Industry Preparing For Possible Attack On Life Insurance Products
The life insurance industry is preparing for a possible attack on life insurance products as Congress seeks new revenue to implement its agenda during a time of a diminishing federal surplus.
David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, Falls Church, Va., notes that the tax treatment of bank-owned life insurance, corporate-owned life insurance and inside buildup again could be viewed as revenue raisers.
Specifically, Winston says, several high-profile spending bills are likely to be considered over the next two months, including President Bushs faith-based charity initiative, Medicare prescription drug benefits and possibly capital gains tax reduction.
The current estimate, he says, is that these and other initiatives will cost some $6 billion. This spending must be revenue-neutral, he notes, meaning that revenue must be found to offset the cost.
However, Winston notes, the Congressional Budget Office estimates that only $2 billion of budget surplus is left to pay for new programs. This means that Congress could be looking for some $4 billion in new revenue to fully implement this program.
Due to the diminishing surplus and the sluggish economy, Winston says, life insurance products could be on the table again.
“I expect we will have to play defense on taxation of life insurance products,” he says.
In addition to these budget issues, several other life insurance concerns will be considered during the remainder of the 2001 session.
A major issue for both agents and companies is H.R. 2269, the Retirement Security Advice Act, that would make it easier for insurers and agents to provide investment advice to participants in qualified pension plans.
Jack Dolan, a spokesman for the American Council of Life Insurers, says ACLI expects the House Committee on Education and the Workforce to consider H.R. 2269 this month.
The hope, he adds, is that the full House will vote on the legislation this fall.
ACLI, Dolan says, is also supporting three tax issues. One is a tax deduction for long-term care insurance, he says, and the hope is that a deduction will be approved sometime during the 107th Congress.
A longer term issue, Dolan says, is ACLIs Lifetime Annuity Payout (LAP) proposal. Under the LAP proposal, retirees who receive their retirement benefits in terms of a lifetime annuity would be taxed at the capital gains rate instead of the higher individual rate.
Dolan says ACLI hopes Congress will begin consideration of LAP this month.