SecProbe.io

CORRESP
1
filename1.htm

    Law Department

    The Lincoln National Life Insurance Company

    350 Church Street

    Hartford, CT 06103

    Scott C. Durocher

    Assistant Vice President

    and Senior Counsel

    Phone: 860-466-1222

    Scott.Durocher@LFG.com

    VIA Email & EDGAR

    January 28, 2020

    Alberto Zapata

    Senior Counsel

    Disclosure Review and Accounting Office

    Division of Investment Management

    Securities and Exchange Commission

    100 F Street, NE

    Washington, DC 20549-8629

    Re:            The Lincoln National Life Insurance Company

    Post-Effective Amendment No. 1

    File No. 333-231487

    Dear Mr. Zapata:

    This letter is in response to your comments received on January 13, 2020, with respect to the above referenced matter.

              1.

              Overview – The Overview contains a discussion about staggering the availability of the
                new indexed accounts for new and existing contract owners. Please state the rationale for these different roll-out dates.

    Response: Lincoln leverages the quarterly statement mailing to provide the
      prospectus supplement and contract rider to our in-force contract owners. This is why April 6, 2020 was chosen as the availability date for in-force contracts.

              2.

              Summary of Common Questions – Please add to the Summary of Common Questions of the
                underlying prospectus a discussion that specifically addresses the participation rate and how it works.

    Response: Lincoln will provide a discussion on participation rates under the
      Summary of Common Questions section of the prospectus as part of its annual updates.

              3.

              Description of Changes – Participation Rates – The discussion includes this sentence:
                “Subsequent Participation Rates may be higher or lower than the initial Participation Rate.”  Please explain under what specific circumstances you would have a lower Participation Rate.

    Response: Capital market economic conditions could cause Lincoln to lower the
      Participation Rate in subsequent terms.

              4.

              Appendix B – The terms “pro-rated” and “pro rata” are both used in the calculation.
                Please use consistent terms.

    Response: Lincoln will change occurrences of “pro rated” and “pro rata” to
      “proportional” in this calculation.

              5.

              2nd Supplement
                – Please provide a discussion of what Pro-Rated Cap means as that term is used in the tables.

    Response: Lincoln will include the following language in the underlying
      prospectus: “Pro-rated Cap, which is the Indexed Crediting Base multiplied by (1 + the Performance Cap multiplied by the total days elapsed in the Indexed Term divided by total days in
      the Indexed Term)”.

    We will file revised supplements along with an updated consent in an upcoming POS AM filing. We will also submit a request to accelerate
      the effective date to February 7, 2020. Please call me at 860-466-1222 with any questions or additional comments.

    Sincerely,

    Scott C. Durocher

    THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

    Lincoln Life Variable Annuity Account N

    Lincoln Level Advantage®
      B-Share Indexed Variable Annuity

    Lincoln Level Advantage®
      Advisory Indexed Variable Annuity

    Lincoln
        Level Advantage® Design B-Share Indexed Variable Annuity

    Lincoln Level Advantage® Design Advisory Indexed Variable Annuity

    Supplement dated February 7 , 2020

    This supplement to your Lincoln
        Level Advantage® Indexed Variable Annuity prospectus describes the addition of new investment options. It is for informational purposes and requires no action on your part. All other provisions in your prospectus remain unchanged.

    OVERVIEW

    Two new Indexed Accounts will be available on new contracts beginning February 18, 2020 (April 6, 2020
      for existing contracts). These accounts will each offer a 3-year Indexed Term, a 10% Protection Level, and a participation crediting strategy. The 3-Year Indexed Accounts with Participation Rates do not have Annual Locks. If
      the Performance Rate of the index you select is positive, your Indexed Segment will be credited with a percentage of that positive performance based on the Participation Rate for the Indexed Segment. The Participation Rate is declared at the
      beginning of the Indexed Term. The Participation Rate will not change during the Indexed Term, but we may declare a different Participation Rate, which can be higher or lower, for subsequent terms.

    DESCRIPTION OF CHANGES

    The following Indexed Accounts are available:

    3-Year Indexed Accounts with Participation Rate

              •

              S&P 500 Participation, 10% Protection

              •

              Capital Strength Net Fee IndexSM Participation, 10% Protection

    As a result, the following discussion describes changes that are incorporated into the
      specified sections of your prospectus.

