever, for this general rule to apply, certain requirement must be satisfied:

. An individual must own the contract (or the tax law must treat the contract
as owned by an individual).

. The investments of the VAA must be "adequately diversified" in accordance
with IRS regulations.

. The 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.

Contracts not owned by the individual
If a contract is owned by an entity (rather than an individual), the tax code
generally does not treat it as an annuity contract for Federal income tax pur-
poses. This means that the entity owning the contract pays tax currently on
the excess of the contract value over the purchase payments for the contract.
Examples of contracts where the owner pays current tax on the contract's earn-
ings are contracts issued to a corporation or a trust. Exceptions to this rule
exist. For example, the tax code treats a contract as owned by an individual
if 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 em-
ployees.

Investments in the VAA must be diversified
For a contract to be treated as an annuity for Federal Income tax purposes,
the investments of the VAA must be "adequately diversified." IRS regulations
define standards for determining whether the investments of the VAA are ade-
quately diversified. If the VAA fails to comply with these diversification
standards, participant could be required to pay tax currently on the excess of
the contract value over the contract contributions. Although we do not control
the investments of the underlying investment options, we expect that the un-
derlying

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<PAGE>

investment options will comply with the IRS regulations so that the VAA will
be considered "adequately diversified."

Restrictions
Federal income tax law limits contractowner's and participant's right to
choose particular investments for the contract. Because the IRS has not issued
guidance specifying those limits, the limits are uncertain and your right to
allocate contract values among the subaccounts may exceed those limits. If so,
contractowner and/or participant would be treated as the owner of the assets
of the VAA and thus subject to current taxation on the income and gains 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 con-
tracts. We reserve the right to modify the contract without contractowner's or
participant's consent to try to prevent the tax law from considering you as
the owner of the assets of the VAA.

Age at which annuity payouts begin
Federal income tax rules do not expressly identify a particular age by which
annuity payouts must begin. However, those rules do require that annuity con-
tract provide for amortization, through annuity payouts, of the contract's
contributions and earnings. If annuity payouts under the contract begin or are
scheduled to begin on a date past the annuitant's 85th birthday, it is possi-
ble that the tax law will not treat the contract as an annuity for Federal in-
come tax purposes. In that event, contractowner and/or participant would be
currently taxable on the excess of the contract value over the contributions
of the contract.

Tax treatment of payments
We make no guarantees regarding the tax treatment of any contract or of any
transaction involving a contract. However, the rest of this discussion assumes
your contract will be treated as an annuity for Federal income tax purposes
and that the tax law will not tax any increase in the contract value until
there is a distribution from your contract.

Taxation of withdrawals and surrenders
Contractowner and/or participant will pay tax on withdrawals to the extent
your contract value exceeds your contributions in the contract. This income
(and all other income from your contract) is considered ordinary income. A
higher rate of tax is paid on ordinary income than on capital gains.
Contractowner and/or participant will pay tax on a surrender to the extent the
amount you receive exceeds contributions. In certain circumstances, contribu-
tions are reduced by amounts received from the contract that were not included
in income.

Taxation of annuity payouts
The tax code imposes tax on a portion of each annuity payout (at ordinary in-
come tax rates) and treats a portion as a nontaxable return of contributions
in the contract. We will notify you annually of the taxable amount of your an-
nuity payout. Once you have recovered the total amount of the contribution in
the contract, contractowner and/or participant 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 of the contributions in the contract has
been received, the amount not received generally will be deductible.

Taxation of death benefits
We may distribute amounts from the contract because of the death of a partici-
pant. The tax treatment of these amounts depends on whether participant 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, they are excludible from income if they do not exceed the
contributions not yet distributed from the contract. All annuity payouts
in excess of the contributions not previously received are includible in
income.

. If death benefits are received in a lump sum, the tax law imposes tax on
the amount of death benefits which exceeds the amount of purchase not pre-
viously received.

