Life Insurers Want Three Items Included In The Stimulus Package
By Steven Brostoff
Life insurance companies are urging Congress to include three items in the economic stimulus package now being debated on Capitol Hill to assist an industry that has taken a major hit due to the Sept. 11 terrorist attack.
Phil Anderson, senior vice president of federal affairs for the American Council of Life Insurers, Washington, emphasizes that the life insurance industry is in a good position to pay all the claims arising from the tragedy.
However, he says, the industry has taken a hit and action on the provisions at issue is long overdue.
One provision is repeal of Sections 809 and 815 of the tax code, Anderson says.
Section 809 is the provision that imposes a tax on mutual insurance companies by reference to the earnings of stock companies.
Section 815 involves policyholder surplus accounts held by stock companies that were established under a different life insurance tax regime.
The second desired change is repeal of the current restictions on consolidated returns, Anderson says.
Under current law, 35% of the net operating losses of a non-life affiliate of a life insurance company can be used to offset the income of the life insurer.
However, this treatment does not apply for the first five years after the life insurer and non-life company affiliate. ACLI is seeking repeal of both the 35% rule and the five-year rule.
Repealing the restrictions, Anderson says, would allow property-casualty insurers, which took a major hit from the Sept. 11 disaster, to take advantage of the relative health of life insurance affiliates.
Finally, Anderson says, ACLI is seeking a long-term extension of the current treatment of investment income earned by foreign subsidiaries of U.S. financial services firms under Subpart F of the tax code.
Currently, this income is not subject to U.S. tax until the parent receives it. However, this treatment will expire at the end of the year. If it does, the income will be subject to U.S. tax as soon as it is earned by the subsidiary.
Turning to the issue of a possible federal role in providing reinsurance for losses arising from terrorist acts, Anderson says ACLI is examining the subject closely.
Four separate proposals creating a federal reinsurance pool for terrorism losses have been put on the table by p-c companies.
These companies took a tremendous hit from the Sept. 11 tragedy and have seen the market for terrorism reinsurance disappear virtually overnight.
Two of the proposals on the tablethose of the Reinsurance Association of America, Washington, and the Alliance of American Insurers, Downers Grove, Ill.contemplate including life insurance under any pooling arrangement.
Under all the proposals, the federal government would become the “reinsurer of last resort” should losses from a terrorist event exceed the capacity of the pool.
Anderson says ACLI understands that p-c insurers have a legitimate case for a federal reinsurance pool.
The ACLI is examining whether a pool should include life insurance, he says, and will develop a position as soon as possible.
He notes that whatever happens will have to happen quickly. Congess is widely expected to recess for the year by the end of October, Anderson says.
In other news, the House Committee on Education and the Workforce has approved industry-backed legislation that would ease some of the current restrictions on life insurance companies and agents providing investment advice to certain pension plan participants.
The legislation, H.R. 2269, was approved by a 29-17 vote.
The bill, called the Retirement Security Advice Act, is sponsored by Committee Chairman John Boehner, R-Ohio.
Under current law, companies and agents that are providing service to pension plans are barred from also providing participants with investment advice.
H.R. 2269 would amend the Employee Retirement Income Security Act to permit agents and companies, as well as other financial firms, to provide investment advice, subject to strict disclosure requirements.
David Winston, vice president of federal affairs for the National Association of Insurance and Financial Advisors, says he is delighted by the committees action.
The legislation, he says, has bipartisan support. Pension plan participants, Winston says, need and want the investment advice available from life insurance agents.
Angela Arnett, senior counsel with ACLI, says the legislation gives workers the option of availing themselves of the investment advice offered by life insurers and others who help them build their retirement nest eggs.
Arnett notes that the committee adopted an amendment requiring that all information provided to participants on whether to seek investment advice through the workplace be written in “plain English.”
“The plain English language added to the bill ensures the disclosure information provided to plan participants is user friendly,” Arnett says.
Boehner says he wants to bring the legislation to the House floor before Congress recesses for the year.
However, it is unclear whether he will be able to do so. Under the parliamentary rules of the House, the Ways and Means Committee has 30 days to assert jurisdiction over H.R. 2269.
If Ways and Means does so, the legislation probably will not reach the floor until next year.
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 8, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.