    Special
        Terms – The following changes are made to the Special Terms section:

    The following term is added:

    Participation Rate –The
      Participation Rate used to determine the Performance Rate for an Indexed Segment at the end of an Indexed Term for any positive index performance. A different Participation Rate may be declared for each Indexed Segment and for each Death Benefit
      type.

    The following term is revised:

    Performance Rate – A rate of
      return for an Indexed Segment based on the performance of an Index over a period of time adjusted for the Protection Level, and subject to either the Performance Cap or Participation Rate depending on the Indexed Segment.

    Risk
        Factors – In addition to those Risk Factors outlined in Risks of Investing in the Indexed Accounts section, the following potential risks are associated with Indexed Accounts with Participation and are added to the Risks of Investing in the Indexed Accounts section.

              1.

              Gains in your Indexed Segment are limited by any applicable Participation Rate. If the Participation Rate is less than 100%, the
                increase in your Segment Value will never reflect the entire corresponding rise in the applicable Index over the Indexed Term. The Participation Rate exists for the full term of the
                Indexed Segment. The Participation Rate may be lower for contracts with the Guarantee of Principal Death Benefit. Participation Rates for new Segments will be declared 5 business days in advance of the beginning of a Segment.

              2.

              The available Indexed Accounts with applicable Participation Rates and Protection Levels will vary over time. Before investing in a
                new Indexed Segment, you should determine exactly what Indexed Account, Participation Rates, and Protection Levels are available to you. There is no guarantee that an Indexed Account will be available in the future. The Participation Rate
                for a new Segment may be lower than the current Rate. You risk the possibility that a declared Participation Rate may be lower than you would find acceptable, so you should make sure the Segment you select is appropriate for your investment
                goals.

              3.

              If we do not receive investment instructions from you by the end of an Indexed Term, we will invest your Segment Maturity Value in a
                new Indexed Segment with the same term, Index, and Protection Level, if available. The Participation Rate in effect at the time for new Indexed Segments will apply. If the same type of Indexed Segment is not available, your Segment Maturity
                Value will be moved to the LVIP PIMCO Low Duration Bond Fund. If your Contract Value has been invested in a new Segment and you wish to withdraw your investment, the Contract Value for that Segment will equal the Interim Value.

    The following information is added to the Investments of the Indexed Accounts
      section:

    The following is added to the list of available Indexed Accounts:

    3-Year Indexed Accounts

              •

              S&P 500 Participation, 10% Protection

              •

              Capital Strength Net Fee IndexSM Participation, 10% Protection

    Indexed
        Term – Indexed Terms of 3 years are available for the new Indexed Accounts with Participation Rate. If you choose to allocate your Purchase Payments to Indexed Accounts, all Indexed Segments of the Indexed Accounts to which you allocate
      Purchase Payments, including future Segments, must begin on the same Indexed Anniversary Date. The Indexed Anniversary Date is the yearly anniversary of the Start Date of your initial allocation to an Indexed Account.  For example, if you select a
      3-Year Indexed Account, two years later, you may start a Segment of a 1-Year Indexed Account, as long as the 1-Year Segment begins on the Indexed Anniversary Date for your contract. If you have more than one Segment of a 3-Year Indexed Account in
      effect at any time, these Segments must have the same Start Date and End Date.

    Participation
        Rates – The Participation Rate represents the proportion of the index performance that is reflected in the value of the Indexed Segment. The Participation Rate may be equal to, or greater or less than 100, and may vary depending on the Death
      Benefit option, the Index, and the Protection Level you select. The Participation Rate will not change during the Indexed Term.

    The initial Participation Rate applies to the initial Indexed Term. Indexed Segments with a Guarantee
      of Principal Death Benefit may have lower Participation Rates than Indexed Segments with the Account Value Death Benefit. The Company will declare, at its discretion, a Participation Rate for each subsequent Indexed Term.

    Subsequent Participation Rates may be higher or lower than the initial Participation Rate. Subsequent
      Participation Rates may differ from the Participation Rate used for new contracts or for other contracts issued at different times. The Company will determine new Participation Rates on a basis that does not discriminate unfairly within any class of
      contracts.

