[AMERICAN GENERAL LIFE COMPANIES LETTERHEAD]
Helena Lee
Assistant General Counsel
Direct Line: (310) 772-6259
Fax: (310) 772-6569
E-mail: hlee@sunamerica.com
Via Edgar and Electronic Mail
October 21, 2014
Sally Samuel
Senior Counsel
Division of Investment Management
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Variable Separate Account and FS Variable Separate Account
(collectively, "Registrant")
American General Life Insurance Company and The United States Life
Insurance Company in the City of New York (collectively, "Depositor")
Initial Registration Statements on Form N-4 File Numbers: 333-198223
and 333-198224
Dear Ms. Samuel:
Thank you for your comments provided on October 8, 2014 regarding the
Initial Registration Statements filed on Form N-4 as referenced above. This
letter provides our responses to the Staff's comments.
1. Cover and Highlights (Pages 1-3, 6)
a. Comment - The Edgar class code should reflect the exact name of
the contract as shown on the prospectus cover. In that regard,
please explain why USL is added after the name in the FS Variable
Separate Account Edgar class code identification or delete the
reference.
Response - The reference to USL in the Edgar class code has been
deleted.
b. Comment - The paragraphs regarding reading the prospectus and
stating where additional information can be found should be moved
to the front cover page along with the statement required by Rule
481(b)(1). See Item 1 of Form N-4. You may move the list of
investment options to the inside cover page, if there is not
enough room on the cover page to list all of the investment
options.
Response - The paragraphs referenced above have been moved to the
front cover page of the prospectus.
c. Comment - Please add disclosure in the "Highlights" section that
all material state variations are described in Appendix A.
Sally Samuel
October 21, 2014
Page 2 of 8
Response - The reference to the material state variations has
been amended to indicate Appendix A.
2. Fee Table (Page 7)
a. Comment - Please reflect the state premium taxes in the actual
fee table, rather than in a footnote.
Response - The fee table has been revised to include the state
premium taxes disclosure and the footnote has been deleted.
Additionally, we have revised the sentence applicable to state
premium taxes as follows:
"If applicable, state premium taxes of up to 3.5% may also
be deducted when you begin the Income Phase. Please see
PREMIUM TAX and Appendix A - STATE CONTRACT AVAILABILITY
AND/OR VARIABILITY."
b. Comment - In the Underlying Fund Table (which should be renamed
Total Portfolio Operating Expenses), please show the maximum
total operating expenses (not net of fees and expenses) in the
table and revise footnote 5 to reflect the additional disclosure
required by Instruction 19 to Item 3. Instruction 19 to Item 3
states "[a] Registrant may reflect minimum and maximum actual
total [portfolio company] operating expenses that include expense
reimbursement or fee waiver arrangements in a footnote to the
table. If the Registrant provides this disclosure, also disclose
the period for which the expense reimbursement or fee waiver
arrangement is expected to continue, or whether it can be
terminated at any time at the option of a portfolio company."
Also, please note that disclosure of net expenses is permitted
only if the expense reimbursement/fee waive arrangements will
continue for at least one year after the effective date of the
registration statement.
Response - The Underlying Fund Table has been renamed "Total
Annual Portfolio Operating Expenses," and the fee table has been
revised to provide that the maximum total operating expense is
4.03%. The contractual agreement with Neuberger Berman Advisers
Management Trust will continue until December 31, 2017. The
footnote has been revised as follows:
"The maximum expense is for the AMT Absolute Return Multi-
Manager Portfolio, an Underlying Fund of Neuberger Berman
Advisers Management Trust. There is a contractual
agreement with Neuberger Berman Advisers Management Trust
under which it will waive 1.30% of its fee and the fee is
2.73% after the waiver. If the fee waiver was reflected in
the maximum expense, the expense would be 2.73%. The
contractual agreement with Neuberger Berman Advisers
Management Trust will continue until December 31, 2017.
