April 6, 2021
VIA E-MAIL
Carolyn Augur, Esq.
Law Department
The Lincoln National Life Insurance Company
350 Church Street
Hartford, CT 06102
Re: The Lincoln National Life Insurance Company
Lincoln Life Variable Annuity Account N
File Nos.: 811-08517 &
333-252473 (Lincoln Investor Advantage Pro) ( Pro Contract
)
333-252653 (Lincoln Investor Advantage Pro Advisory)
333-252654 (Lincoln Investor Advantage Pro Advisory Choice)
Lincoln Life & Annuity Company of New York
Lincoln New York Account N for Variable Annuities
File Nos. 811-09763 &
333-252656 (Lincoln Investor Advantage Pro)
333-252657 (Lincoln Investor Advantage Pro Individual VA
Contracts)
333-252658 (Lincoln Investor Advantage Pro Advisory Choice
Individual
Variable Annuity Contracts)
Dear Ms. Augur:
On January 27, 2021, you filed the first-listed above-referenced initial
registration statement on
Form N-4 on behalf of The Lincoln National Life Insurance Company (the
Company ) and its
separate account, Lincoln Life Variable Annuity Account N (the Account ).
On February 2,
2021, you filed five additional registration statements, two of which were
filed to register
variable annuity contracts out of the same Account as the Contract filing;
three were filed on
behalf of Lincoln Life & Annuity Company of New York (the New York Company
) to register
variable annuity contracts out of the New York Company s Lincoln New York
Account N for
Variable Annuities ( New York Account ). We understand the New York Account
variable
annuity contracts correlate substantially to each of their counterpart Account
contracts (each a
Contract, collectively, Contracts ).
Carolyn Augur, Esq.
April 6, 2021
Page 2 of 10
We note that in a January 28, 2021 cover letter, you indicated that the
Contracts are in many
respects, similar to another individual variable annuity contract issued by
Lincoln through the
Account (specifically, Lincoln Investor Advantage; File No. 333-193272)
previously reviewed
within the Division of Investment Management. As such, you requested
selective review of
these registration statements. In our review, we considered that the staff
had previously
reviewed substantially similar disclosure in Lincoln Investor Advantage, and
that we had recently
reviewed a post-effective amendment, filed in November 20, 2020 to comply
with new rule
498A and the revised Form N-4, for the Lincoln Choice Plus Assurance Series
variable annuity
contract (File No. 333-181616). However, given the novel changes to Form N-4
under the
VASP amendments, we gave a full review to these registration statements,
overall.
Based on our review, our comments were made in reference to the Pro
Contract. Except as
specified herein as relating to a specific Contract or Contracts, comments
apply equally to all of
the Contracts and should be carried-over to the other five registration
statements, as applicable.
Where a comment is made with regard to disclosure in one location, it is
applicable to all similar
disclosure appearing elsewhere (including in each of the other five
registration statements).
Capitalized terms have the same meaning as in the Contracts, unless
otherwise indicated. Page
numbers, unless specifically stated otherwise, refer to the pages in the Pro
Contract registration
statement as filed on EDGAR; references to Item are to items in Form
N-4, as amended (which
may be referred to as the Form ).
General
1. Please confirm that all missing information, including all exhibits, will be
filed in pre-effective
amendments to the registration statements. We may have further comments when
you supply the
omitted information.
2. Please confirm whether there are any types of guarantees or support
agreements with third
parties to support any contract features or benefits, or whether the Company
will be solely
responsible for any benefits or features associated with the Contract.
3. As to the New York specific ISPs, explain supplementally to the staff what
certain scenarios
would make the free-look or cancellation period longer than ten days from
receiving the
Contract, as additional disclosure may be required.
Special Terms
4. Consider adding a definition of Contract (when referring to Variable
Annuity Contracts being
offered pursuant to one of the registration statements prepared on this
Form), rather than using
the generic term, contract, if appropriate.
5. Please use the term Portfolio Company rather than fund
throughout. Consider defining in
the Special Terms section, Portfolio Company, (which the Form
defines as any company in
which the Registrant invests and which may be selected as an option by the
investor).
Carolyn Augur, Esq.
