November 13, 2009
VIA U.S. MAIL AND FACSIMILE
Christopher E. Palmer, Esq.
Goodwin Procter LLP
901 New York Ave., N.W.
Washington, DC 20001
RE: AXA Equitable Life Insurance Company:
Separate Account No. 49 of AXA Equitable Life Insurance Co.
Retirement Cornerstone Series
Pre-effective Amendment Nos. 2 and 3 filed on Form N-4
File Nos. 811-07659 and 333-160951
Dear Mr. Palmer:
The staff has reviewed the above-referenced pre-effective
amendments, which the Commission received, respectively, on
October
15 and 23, 2009.
Based on our review, we have the following comments. Page
references below correspond to the pages in the marked courtesy
copy
of Pre-Effective Amendment No. 3.
1. GENERAL
a. Please confirm with the staff whether all versions of the
contract are offered to any given offeree.
b. Please confirm that "Index of key words and phrases" is
accurate. For example, note the page number provided for "Non-
Guaranteed benefit account value."
PROSPECTUS
2. Front Cover Page
a. To avoid confusion as to whether a description of all
material
provisions in fact describes all material rights and obligations
under the contract, please revise the first sentence of the second
paragraph to specifically note that the prospectus describes "all
material features, benefits, rights and obligations."
b. Please highlight the last sentence of the paragraph preceding
"Possible changes to the Custom Selection Rules" on page 41, and
provide similar highlighted disclosure at end of last paragraph on
page 2 as was originally provided in Pre-Effective Amendment No.
2.
c. Please provide precedent for the proposed presentation of the
relevant portfolios on an inserted page following the cover page.
d. With respect to the footnote 1, please provide the
disclosure,
"expenses for a contract with the credit may be higher than
expenses
for a contract without the credit" (not other way around) in text
of
disclosure instead of as a footnote.
3. Series at a glance - key features (page 10)
a. Under "Contribution amounts" on page 11, please disclose the
maximum contribution limits or at least provide a cross-reference
to
the fuller discussion of them that you have noted is provided
later.
b. With respect to the disclosure of certain features under
"Additional features" currently marked as not available, the staff
believes that the disclosure could be misleading. Accordingly,
please
delete disclosure of those options not available until Dec. 1,
2010.
4. Fee table (page 13)
a. With respect to footnote 3, please clarify what is meant by
the
statement that the charge is deducted from each investment option
from which each transfer is made on a pro rata basis. The
disclosure
seems to suggest that if there is more than one transfer requested
on
the same day, then all of those transfers will only count as one
transfer for purposes of the charge.
b. For the Return of Principal death benefit, just state "no
charge" to remove any ambiguity, i.e., 0.00% could be current rate
and be subject to future charge. For the Annual Ratchet charge,
even
if the percentage is fixed, then it is still representative of a
maximum charge.
c. Examples (page 15)
i. Please reconcile the statement in the third paragraph of the
narrative preceding the first set of examples and the statement in
the second paragraph of the narrative preceding the second set of
examples that withdrawal charges do not apply to the guaranteed
interest option or allocations to the Special DCA accounts (as
available) with the fuller discussion of the withdrawal charge on
page 70.
Please note that examples to be added are subject to
further review.
ii. In the second to last sentence of the second paragraph,
please
clarify that the "charge" applied is the maximum charge applicable
to
a Roll-up benefit base reset and also incorporate your response to
comment 4.d.iii. in your October 23, 2009, letter into the second
paragraph to better explain to the reader the basis for employing
the
8% Annual Roll-Up rate.
Please also advise the staff as where in the prospectus it states
that the Company reserves the right to declare an Annual Roll-up
rate
in excess of 8%.
5. What are your investment options under the contract? (page
37)
Please insert "Special DCA programs" in lieu of the last
part
of the last sentence of the first paragraph on page 38 beginning
with
"dollar."
6. Custom Selection Rules (applicable to Guaranteed benefit
account
value only) (page 40)
In the "Possible changes to the Custom Selection Rules"
section
on page 41, the second paragraph appears to contradict the third
paragraph in terms of how a change to Custom Selection Rules
impacts
existing monies as opposed to subsequent contributions and
transfers
as well as existing allocation instructions.