The minimum expense is for VALIC Company I Stock Index
Fund, an Underlying Fund of VALIC Company I."
c. Comment - Also, in the Underlying Fund Table, please indicate in
the parenthetical that expenses are deducted from Fund assets, rather
than the Trust assets.
Response - The text in the parenthetical has been revised to
indicate that expenses are deducted
Sally Samuel
October 21, 2014
Page 3 of 8
from "Underlying Fund assets."
3. Maximum Expense Example (Page 8)
a. Comment - Please confirm that the examples reflect the fee waiver
only for the duration of the contractual fee waiver (as specified
in the to be revised footnote 5).
Response - The Maximum Expense Examples reflect the fee waiver
only for the duration of the contractual fee waiver which
includes 1 year and 3 years.
b. Comment - In example 2, please revise the caption to read "If you
do not surrender or if you annuitize...."
Response - The caption has been revised accordingly.
4. Purchasing A Polaris Select Investor Variable Annuity (Page 9)
a. Comment - In the fourth paragraph, please revise in plain English
the language "we further reserve the right to limit the death
benefit amount payable in excess of the contract value...." If this
means that you reserve the right to terminate the Optional Return
of Purchase Payment Death Benefit, please so state. If not,
please explain or delete.
Response - The language has been revised as follows:
"For any contracts that meet or exceed these dollar amount
limitations, we further reserve the right to limit but not
eliminate the death benefit amount payable in excess of
contract value at the time we receive all required
paperwork and satisfactory proof of death for prospectively
issued contracts."
5. Page 18
a. Comment - This page is not included. Please advise if this is a
blank page or provide it to the staff for review.
Response - The missing page 18 was due to an error in pagination.
There is no missing content and the error has now been corrected.
6. Dollar Cost Averaging Program (Page 20)
a. Comment - Please clarify the disclosure in the second paragraph:
"We may also offer DCA Fixed Account source account...." It is not
clear when the DCA Fixed Account may be used for transfers into
the DCA program.
Response - DCA Fixed Accounts may not be used for transfers. We
have revised the first sentence of the second paragraph as
follows:
"DCA Fixed Accounts are only offered as source accounts
exclusively to facilitate the
Sally Samuel
October 21, 2014
Page 4 of 8
DCA program for a specified time period."
7. Polaris Portfolio Allocation Program (Page 20-22)
a. Comment - Please explain why you state that this program "may be
offered to you" since it is described in the prospectus. Please
also state, if true, that if you select this program, 100% of
Purchase Payments must be invested in the program.
Response - We have modified the language in the first paragraph
under the header "Program Description" to indicate that the
program "is" offered, rather than "may be" offered.
With the exception of electing a Select Strategy, election of a
Polaris Portfolio Allocator Model requires that 100% of the
initial and subsequent Purchase Payment(s) be invested in the
same model in order for the investment to be consistent with the
model's intended objectives. We have revised the third paragraph
under the header "Enrolling in the Polaris Portfolio Allocator
Program" as follows:
"You may only invest in one Portfolio Allocator model at a
time. Participation in this program requires that you
invest 100% of your initial Purchase Payment and subsequent
Purchase Payment(s) in the same Portfolio Allocator Model
unless you elect a Select Strategy. If you: 1) attempt to
allocate a portion of your Purchase Payment outside of your
elected Portfolio Allocator model, or 2) if you invest in
any Variable Portfolios in addition to investment in a
Portfolio Allocator model under this program, such an
investment may no longer be consistent with the Portfolio
Allocator model's intended objectives and therefore, will
effectively terminate your election of the Polaris
Portfolio Allocator Model."
b. Comment - Please explain what will happen to amounts invested in
the Polaris program if you exercise your "right to modify suspend
or terminate" the program.
Response - If we modify, suspend, or terminate the Polaris
Portfolio Allocator Program, the contract owner's investment will
remain allocated to the same Underlying Funds and in the same
amounts as before the program was modified, suspended, or
terminated; however, the contract owner's investment will no
longer be deemed to be in a Polaris Portfolio Allocator Model.