April 6, 2021
Page 3 of 10
Comments Applicable Solely to the Four Advisor-Sold Contracts: 333-252653,
333-252654,
333-252657, 333-252658
6. Disclose on the cover page that the contract is/may be available through
third-party financial
intermediaries who charge an advisory fee for their services, and that this
fee is in addition to contract
fees and expenses. Also state that if a contractowner elects to pay the
advisory fee from his or her
contract value, then this deduction may reduce death benefit(s) and other
guaranteed benefits, as
applicable, and may be subject to federal and state income taxes and a 10%
federal penalty tax.
7. In the Key Information Table, captioned in each Contract, Important
Information You Should Consider
About [the Contract], disclose the following:
Fees and Expenses - Ongoing Fees and Expenses - Minimum and Maximum
Annual Fee
Table - Modify the legend to state that the fees and expenses do not
reflect any advisory fees
paid to financial intermediaries from contract value or other assets of
the owner, and that if
such charges were reflected, the fees and expenses would be higher.
Fees and Expenses - Ongoing Fees and Expenses - Lowest and Highest
Annual Cost Table
Modify the bullets to read No sales charges or advisory fees in
both the lowest and highest
annual cost columns.
Risks Restrictions Optional Benefits State that if a
contractowner elects to pay third-
party advisory fees from his or her contract value, then this deduction
may reduce the death
benefit(s) and other guaranteed benefits, and may be subject to federal
and state income taxes
and a 10% federal penalty tax. Add appropriate cross-references.
Conflicts of Interest Investment Professional Compensation If
the contract is sold only by
third-party financial intermediaries, then this disclosure is not
applicable and the registrant
may exclude this item. See Instruction to Instruction 6 to Item 2.
8. In the Overview of the Contract section, disclose in a separate paragraph,
information pertaining to the
deduction of third-party advisory fees, disclosing that if a contractowner
elects to pay third-party
advisory fees from his or her contract value, then this deduction may reduce
the death benefit(s) and
other guaranteed benefits, and may be subject to federal and state income
taxes and a 10% federal
penalty tax. Add appropriate cross-references. See Item 3.
9. In the narrative preceding the fee table, currently captioned, Expense
Table , state that the fees and
expenses do not reflect any advisory fees paid to financial intermediaries
from contract value or other
assets of the owner, and that if such charges were reflected, the fees and
expenses would be higher. See
Item 4.
10. In the Examples section of the fee table, state that the examples do not
reflect any advisory fees paid to
financial intermediaries from contract value or other assets of the owner,
and that if such fees were
reflected, costs would be higher. See Item 4.
11. In the Principal Risks section, include a separate paragraph summarizing
the risks relating to the
deduction of third-party advisory fees from contract value (e.g., this
deduction will/may reduce the death
Carolyn Augur, Esq.
April 6, 2021
Page 4 of 10
benefit(s) and other guaranteed benefits, and may be subject to federal and
state income taxes and a 10%
federal penalty tax). See Item 5.
12. As to the deduction of advisory fee:
Disclosure must be included that explains the basis upon which the
fee is calculated (e.g., as a
percentage of contract value). Furthermore, explain how and when the
fee will be deducted (e.g.,
pro-rata from each investment option on an annual basis).
There should be a brief description of the deduction of advisory fee
authorization agreement
between the insurer and the contractowner, including how the
contractowner may terminate the
agreement.
Ensure, and confirm to the staff supplementally, that there is no
disclosure that represents that
the Company is not responsible for verifying that the amount of the
advisory fee deducted from
contract value is the amount stated in the agreement, as the Company
is responsible for ensuring
that it accurately processes all contract transactions (especially
those submitted on its own
corporate form).
Finally, if the financial intermediaries are also appointed
insurance agents of the Company, then
the Company should not disclose that it has not made an
investigation of such intermediaries. If
applicable, please address this; if not, you may confirm in your
response letter. See Item 7.
13. With respect to the impact on fixed account value, if advisory fees are
deducted from contract value,
then when describing the calculation of fixed account value, the deduction
of advisory fees should be
included as a transaction that will reduce fixed account value. See Item 8.