7. Our Special DCA Programs (page 42)
With respect to your response to comment 8.e. in your
October
15, 2009, letter, please reconcile the changes made to the sixth
bullet point on page 43 with all other applicable sections of the
prospectus, e.g., the preceding first and fifth bullet points.
8. Credits (for Series CP contracts) (page 44)
a. Please clarify with the staff whether the contract in this
prospectus is a "2006 Amended Contract" within the meaning of the
2006 order, and if not, why the registrant believes it is
otherwise
"substantially similar in all material respects" to the 2006
Amended
Contract.
b. Please expand on how the recapture of the Credit will affect
the amount to be returned to the contract owner in the case of
exercising the right to cancel including incorporating the
asterisk
footnote into the text of the prospectus. Moreover, based upon
expanded disclosure following "For example:" please confirm with
the
staff whether recapture due to death is still applicable, i.e.,
Credit does not go into calculation of benefit bases as reiterated
in
second paragraph on page 46.
9. Guaranteed minimum death benefit and Guaranteed income
benefit
base (page 45)
a. Please insert "Guaranteed" in between "Your" and "benefit" in
the second to last sentence of the first paragraph under this
section.
In the "Annual Ratchet to age 85 benefit base/Annual Ratchet to
age
95 benefit base" sub-section on page 46, please define "Annual
Ratchet benefit base."
b. The prospectus notes in the first paragraph of the "How
withdrawals affect your Guaranteed benefits" section on page 47
that
"[i]n general, withdrawals from [an investor`s] Guaranteed benefit
account value will reduce [the investor`s] Guaranteed benefit
bases
[which includes the Guaranteed income benefit base] on a pro-rata
basis." The prospectus later notes in the same section that
withdrawals "always" reduce the Annual Ratchet benefit base
(which,
as noted in an entirely different section, is a component of the
Guaranteed income benefit base) on a pro rata basis.
However, in that same section the prospectus notes that an excess
withdrawal of the Annual Withdrawal Amount reduces the Roll up
benefit bases (which includes the GIB Roll up benefit base) on a
pro
rata basis. In addition, the prospectus notes later, on page 49,
that withdrawals of up to the Annual Withdrawal amount do not
reduce
the GIB Roll up benefit base.
While the statements in the second paragraph may technically be
accurate, there remains a significant problem with the disclosure.
A
careful reading of the prospectus indicates that a compliant
withdrawal may lead to a pro-rata reduction in the Guaranteed
income
benefit base, at least where the Annual Ratchet base was larger
than
the Roll up base prior to the withdrawal. Please confirm with the
staff whether this is the case and, if so, revise the prospectus
to
make this absolutely clear.
In this case, please also note that an investor must refer to
multiple pages to understand this consequence. The Annual
Withdrawal
Amount and the Annual Roll up amount and annual benefit base
adjustment sections currently discusses the effect of withdrawals
on
the Roll up base, omitting entirely how withdrawals affect the
Annual
Ratchet component of the Guaranteed income benefit base. These
sections must be revised to avoid misleading the investor as to
the
effect of a withdrawal, both compliant and noncompliant, on the
base
that matters the most, i.e., the Guaranteed income benefit base
and
not just one of the components of that base.
Separately, we note that the "How withdrawals affect your
Guaranteed
benefits" section on page 47 indicates the pro-rata nature of many
withdrawals. However, it would be helpful to clarify in plain
English the consequence of this type of deduction, i.e., the
amount
of the deduction exceeds the amount of the withdrawal if the
account
value is below the Guaranteed base. Please revise this section
accordingly.
Please also make the following clarifications:
i. Please use the term "Roll-Up benefit bases" as defined in the
last sub-caption on page 46, for example, note the use of the term
in
the singular in the first sentence under "GIB and `Greater of`
death
base reset" on the next page.
ii. In the first paragraph on page 48, please clarify the term
"current benefit," i.e., the term "current Guaranteed benefit
base"
may be more accurate.
iii. Please expand the fourth full paragraph on page 48 to
properly
account for the GIB Roll-up benefit base, , i.e., should have
corresponding disclosure for GIB Roll-up benefit base but based on
age 95.