8. Select Strategies (Page 22-24)
a. Comment - If 100% of Purchase Payments must be invested in one
Select Strategy, please explain why you included the discussion
of what happens if investments are split between strategies.
Response - We were attempting to describe what would happen if a
portion of the Purchase Payment(s) was not 100% invested in a
Select Strategy. In order to clarify, we have revised the third
paragraph under "Electing a Select Strategy" as follows:
"You may only invest in one Select Strategy at a time.
Election of a Select Strategy requires that you invest 100%
of your initial Purchase Payment and subsequent Purchase
Payment(s) in the same Select Strategy. If you: 1) attempt
to allocate a portion of your
Sally Samuel
October 21, 2014
Page 5 of 8
Purchase Payment outside of your elected Select Strategy,
or 2) if you invest in any Variable Portfolios in addition
to investment in your Select Strategy, such an investment
may no longer be consistent with the Select Strategy's
intended objectives and therefore, will effectively
terminate your election of the Select Strategy."
b. Comment - Please describe the "Combination Model" identified on
page 23
Response - Inclusion of "Combination Model" was a scrivener's
error and has been replaced with "Select Strategy."
c. Comment - Please explain what will happen to amounts invested in
the Select Strategies if you exercise your "right to modify
suspend or terminate" the program.
Response - If we modify, suspend, or terminate the Select
Strategies, the contract owner's investment will remain allocated
to the same Underlying Funds and in the same amounts as before
the Select Strategy was modified, suspended, or terminated;
however, the contract owner's investment will no longer be deemed
to be in a Select Strategy.
9. Return Plus Program (Page 26)
a. Comment - Please clarify if this program is available for the
contracts covered by this prospectus. Otherwise, delete the
disclosure.
Response - The Return Plus Program has been deleted from the
prospectus.
10. Voting Rights (Page 26-27)
a. Comment - In this section, please add disclosure that, as a
result of proportionate or mirror voting, the vote of a small
number of contract owners can determine the outcome.
Response - The following sentence has been added after the fourth
sentence under the header "VOTING RIGHTS:"
"As a result of this proportionate voting, the vote of a small
number of contract owners can determine the outcome of a vote."
11. Free Withdrawal (Page 27)
a. Comment - Please highlight the disclosure that if a contract
owner surrenders the contract in full while withdrawal charges
are in effect, the withdrawal charge will also apply to any free
withdrawal amounts previously withdrawn.
Response - The following disclosure has been highlighted in bold:
"As a result, if you surrender your contract in the future while
withdrawal charges are still applicable, you will not receive the
benefit of any previous free withdrawals upon a full surrender
for the purpose of calculating the withdrawal charge."
Sally Samuel
October 21, 2014
Page 6 of 8
b. Comment - Please explain in plain English the "signature
guarantee" requirement.
Response - The fourth sentence of the first paragraph on page 28
is revised as follows:
"For withdrawals of $500,000 and more, you are required to
include a signature guarantee issued by your broker-dealer
which verifies the validity of your signature."
12. Death Benefits (Page 29)
a. Comment - In the paragraph on page 29 dealing with the
calculation and payment of the death benefit, please use the
defined term "Good Order," rather than "when we receive all the
required paperwork." Also, please identify what due proof of
death you will accept, rather than "which may include but is not
limited to...."
Response - Per your comment, we have revised the first sentence
of the sixth paragraph following the "DEATH BENEFITS" header as
follows:
"We calculate and pay the death benefit when we receive all
required paperwork and satisfactory proof of death in Good
Order."
Additionally, we have removed the phrase "but is not limited to"
and revised the due proof of death sentence as follows:
"We consider due proof of death in Good Order to be
satisfactory written proof of death which may include: (1)
a certified copy of the death certificate; (2) a certified
copy of a decree of a court of competent jurisdiction as to
the finding of death; or (3) a written statement by a
medical doctor who attended the deceased at the time of
death."