14. We note that the four advisor-sold contract prospectuses generally address
Item 10 required disclosure;
however, as to the initial summary prospectus(es), please note the
following: In accordance with Item
10(a), the initial summary prospectus should briefly describe whether the
deduction of third-party
advisory fees are treated as withdrawals that impact the death benefit(s)
and any guaranteed benefit
values, including whether the deductions will reduce values on a
dollar-for-dollar basis or
proportionately (i.e., reduced in the same proportion that the withdrawal
bears to the contract value). If
the latter, there should be a brief but prominent statement that these
deductions could reduce the relevant
values significantly, and by substantially more than the actual amount of
the deduction. The impact of
advisory fees also should be disclosed as a restriction/limitation in the
Benefits table. If such deductions
will not be treated as withdrawals, there should be a brief statement that
such deductions will still reduce
the death benefit(s) as well as reduce the potential for increases in any
guaranteed benefits (e.g., annual
increases in the benefit base to equal contract value). Appropriate
cross-references to the statutory
prospectus should be included.
15. If advisory fees are deducted from contract value, then disclose that the
deduction of advisory fees will
result in the cancellation of accumulation units (in addition to other
transactions such as withdrawals and
transfers). See Item 11.
Carolyn Augur, Esq.
April 6, 2021
Page 5 of 10
16. While we note that Item 12 (Advisory Fee Deductions as Withdrawals) and
Item 14 (Federal Tax
Matters) disclosure is generally included in the advisor-sold contracts
prospectuses, please add
disclosure pursuant to Item 23 (Commissions), which was not found in our
review: Regardless of
whether advisory fees are deducted from contract value, the compensation
disclosure should clarify that
the insurer does not pay commissions to financial intermediaries because
such intermediaries receive
compensation in connection with the contract in the form of advisory fees
paid by contractowners.
Important Information You Should Consider About the Lincoln Investor
Advantage Pro
Variable Annuity Contract (pages 6-8)
17. If Charges for Early Withdrawals could cause large account credits to be
returned, please
disclose.
18. The Ongoing Fees and Expenses (annual charges) portion of the key
information table, in the
Minimum and Maximum Annual Fee Table row, includes reference to your
contract
specifications page. In the online version, please include a hyperlink
or its equivalent to that
page.
19. As to the row disclosing optional benefits available for an additional
charge, confirm that the
maximum platform charge or fund facilitation fee, if any, is included. This
comment applies
equally to the appropriate location in the Expense Table disclosure later
in the prospectus.
20. In the introductory narrative Lowest and Highest Annual Cost Table within
the Ongoing Fees
and Expenses (annual charges) portion of the key information table, after
the words, each year,
add the words, based on current charges, as prescribed by the Form.
21. Confirm that the Lowest Annual Cost and Highest Annual Cost
columns disclose the least
and most expensive contract class, respectively, and replace the term
contract option with
contract class in each column or explain the basis for using the term
contract option. Note
that the term contract class is used in the [b]ase contract row
above.
Overview of the Contract (page 8)
22. Confirm to the staff that Appendix A referred to in this section,
includes net expenses.
Expense Tables (pages 10-11)
23. Per Item 4, please use the caption, Fee Table, rather than,
Expense Table.
24. Per Item 4, please use the caption, Annual Portfolio Company Expenses,
rather than, Annual
Fund Expenses.
25. In addition to the disclosure immediately after the header, Expense
Table, insert the additional
sentence of narrative required under Item 4: Please refer to your
Contract specifications page
for information about the specific fees you will pay each year based on the
options you have
Carolyn Augur, Esq.
April 6, 2021
Page 6 of 10
elected. Please delete from the introductory disclosure in the second
paragraph of the section
the disclosure that reads, [t]he premium tax rates range from zero to 5%,
as it is not required
by Form N-4.
26. Delete from the introductory narrative prior to Annual Contract
Expenses, the following
disclosure: [o]nly one table will apply to a given Contractowner. The
tables differ based on
whether the Contractowner has purchased the I4Life Advantage rider.
27. Consistent with comment 5 above, on page 11, change the header, Annual
Fund Expenses, to
Annual Portfolio Company Expenses, as suggested by Item 4.