Penalty taxes payable on withdrawals, surrenders or annuity payouts
The tax code may impose a 10% penalty tax on any distribution from your con-
tract which contractowner and/or participant must include in your gross in-
come. The 10% penalty tax does not apply if one of several exceptions exists.
These exceptions include withdrawals, surrenders or annuity payouts that:

. participant receives on or after they reach age 59 1/2,

. participant receives because they became disabled (as defined in the tax
law),

. A beneficiary receives on or after participant's death, or

. participant receives as a series of substantially equal periodic payments
for their life (or life expectancy).

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<PAGE>

Special rules if you own more than one annuity contract
In certain circumstances, we must combine some or all of the nonqualified an-
nuity contracts participant owns in order to determine the amount of an annu-
ity payout, a surrender or a withdrawal that participant must include in in-
come. For example, if you purchase two or more deferred annuity contracts from
the same life insurance company (or its affiliates) during any calendar year
the tax code treats all such contracts as one contract. Treating two or more
contracts as one contract could affect the amount of a surrender, a withdrawal
or an annuity payout that participant must include in income and the amount
that might be subject to the penalty tax described above.

Loans and assignments
Except for certain qualified contracts, the tax code treats any amount re-
ceived as a loan under a contract, and any assignment or pledge (or agreement
to assign or pledge) any portion of participant's contract value, as a with-
drawal of such amount or portion.

Gifting a contract
If contractowner and/or participant transfer ownership of your contract to a
person other than participant's spouse (or to participant's former spouse in-
cident to divorce), and receive a payment less than the contract's value, par-
ticipant will pay tax on their contract value to the extent that it exceeds
contractowner's and/or participant's contributions not previously received.
The new owner's contributions in the contract would then be increased to re-
flect the amount included in the contractowner's and/or participant's income.

Loss of interest deduction
After June 8, 1997, if a contract is issued to a taxpayer that is not an indi-
vidual, or if a contract is held for the benefit of an entity, the entity will
lose a portion of its deduction for otherwise deductible interest expenses.
This disallowance does not apply if contractowner and/or participant pay tax
on the annual increase in the contract value. Entities that are considering
purchasing a contract, or entities that will benefit from someone else's own-
ership of a contract, should consult a tax advisor.

Qualified retirement plans

We also designed the contracts for use in connection with certain types of re-
tirement plans that receive favorable treatment under the tax code. Contracts
issued to or in connection with a qualified retirement plan are called "quali-
fied contracts". We issue contracts for use with different types of qualified
plans. The Federal income tax rules applicable to those plans are complex and
varied. As a result, this Prospectus does not attempt to provide more than
general information about use of the contract with the various types of quali-
fied plans. Persons planning to use the contract in connection with a quali-
fied plan should obtain advice from a competent tax advisor.

Types of qualified contracts and terms of contracts
Currently, we issue contracts in connection with the following types of quali-
fied plans:

. Individual Retirement Accounts and Annuities ("Traditional IRAs")

. Public school system and tax-exempt organization annuity plans ("403(b)
plans")

. Qualified employee pension and profit sharing plans ("401(a)") and qualified
annuity plans ("403(a) plans")

We may issue a contract for use with other types of qualified plans in the fu-
ture.

We will amend contracts to be used with a qualified plan as generally neces-
sary to conform to tax law requirements for the type of plan. However, the
rights of a person to any qualified plan benefits may be subject to the plan's
terms and conditions, regardless of the contract's terms and conditions. In
addition, we are not bound by the terms and conditions of qualified plans to
the extent such terms and conditions contradict the contract, unless we con-
sent.

Tax treatment of qualified contracts
The Federal income tax rules applicable to qualified plans and qualified con-
tracts vary with the type of plan and contract. For example,

. Federal tax rules limit the amount of 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 plan and the plan partici-
pant's specific circumstances, e.g., the participant's compensation.

. Under most qualified plans, e.g., 403(b) plans and Traditional IRAs, the
participant must begin receiving payments from the contract in certain mini-
mum amounts by a certain age, typically age 70 1/2. However, these "minimum
distribution rules" do not apply to a Roth IRA.