Please apply the same to the first paragraph on page 50, i.e.,
should
have corresponding disclosure for GIB Roll-Up benefit base but
based
on age 95.
iv. Although the example of Excess Withdrawals on page 50
reflects,
among other things, the effects of an Excess Withdrawal, please
revise the example in better plain English. For example,
information
regarding initial contribution amounts, the transfer amount in the
third year, and the Annual Roll-Up rate is given, yet, the example
jumps to year five and provides the GIB Roll-Up benefit base
without
necessarily explaining how it got to that value.
c. With respect to the fourth paragraph of the section entitled
"Guaranteed minimum death benefit and Guaranteed minimum income
benefit base" on page 46, please provide examples to better
explain
the given disclosure. Moreover, please disclose treatment of
earnings
in this section as well as the cross-referenced section and
disclose
last sentence of cross-referenced section earlier in both
sections.
10. Guaranteed income benefit (page 48)
a. In anticipation of a further amendment to the registration
statement that the staff expects would lay out a complete set of
examples for the numerous calculations described in the
prospectus,
the staff points out that there are twelve different examples the
registrant should provide, either in the prospectus or in an
Appendix, to demonstrate the calculations described on two pages
of
the prospectus, pages 49 and 50. In addition, the calculation of
each derived value that is assumed for purposes of any example
should
be clearly explained. The examples requested from these two pages
are:
i. The effect of Subsequent Contribution on GIB and Annual
withdrawal amount when Annual Ratchet is higher than Roll up and
when
Annual Ratchet is lower, both in the circumstance when the base is
higher than account value and when it is lower
ii. The effect of Compliant Withdrawal on GIB and Annual
withdrawal
amount when Annual Ratchet is higher and lower, in both account
value
circumstances
iii. The effect of Excess Withdrawal on GIB and Annual withdrawal
amount when Annual Ratchet is higher and lower, in both account
value
circumstances.
These examples should include calculations of the Roll-Up base and
Annual withdrawal amount where contributions are made both during
and
before the prior four year period that the Annual Withdrawal
Amount
section states is used to exclude contributions to the benefit
base.
b. The fifth paragraph should make clear whether an investor has
the right to withdraw funds in excess of the Annual withdrawal
amount
and any consequences of doing so.
c. Please address what happens in the first five contract years
under "Guaranteed income benefit" on page 48. Please revise
example
in better plain English and not comment 11.a. above with respect
to
any examples provided.
d. In the "Annual Roll up rate" section on page 49, but please
add
that the rate is also used to calculate the Annual withdrawal
amount
as stated under "Annual withdrawal amount" or clarify the
distinction.
e. In the "Annual Roll-up amount and annual benefit base
adjustment" example provided on page 50, please revise the example
in
better plain English, and in particular, explain how the one half
used to determine the pro rated amount was determined. In addition
to
providing an example, the second to last bullet point on page 49
should also explain what is meant by the term "prorated" and how
it
is applied, e.g., based on months and if so, the effect of
contributions made in middle of the month.
f. In the last bullet point on page 49, please specify whether
the
deduction of Annual withdrawal amounts will result in a dollar-
for-
dollar or a pro rata reduction.
g. In light of revised disclosure under "Annual withdrawal
amount"
on page 49 and the last three paragraphs under "How withdrawals
affect your Guaranteed benefits" on page 48, please disclose the
differences, if any, in how withdrawals up to and exceeding the
Annual Withdrawal Amount; and/or after the beginning of the sixth
year; and/or beginning at age 86 affect the Roll-Up benefit bases,
respectively for the GIB and "greater of" death benefit.
h. The disclosure in the second paragraph under "Guaranteed
minimum
death benefits" on page 52 clarifies that the election of the GIB
does not require the election of a Guaranteed minimum death
benefit.
However, the "Greater of` death benefit can only be elected in
combination with the GIB. Please note this in summary on page 10.
11. Lifetime GIP payments (page 50)
The hypothetical illustrations to be provided in Appendix
III
of the prospectus will be still subject to further review;
otherwise, please note following comments on revised disclosure
under
"Lifetime GIP payments" on pages 50-52.
a. Based on the second paragraph, it appears that functionally
the
single owner and jointly owned contracts are the same in terms of
the
ability to choose life payments based on single or joint lives.