28. In the section currently captioned, Annual Fund Expense, delete,
after any waivers or
expense reimbursements. Alternatively, if disclosure states, after
any waivers or expense
reimbursements, also disclose the period for which the expense
reimbursements or fee waiver is
expected to continue, and, if applicable, that it can be terminated at any
time at the option of a
Portfolio Company (i.e., fund ) (see, Instruction 17 to Item 4).
29. In the narrative preceding the Examples, please use the following
language prescribed by the
Form: This Example is intended to help you compare the cost of investing
in the Contract with
the cost of investing in other variable annuity contracts. These costs
include transaction
expenses, annual Contract expenses, and Annual Portfolio Company Expenses.
Furthermore, as
mentioned in a comment above, consider adding to the Special Terms section
of the statutory
prospectus and initial summary prospectus a definition of, Contract.
As currently drafted,
references are made to the lowercase, contract, throughout various
portions of disclosure,
causing potential confusion.
Principal Risks (pages 11-12)
30. In the Defined Outcome Funds Risk disclosure, in the third sentence, please
insert the word,
limited before the word, protection, so that the sentence
reads, [t]he buffer provides limited
protection in the event of a market downturn.
31. Please include additional Defined Outcome Funds Risk disclosure that
captures the essence of
the information conveyed in following bullets:
x The Outcomes (e.g., cap, buffer/floor, index and period);
o Example: The fund is designed to participate in positive returns
of the [XYZ index or
ETF] up to a cap of [XX%] before fees and expenses and [XX%] after
fees and
expenses, while seeking to provide a level of protection ([a XX%
floor/buffer]
[before fees and expenses]) and [a XX% floor/buffer] [after fees
and expenses]) in
down markets ( Outcomes ) over the period from [start date] to
[end date] (the
Outcome Period ).
Carolyn Augur, Esq.
April 6, 2021
Page 7 of 10
x That the specified Outcomes may not be achieved and investors may lose
some or all of their
money;
o Example: The fund seeks to achieve specified Outcomes but there is
no guarantee that
the Outcomes for an Outcome Period will be achieved. You may lose
some or all of
your money by investing in the fund.
x That the fund only provides the specified Outcome if an investor buys on
the first day of the
period and holds the fund until the end of the period;
o Example: The Outcomes described in this prospectus are
specifically designed to
apply only if you hold shares on the first day of the Outcome
Period and continue to
hold them on the last day of the period.
x That if investors buy or sell on a date other than the start or end
date, their returns will be
different and they may incur losses that are greater than the
floor/buffer. Explain how an
investor may obtain the current return profile for the fund through the
end of the Outcome
Period; and
o Example: If you purchase shares after the Outcome Period starts or
sell your shares
before the Outcome Period ends, you may receive a very different
return based on the
fund s current value. Investors purchasing shares of the fund
after the Outcome
Period begins can see their expected Outcome until the end of the
period by visiting
www.XYZ.com.
o Please supplementally provide a description of how this
information is presented on
Lincoln s website.
x That the cap [and floor/buffer] will likely change each year on the
reset date.
o Example: At the end of the Outcome Period, the fund will reset for
a new Outcome
Period tied to the same index [and floor/buffer], but the cap [and
floor/buffer] may
change based on market rates as of the start of the new period.
Investments of the Variable Annuity Account (pages 13-15)
32. On page 14, in the Selection of the Funds subsection, add disclosure
clarifying the statement in
the penultimate paragraph that the defined outcome is a variable return
within certain
parameters, not a set return. Make it clear that the parameters are only
a strategy and results can
be outside those parameters. Furthermore, clarify that those parameters
typically change each
year, and direct investors to the appropriate prospectus(es).
The Contracts (pages 13-33)
33. On page 20, in the Allocation of Purchase Payments subsection,
disclosure indicates that if an
order to purchase a defined outcome fund is received after 2:00 PM, but
prior to the calculation
Carolyn Augur, Esq.
April 6, 2021
Page 8 of 10
of NAV, the transaction will be honored at the following day s NAV next
computed. Please
state to the staff in correspondence the Company s legal basis for this
under Rule 22c-1 of the
Investment Company Act of 1940. Furthermore, early cut-offs appear to apply
to purchases and
transfers; however, disclosure (and your reply in correspondence to staff)
should indicate
whether they equally apply to redemptions.