. Loans are allowed under certain types of qualified plans, but 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 dura-
tion, and the manner of repayment. Your contract or plan may not permit
loans.

Tax treatment of payments
Federal income tax rules generally include distributions from a qualified con-
tract in the participant's income as ordinary income. These taxable distribu-
tions will in-
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<PAGE>

clude 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. There are ex-
ceptions. For example, participant does not include amounts received from a
Roth IRA in income if certain conditions are satisfied.

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 generally equals 50% of the amount by which a mini-
mum required distribution exceeds the actual distribution from the qualified
plan.

Federal penalty taxes payable on distributions
The tax code may impose a 10% penalty tax on the amount received from the qual-
ified contract that must be included in income. The tax code does not impose
the penalty tax if one of several exceptions applies. The exceptions vary de-
pending on the type of qualified contract you purchase. For example, in the
case of an IRA, exceptions provide that the penalty tax does not apply to a
withdrawal, surrender or annuity payout:

. received on or after the participant reaches age 59 1/2,

. received on or after the participant's death or because of the participant's
disability (as defined in the tax law),

. received as a series of substantially equal periodic payments for the partic-
ipant's life or (life expectancy), or

. received as reimbursement for certain amounts paid for medical care.

These exceptions, as well as certain others not described here, generally apply
to taxable distributions from other qualified plans. However, the specific re-
quirements of the exception may vary.

Transfers and direct rollovers
In many circumstances, money may be moved between qualified contracts and qual-
ified plans by means of a rollover or a transfer. Special rules apply to such
rollovers and transfers. If the applicable rules are not followed, participant
may suffer adverse Federal income tax consequences, including paying taxes
which might not otherwise have had to be paid. A qualified advisor should al-
ways be consulted before you move or attempt to move funds between any quali-
fied plan or contract and another qualified plan or contract.

The direct rollover rules apply to certain payments (called "eligible rollover
distributions") from section 401(a) plans, section 403(a) or (b) plans, H.R. 10
plans, and contracts used in connection with these types of plans. (The direct
rollover rules do not apply to distributions from IRAs). The direct rollover
rules require that we withhold Federal income tax equal to 20% of the eligible
rollover distribution from the distribution amount unless participant elects to
have the amount directly transferred to certain qualified plans or contracts.
Before we send a rollover distribution, we will provide the participant with a
notice explaining these requirements and how the 20% withholding can be avoided
by electing a direct rollover.

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 the participant notifies us at or be-
fore the time of distribution that tax is not to be withheld. In certain cir-
cumstances, Federal income tax rules may require us to withhold tax. At the
time a withdrawal, surrender or annuity payout is requested, we will give the
participant an explanation of the withholding requirements.

Tax status of LLANY
Under existing Federal income tax laws, LLANY does not pay tax on investment
income and realized gains of the VAA. LLANY does not expect that it will incur
any Federal income tax liability on the income and gains earned by the VAA. We,
therefore, do not impose a charge for Federal income taxes. If Federal income
tax law changes and we must pay tax on some or all of the income and gains
earned by the VAA, we may impose a charge against the VAA to pay the taxes.

Changes in the law
The above discussion is based on the tax code, IRS regulations, and interpreta-
tions existing on the date of this Prospectus. However, Congress, the IRS and
the courts may modify these authorities, sometimes retroactively.

Voting rights

As required by law, we will vote the fund shares held in the VAA at meetings of
shareholders of the funds. The voting will done according to the instructions
of participants that have interests in any subaccounts which invest in the
funds. If the 1940 Act or any regulation under it should be amended or if pres-
ent 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 the participant has the right to cast will be deter-
mined by applying the participant's 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.

Shares held in a subaccount for which no timely instructions are received will
be voted by us in proportion to the voting instructions which are received for
all contracts participating in that subaccount. Voting instruc-

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<PAGE>

tions to abstain on any item to be voted on will be applied on a pro-rata ba-
sis to reduce the number of votes eligible to be cast.