Therefore, please expand the disclosure to explain any differences
between the options and why an owner would elect one over the
other.
b. In item (ii) of the second item list at the end of page 50,
please clarify what kinds of changes could be made, including the
election of payment based on a joint life.
Please make corresponding changes to item (ii) of next item list
on
page 51.
c. In same item list on page 51, please clarify what is meant by
a
"GIB payout kit."
d. In the next item list beginning at the end of page 51, please
prominently disclose the substance of item (ii) and (iii) earlier
in
the prospectus as well as later in the "Accessing your money."
Please
also provide an example of the workings of item (ii).
e. Under item (iv) of the same item list at the end of page 51,
please distinguish which death benefits are being referred to as
was
done in item (vii) and (viii), respectively, in the prior two item
lists.
f. The distinction pointed out in the second paragraph on page
52
regarding the deduction of charges as withdrawals should be
disclosed
in the beginning of this section and expanded upon in terms of
whether deductions of charges may count as Excess Withdrawals.
12. Dropping a Guaranteed Benefit (page 52)
Based on third bullet point of this section, the eighth
bullet
point under "Additional features" in "Retirement Cornerstone(SM)
Series at a glance - key features" on page 12 should be revised to
state that "this option is available only at the end of the
withdrawal period, which may extend for several years."
13. Inherited IRA Beneficiary Continuation Contract (page 53)
The first paragraph describes in long detail the people who
may
purchase this contract, and then notes in the middle of the
paragraph
that tax advice should be sought. For clarity, please highlight
in
bold in the beginning of the section that the contract is intended
only for a limited set of purchasers and a limited set of
circumstances and that, even if a purchaser qualifies, tax advice
should be sought.
Also, in second to last sentence of third paragraph, please insert
"traditional or Roth" between "original" and "IRA."
14. Transferring your account value (page 57)
In the highlighted second to last sentence of the third
bullet
point please confirm and clarify whether contributions to the
Guaranteed benefit account value are now permitted or if
subsequent
contributions are only permitted for the Non-Guaranteed benefit
account value.
Please also confirm with the staff where the disclosure with
respect
to the substance of the sentence is provided earlier in the
prospectus.
15. Withdrawing your account value (page 61)
a. The prospectus notes at the end of the new first paragraph of
the Maximum payment plan subsection on page 61 that the payment
amount may increase or decrease annually as the result of a "Roll
up
benefit base reset." The examples provided in Appendix V do not
clearly indicate the adverse effect of such a reset and need to be
revised to do so. If in fact even compliant withdrawals reduce
the
Annual Ratchet base on a pro rata basis then the prospectus must
also
include examples that demonstrate the effect on the GIB and the
automatic payments as a consequence of the reduction. This
comment
also applies to systematic withdrawals as described on pages 62
through 64 as well.
Please also make the following clarifications:
i. For the fixed percentage options (i) through (iii) under
"Customized payment plan," please clarify that the applicable
percentage is multiplied by the GIB benefit base (as adjusted).
ii. Please add disclosure to items (i), (iii), and (v)
corresponding
to the last sentence under item (ii). Moreover, given that both
items
(i) and (ii) are based on fixed percentages, please confirm
accuracy
of the last sentence under item (ii) with respect to the "a change
in
the Annual Roll-Up rate" impacting the amount of payment.
iii. Mathematically, the second sentence under item (ii) does
appear
possible, e.g., if you set the percentage to be higher than 4%,
the
resulting amount to be withdrawn would always be greater than the
resulting amount based on 4%. Therefore, revise the sentence to
state
that the percentage can not be lower than the guaranteed minimum
rate, 4%.
iv. Please clarify from where the "maximum amount" will be
derived
from if there is insufficient value to pay the requested fixed
dollar
or fixed percentage withdrawal. If from the Guaranteed benefit
account value, please also add disclosure regarding the risk that
the
withdrawal may result in Excess Withdrawals.
v. As with Appendix II above, please revise Appendix V by
employing
more plain English narrative in order to more clearly explain how
the
amounts of withdrawals have been determined.
b. In the second paragraph under "Systematic withdrawals" on
page
57, please make it clear that the limits apply when withdrawal
charges are applicable and highlight the second sentence of the
third
paragraph.
c. The disclosure in the "Surrendering your contract to receive
its
cash value" subsection on page 65 still requires clarification.