34. In the Death Benefits subsection (pages 25-29), please provide one or
more examples
illustrating the operation of each benefit in a clear, concise, and
understandable manner per
instruction to Item 10(b) & (c).
Appendix A Funds Available Under the Contract (pages A-1 A-10)
35. In addition to using the heading terms (e.g., Portfolio Companies
rather than Funds )
prescribed by the Form, your appendixes should specifically follow the
columnar layout and
information conveyed, as required by Item 17 of the Form. Please revise
accordingly.
36. Because a summary prospectus is being used, in the opening paragraph to
this appendix, a direct
link should be provided that takes investors to the specific landing page
where documents are
located, rather than the Company s home page (i.e.,
www.LincolnFinancial.com). See
Instruction 1.b. to Item 17.
37. Given the unique nature of the Lincoln [] 500 Buffer Fund May and the
Lincoln [] 500 Ultra
Buffer Fund May, provide a brief description of the funds and key risks in
a footnote and refer
investors to the prospectus(es). If the defined outcome parameters are
disclosed in the
investment objective description, be certain that it is clear to an
investor that the impact of
contract level charges are not reflected.
38. With respect to footnote 3 to Appendix A, please explain supplementally to
the staff how what is
explained regarding the funds referenced in that footnote is different from
what is applicable to
other funds. Depending on the response, the staff may recommend removing
the footnote.
Appendix B Investment Requirements (pages B-1 & B-2)
39. Please explain supplementally to the staff the Company s legal basis for
defaulting investors
allocations to the LVIP PIMPCO Low Duration Bond Fund, where such investors
allocation
instructions do not meet the Investment Requirements.
Statement of Additional Information (SAI)
40. Please provide the date of the prospectuses referred to in the second
paragraph of the SAI, prior
to the Table of Contents of the SAI, pursuant to Item 18(a)(5).
41. Given that the disclosure on page B-4 of the SAI in the, About the S&P
500 Index section is
provided, the same information does not also need to be included as
Footnote 4 to Appendix A,
Carolyn Augur, Esq.
April 6, 2021
Page 9 of 10
particularly since the SAI is incorporated by reference into the statutory
prospectus. Please
consider deleting Footnote 4 from the appendix.
42. The Non-Principal Risks of Investing in the Contract appear to be
fairly abbreviated; please
consider whether additional risk disclosure is appropriate, including risk
disclosure related to
COVID-19 and Affiliated Funds risk disclosure regarding the potential
that affiliated funds
may be more expensive than similar non-affiliated funds.
43. Please explain supplementally to the staff the reason for including the,
Examples of Regular
Income Payment Calculation subsection. If it is legacy
information, consider relocating it to
the statutory prospectus.
PART C
44. Item 32, Location of Accounts and Records, is not required if
included in Form N-CEN.
45. Please include depositor financial statements that comply with the time
periods required by Item
23(b) of Form N-4 and Regulation S-X.
********
Responses to this letter should be made in a letter to me filed on Edgar and
in the form of a pre-
effective amendment filed pursuant to Rule 472 under the Securities Act.
Where no change will
be made in the filing in response to a comment, please indicate this fact in
the letter to us and
briefly state the basis for your position. You should review and comply with
all applicable
requirements of the federal securities laws in connection with the
preparation and distribution of
preliminary prospectuses.
Although we have completed our initial review of the registration
statements, the filing will be
reviewed further after we receive your response. Therefore, we reserve the
right to comment
further on the registration statements and any amendments. After we have
resolved all issues,
the Company and its underwriter must request acceleration of the effective
date of the
registration statement.
Carolyn Augur, Esq.
April 6, 2021
Page 10 of 10
In closing, we remind you that the Company is responsible for the accuracy and
adequacy of its
disclosure in the registration statements, notwithstanding any review,
comments, action, or
absence of action by the staff.
Should you have any questions prior to filing pre-effective amendment, please
feel free to
contact me at 202-551-6763 or scottpa@sec.gov.
Sincerely,
/s/ Patrick
F. Scott
Patrick F.
Scott
Senior
Counsel
cc: Andrea Ottomanelli Magovern
Michael Pawluk
Sumeera Younis