Whenever a shareholders meeting is called, we will furnish participants with a
voting interest in a subaccount with proxy voting materials, reports, and vot-
ing instruction forms for all participants who have voting rights under the
contract. Since the funds engage in shared funding, other persons or entities
besides LLANY may vote fund shares. See Sale of fund shares.

Distribution of the contracts

Lincoln Financial Advisors Corporation (LFA), 1300 South Clinton Street, Fort
Wayne, Indiana 46802, is the distributor and principal underwriter of the con-
tracts. The contracts will be sold by properly licensed registered representa-
tives of independent broker-dealers which in turn have selling agreements with
LFA and have been licensed by state insurance departments to represent us. LFA
is registered with the SEC under the Securities Exchange Act of 1934 as a bro-
ker-dealer and is a member of the National Association of Securities Dealers
(NASD). LLANY will offer contracts in New York.

Return privilege

Participants under Sections 403(b), 408 and certain non-qualified plans will
receive an active life certificate. Within the free-look period (ten days) af-
ter the participant receives the active life certificate, the participant may
cancel it for any reason by giving us written notice. The postmark date of the
notice is the date of notice for these purposes. An active life certificate
canceled under this provision will be void. With respect to the fixed side of
the contract, we will return the participant's contributions less withdrawals
made on behalf of the participant. With respect to the VAA, we will return the
greater of the participant's contributions less withdrawals made on behalf of
the participant, or the participant's account balance in the VAA on the date
we receive the written notice.

State regulation

As a life insurance company organized and operated under New York law, we are
subject to provisions governing life insurers and to regulation by the New
York Commissioner of Insurance.

Our books and accounts are subject to review and examination by the New York
Insurance Department at all times. The Department conducts a full examination
of our operations at least every five years.

Records and reports

As presently required by the 1940 Act and applicable regulations, we are re-
sponsible for maintaining all records and accounts relating to the VAA. We
have entered into an agreement with Lincoln Life, 1300 South Clinton Street,
Fort Wayne, IN 46802, to provide accounting services to the VAA. The account-
ing services for Lincoln Life are in turn provided by Delaware Management Com-
pany, 2005 Market Street, Philadelphia, PA 19203, through Lincoln Life's serv-
ice agreement with Delaware. We will mail to the contractowner, at its last
known address of record at our offices, at least semiannually after the first
contract year, reports containing information required by that Act or any
other applicable law or regulation.

Other information

Contract deactivation. Under certain contracts, we may deactivate a contract
by prohibiting new contributions and/or new participants after the date of de-
activation. We will give the contractowner and participants at least ninety
days notice of the deactivation date.

Delay in payments. We may delay payments from the fixed account for up to six
months. During this period, we will continue to credit the current declared
interest rate to a participant's account in the fixed account. Contract pro-
ceeds from the VAA will be paid within seven days, except (i) when the NYSE is
closed (except weekends and holidays); (ii) times when market trading is re-
stricted or the SEC declares an emergency, and we cannot value units or the
funds cannot redeem shares; or (iii) when the SEC so orders to protect con-
tract owners.

IMSA. We are a member of the Insurance Marketplace Standards Associajtion
("IMSA") and may include the IMSA logo and information about IMSA membership
in our advertisements. Companies that belong to IMSA subscribe to a set of
ethical standards covering the various aspects of sales and services for indi-
vidually sold life insurance and annuities.

Preparing for Year 2000

Many existing computer programs use only two digits in the date field to iden-
tify the year. If left uncorrected these programs, which were designed and de-
veloped without considering the impact of the upcoming change in the century,
could fail to operate or could produce erroneous results when processing dates
after December 31, 1999. For example, for a bond with a stated maturity date
of July 1, 2000, a computer program could read and store the maturity date as
July 1, 1900. This problem is known by many names, such as the "Year 2000
Problem", "Y2K", and the "Millenium Bug".

