MOSFET and TVS Voltage requirements for 120V single phase AC circuit
Using 200V rated MOSFETs for 120VAC are under rated, like walking on the edge. You should choose higher breakdown voltage. Further you could use avalanche rated MOSFETs, they can conduct some short pulse surge in the reverse polarity. You can place an additional TVS accross them with little lower breakdown voltage.

It is not clear from your question what current is expected and how would you drive the MOSFETs.


  When passing AC, one MOSFET is on and the body diode in the other is
  forward biased.


That's true, except that when turned ON, both transistors will conduct, when OFF only one body diode will conduct the other transistor will not.