13. Spousal Continuation (Page 31)
a. Comment - Please explain in plain English what is meant by the
last sentence of the third paragraph regarding how the age of the
Continuing Spouse affects any future death benefit.
Response - This sentence has been revised as follows:
"The age of the Continuing Spouse on the Continuation Date
will be used to determine any future death benefits under
the contract."
This sentence relates to the section titled "Optional Return of
Purchase Payment Death Benefit Payable Upon Continuing Spouse's
Death" which states that the respective death benefit applies if
the Continuing Spouse is age 75 or younger, or if the Continuing
Spouse is 76 or older, on the Continuation Date.
b. Comment - Please confirm supplementally that, if and when you
exercise the right to modify, suspend or terminate the Spousal
Continuation provision, you will supplement the prospectus to
reflect this change. Please make the same confirmation regarding
the Return Plus Program, the
Sally Samuel
October 21, 2014
Page 7 of 8
Polaris Portfolio Allocation Program, the Select Strategies, the
Systemic Withdrawal Program and any other program where you
reserve the right to modify, suspend or terminate.
Response - We will supplement the prospectus if we exercise the
right to modify, suspend or terminate the Polaris Portfolio
Allocator Program, Select Strategies, or Systematic Withdrawal
Program which are administrative programs. We will supplement
the prospectus if we exercise the right to modify, suspend or
terminate Spousal Continuation which would only apply to
prospectively issued contracts. We have removed the Return Plus
Program as indicated in our response to comment 9 above.
14. Premium Taxes (Page 33)
a. Comment - Please specify when you actually deduct this tax.
Response - Premium Taxes are only deducted upon annuitization
i.e. when the Income Phase begins. The state-specific premium
tax information is detailed in Appendix A - State Contract
Availability and/or Variability. Also, in our response to
comment 2a. above, we have revised our language to indicate that
Premium Taxes are only deducted when the Income Phase begins.
15. Fixed or Variable Annuity Income Payments (Page 36)
a. Comment - Please add at the end of the first paragraph that
variable payments "fluctuate as described below."
Response - The last sentence of the first paragraph has been
revised as follows:
"If the annuity income payments are variable, the amount is
not guaranteed and may fluctuate as described under ANNUITY
INCOME PAYMENTS below."
16. Part C
a. Comment - Copies of actual agreements rather than "the form of"
should be filed as Exhibits. See Rule 483.
Response - The actual agreements rather than "form of" will be
filed.
17. Financial Statements, Exhibits, and Other Information
a. Comment - Financial statements, exhibits, and other required or
missing disclosure not included in this registration statement
must be filed in a pre-effective amendment to the registration
statement
Response - We will file a pre-effective amendment to the
registration statement that includes all revisions and all
relevant exhibits and financial statements.
Sally Samuel
October 21, 2014
Page 8 of 8
18. Tandy Comment
Response - The Registrant and Depositor acknowledge 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; and
- The action of the Commission or the Staff, acting pursuant to
delegated authority, in declaring the filing effective, does
not relieve the Registrant and Depositor from full responsibility
for the adequacy and accuracy of the disclosure in the filling; and
- The Registrant and Depositor may not assert this action as a
defense in any proceeding initiated by the Commission or any
other person under the federal securities laws of the United
States.
Per our conversation after the Initial N-4 was filed, we have modified
the Separate Account charge from 1.25% to 1.10% and the optional Return of
Purchase Payment death benefit fee from 0.15% to 0.30%. These changes will
be reflected accordingly in the prospectus and filed in the Pre-Effective
Amendments to the Registration Statements.
We will file all revisions and relevant exhibits and financial
statements in Pre-Effective Amendments to the Registration Statements on
November 3, 2014 along with the Acceleration Request asking for effectiveness
on November 3, 2014. As part of the Acceleration Request, we will make the
appropriate representations pursuant to the Staff's press release dated June
24, 2004.
Should you have any questions or need any additional information
concerning the Registration Statements, please do not hesitate to contact me
at (310) 772-6259.
Very truly yours,
/s/ Helena Lee
Helena Lee