    Indexed
        Segments with Participation and Without Annual Locks – The Performance Rate is the percentage change in the Index Value from the Start Date to the End date, adjusted by the Protection Level and Participation Rate. The Performance Rate can
      be positive, negative, or zero. The percentage change in the Index Value is calculated by subtracting the Index Value on the Start Date from the Index Value on the End Date. The difference is divided by the Index Value on the Start Date. The daily
      Index Value is posted on the index’s website. If an Index Value is not published for a particular day, we will use the Index Value at the close of the next Valuation Date the index is published.

    If the percentage change of the Index Value from the Start Date to the End Date is positive, then the
      Performance Rate equals the Participation Rate multiplied by the Performance Rate. If the percentage change is negative but is absorbed by the Protection Level percentage, the Performance Rate equals zero. If the percentage change is negative, and is
      greater than the Protection Level percentage, the Performance Rate is equal to the percentage change in excess of the Protection Level.

    The amount credited to or deducted from the Indexed Segment is equal to the Performance Rate times the
      Indexed Crediting Base on the End Date. This will be used to determine the Segment Maturity Value as set forth below. The Indexed Crediting Base is the amount you allocated to the Indexed Segment, less any transfers and withdrawals during the Indexed
      Term deducted proportionately by the amount that the transfer or withdrawal reduced the Interim Value. Withdrawals include any applicable surrender charge, premium tax or rider charge deductions. If the Performance Rate is positive, the value of your
      Indexed Segment will increase. If the Performance Rate is negative (after calculation including the Protection Level), the value of your Indexed Segment is reduced. If the Performance Rate is zero, the value of your Indexed Segment will not change.
      The Segment Maturity Value on the End Date is equal to the sum of A plus (A times B) where:

    A = the Indexed Crediting Base on the End Date and

    B = the Performance Rate.

    For example:

    Indexed Term Segment Start Date = 1/8/2019

    Indexed Account = 3-Year with 115% Participation Rate

    Indexed Value at Beginning of Term = 1569

    Allocation to Indexed Segment = $100,000

    Indexed Crediting Base: $100,000

            Indexed Segment

            Anniversary

            Index Value

            Index % Change

            Account Performance Rate (adjusted for Participation Rate)

            Account

            Value

            1/8/2020

            1679

            -

            -

            -

            1/8/2021

            1780

            -

            -

            -

            1/8/2022

            1883

            +20

            %

            +20% * (115%) = 23%

            $

            123,000

    The following examples demonstrate how the Interim Value is calculated in different scenarios for
      Indexed Segments with Participation without Annual Locks.

             3 Year

            3 Year

            Indexed Term length ………………………………………………………….

            36 months

            36 months

            Months since Indexed Term Start Date …………………………………….

            33

            15

            Indexed Crediting Base ………………………………………………………

            $

            1,000

            $

            1,000

            Protection Level ……………………………………………………………….

            10

            %

            10

            %

            Participation Rate ……………………………………………………………..

            104

            %

            104

            %

            Months to End Date …………………………………………………………..

            3

            21

            Change in Index Value is -30%

            3 Year

            3 Year

            1. Fair Value of Hypothetical Fixed Instrument ……………………………

            $

            995

            $

            968

            2. Fair Value of Hypothetical Derivatives …………………………………..

            $

            (199

            )

            $

            (197

            )

            3. Sum of 1 + 2 ………………………………………………………………..

            $

            796

            $

            771

            4. Application of pro-rated Participation Rate …..……………………..

            $

            1,000

            $

            1,000

            Account Interim Value = Minimum of 3 and 4 ……………………………..

            $

            796

            $

            771

            Change in Index Value is -10%

            3 Year

            3 Year

            1. Fair Value of Hypothetical Fixed Instrument ……………………………

            $

            995

            $

            968

            2. Fair Value of Hypothetical Derivatives …………………………………..

            $

            (23

            )

            $

            (46

            )

            3. Sum of 1 + 2 ………………………………………………………………..

            $

            972

            $

            922

            4. Application of pro-rated Participation Rate ………………………..

            $

            1,000

            $

            1,000

            Account Interim Value = Minimum of 3 and 4 ……………………………..

            $

            972

            $

            922

            Change in Index Value is 20%

            3 Year