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<PAGE>

The Year 2000 Problem affects virtually all computer programs worldwide. It can
cause a computer system to suddenly stop operating. It can also result in a
computer corrupting vital company records, and the problem could go undetected
for a long time. For our products, if left unchecked it could cause such prob-
lems as contributions collection and deposit errors; claim payment difficul-
ties; accounting errors; erroneous unit values; and difficulties or delays in
processing transfers, surrenders and withdrawals. In a worst case scenario,
this could result in a material disruption to the operations of LLANY and of
Lincoln Life and Delaware Service Company Inc. (Delaware), affiliates of LLANY
and providers of the accounting and valuation services for the VAA.

However, both provider companies (Lincoln Life and Delaware) are wholly owned
by Lincoln National Corporation (LNC), which has had Year 2000 processes in
place since 1996. LNC projects aggregate expenditures in excess of $92 million
for its Y2K efforts through the year 2000. Both Lincoln Life and Delaware have
dedicated Year 2000 teams and steering committees that are answerable to their
counterparts in LNC. LLANY also has a dedicated Year 2000 team and is coordi-
nating its activities with those of Lincoln Life, Delaware and LNC.

In light of the potential problems discussed above, LLANY, as part of its Year
2000 updating process, has assumed responsibility for correcting all high-pri-
ority Information Technology (IT) systems which service the VAA. Delaware is
responsible for updating all its high-priority IT systems to support these vi-
tal services. The Year 2000 effort, for both IT and non-IT systems, is orga-
nized into four phases:

. awareness-raising and inventory of all assets (including third-party agent
and vendor relationships)

. assessment and high-level planning and strategy

. remediation of affected systems and equipment; and

. testing to verify Year 2000 readiness.

All three companies are currently on schedule to have their high-priority IT
systems remediated and tested to demonstrate readiness by June 30, 1999. During
the third and fourth quarters of 1999 additional testing of the environment
will continue. All three companies are currently on schedule to have their
high-priority non-IT systems (elevators, heating and ventilation, security sys-
tems, etc.) remediated and tested by October 31, 1999.

The work on Year 2000 issues has not suffered significant delays; however, some
uncertainty remains. Specific factors that give rise to this uncertainty in-
clude (but are certainly not limited to) a possible loss of technical resources
to perform the work; failure to identify all susceptible systems; and non-com-
pliance by third parties whose systems and operations impact LLANY. In a report
dated February 26, 1999, entitled, Investigating the Impact of the Year 2000
Technology Problem, S. Prt. 106-10, the U.S. Senate Special Committee on the
Year 2000 Technology Problem expressed its concern that "Financial services
firms...are particularly vulnerable to...the risk that a material customer or
business partner will fail, as a result of the computer problems, to meet its
obligations".

One important source of uncertainty is the extent to which the key trading
partners of LLANY, Lincoln Life and of Delaware will be successful in their own
remediation and testing efforts. LLANY, Lincoln Life and Delaware have been
monitoring the progress of their trading partners; however, the efforts of
these partners are beyond our control.

LLANY, Lincoln Life and Delaware expect to have completed their necessary
remediation and testing efforts prior to December 31, 1999. However, given the
nature and complexity of the problem, there can be no guarantee by any of the
three companies that there will not be significant computer problems after De-
cember 31, 1999.

Legal Proceedings. LLANY may be involved in various pending or threatened legal
proceedings arising from the conduct of its business. Most of these proceedings
are routine and in the ordinary course of business.

Variable Annuity III
Statement of additional information
table of contents

<TABLE>
<CAPTION>
Page
- -----------------------------------------------
<S> <C>
Definitions 2
- -----------------------------------------------
Determination of variable annuity payouts 2
- -----------------------------------------------
Performance calculations 3
- -----------------------------------------------
Tax law considerations 6
- -----------------------------------------------
Distribution of contracts 8
- -----------------------------------------------
Independent auditors 8
- -----------------------------------------------
Advertising and sales literature 9
- -----------------------------------------------
Financial statements 11
</TABLE>

22
<PAGE>

...........................................................................

Please send me a free copy of the current Statement of Additional Information
for Lincoln Life & Annuity Co. of New York Variable Annuity Account L (GVA
III):

(Please Print)

Name: ___________________________ Social Security No.: ______________

Address: __________________________________________________________________

City ____________________________ State _______
Zip ___________