The
disclosure does not adequately distinguish between a surrender
before
as opposed to after GIB annuity payments have begun. For example,
the
first paragraph is very clear that it addresses a surrender
"before
you begin [presumably GIB] annuity payments" whereas the second
paragraph is not as clear.
Any further revisions should be consistent with rest of
prospectus.
16. Your annuity payout options (page 65)
a. In the second paragraph, please disclose what notice, if any,
the registrant will provide to the investors in advance of the
registrant converting their contract on the maturity to the
default
annuity payout option if an investor has not made an affirmative
choice.
In the last sentence under "Annuity maturity date" on page 67,
please
also clarify what the notice will disclose.
b. The third paragraph discloses that the registrant reserves
the
right to change the guaranteed annuity purchase rates and you have
previously indicated that investors will be given at least 30 days
advance written notice of such an occurrence. Please disclose this
fact as well as details as to how new annuity purchase factors
would
be applied, i.e., in prior response, you indicated that you "will
only change annuity purchase factors for new contributions."
However,
given that partial annuitizations are not permitted under the
contract, how would this work?
Moreover, given the impact that a lower rate could have on a
contract
owner, we urge the registrant to consider providing a longer
notice
period.
c. The prospectus notes that the Income Manager payout option is
described in a separate prospectus, and refers to other payout
options as "payout option contracts." Please revise at the front
of
the section that payout options may involve the purchase of a
separate security and identify all such securities in the
beginning
of the section. Please also provide the staff with your
basis/authority under Section 11 of the Investment Company Act of
1940 to offer such securities.
In addition, the prospectus states on pages 65 and 66 that you
offer
"variable payout options," but no further reference is made to
these
options other than references to "Variable Immediate Annuity"
payout
options. The prospectus then notes on page 66 that these
"Variable
Immediate Annuity" options are sold under a separate prospectus.
Please confirm with the staff whether any variable annuity payout
options are being offered under this prospectus. If not, please
revise the prospectus to note in the beginning of the payout
section
that the prospectus offers only fixed payout options. In this
case,
please also revise any references to offers of variable payout
options to clarify that those options are available only under a
separate prospectus. Further, please clarify that the "Variable
Immediate Annuity" and "Income Manager" payout options are the
only
variable annuity payout options that the insurer offers to
purchasers
of this contract. Finally, please confirm whether the default
annuitization options described on page 67 are fixed annuities.
17. Payment of Death Benefit (page 74)
Please expand the last paragraph on page 77 to not only list
factors to consider but how each factor would affect the decision
to
elect one option over the other.
18. Appendices
Additional appendices still subject to further review.
19. Financial Statements, Exhibits, and Certain Other Information
Any financial statements, exhibits, and any other required
disclosure not included in this registration statement must be
filed
by pre-effective amendment to the registration statement.
20. Representations
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the registrant is in possession of
all
facts relating to the registrant`s disclosure, it is responsible
for
the accuracy and adequacy of the disclosures it has made.
Notwithstanding our comments, in the event the registrant
requests acceleration of the effective date of the pending
registration statement, it should furnish a letter, at the time of
such request, acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the registrant from its full responsibility for the
adequacy
and accuracy of the disclosure in the filing; and
* the registrant may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Investment Management in connection with our review of
your filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities.
*****************************************
Responses to these comments should be made in a letter to the
staff and in a pre-effective amendment to the registration
statement.
If you believe that you do not need to change the registration
statement in response to a comment, please indicate that in the
letter and explain your position.
Although we have completed our initial review of the
registration statement, it will be reviewed further after our
comments are resolved. Therefore, we reserve the right to comment
further on the registration statement and any amendments to it.
After
we have resolved all issues, the registrant and its underwriter
must
both request that the effective date of the registration statement
be
accelerated.
If you have any questions, you are welcome to call me at
(202)
551-6767. Mail or deliveries should include reference to Mail Stop
8629 and should include all nine digits of the following zip code:
20549-8629. My facsimile number is (202) 772-9285.
Sincerely,
Sonny Oh
Staff Attorney
Office of Insurance Products
Christopher E. Palmer, Esq.
Goodwin Procter LLP
November 13, 2009
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