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Investment Advice Bill Could Face Tough Sledding In The Senate

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Investment Advice Bill Could Face Tough Sledding In The Senate

By Steven Brostoff


Legislation that would allow insurance companies and agents to provide investment advice to pension plan participants is advancing, but may face tough going in the Senate.

The House of Representatives last week approved H.R. 2269, the Retirement Security Advice Act, by a 280-144 vote.

The bill would allow those that already provide certain services to qualified plans to also provide investment advice to plan participants, subject to strict disclosure requirements regarding compensation and possible conflicts of interest.

H.R. 2269 was strongly praised by Labor Secretary Elaine L. Chao, who calls the bill an important tool to help workers better manage their retirement savings.

“President Bush and the administration are working to ensure that every worker has access to a fulfilling and financially secure retirement,” she says.

“I look forward to seeing the Senate take the next step and pass this legislation as soon as possible,” Chao adds.

But David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, Falls Church, Va., says H.R. 2269 may have problems in the Senate.

He praised the House for passing the legislation, noting that 64 Democrats voted in favor of it. That, Winston says, gives H.R. 2269 bipartisan momentum going into the Senate.

However, he notes, Sens. Jeff Bingaman, D-N.M., and Susan Collins, R-Maine, are backing a different version of the bill, S. 1677.

This bill would hold harmless employers that sponsor plans if they hire “qualified” advisors to provide investment advise.

The term “qualified advisors” is defined as registered investment advisors, registered broker/dealers and individuals at insurance companies and banks who are registered to give investment advice.

Winston says this would exclude state licensed agents.

Winston notes that groups such as the American Association of Retired Persons and the AFL-CIO support the Senate version.

Thus, despite its bipartisan support in the House, H.R. 2269 will face tough sledding in the Senate, Winston says.

Angela Arnett, senior counsel with the American Council of Life Insurers, adds that the language of S. 1677 will not allow ACLI member companies that currently provide services to pension plans to also provide investment advice, even though these companies are the most qualified to do so.

She says the approach taken by S. 1677 will not accomplish the purpose of making professional investment advice more readily available to plan participants.

S. 1677, Arnett says, will not establish the proper incentives for employers to provide plan participants with investment advice.

In other news, three members of the House Ways and Means Committee formally introduced legislation that would provide a tax break for individuals who choose to annuitize their retirement savings.

Based on a proposal developed by the ACLI, Reps. Philip S. English, R-Pa., Karen Thurman, D-Fla., and Nancy Johnson, R-Conn., introduced H.R. 3320, the Lifetime Annuity Payout Act.

Under H.R. 3320, individuals who elect to annuitize their retirement savings will be taxed at the capital gains rate rather than ordinary income tax rates.

In a statement on the floor of the House, English said the LAP proposal reflects current demographic trends.

“Actuarial predictions estimate one-fifth of todays 35-year-olds who reach retirement age can expect to live into their 90s,” he said. “Yet current financial planning models and tax laws often encourage retirees to spend down their assets by the time they reach their 80s.

“Americans need to receive a substantial portion of their retirement income in a guaranteed stream of income they can never outlive,” he said.

Jeanne Hoenicke, senior vice president with ACLI, says the LAP proposal is one of a series of legislative initiatives supported by ACLI to encourage individuals to take personal responsibility for their financial futures.

ACLI also supports H.R. 831, Hoenicke says, which would provide an above-the-line tax deduction for individuals who purchase long-term care insurance.

“Above-the-line” means that the deduction is available to all taxpayers, whether or not they itemize.

Finally, Congress is still wrestling with insurance legislation relating to the Sept. 11 terrorist attack that could include a study of circumstances in which the life insurance industry may need federal assistance as a result of a major event.

The House is expected to take up H.R. 3210 this week. That bill calls for the creation of a seven-member commission, including an insurance agent representative, to examine the issue and report back to Congress in three months.

The holdup is on the Senate side, where two committees, Banking and Commerce, are locked in a jurisdictional battle focusing on the issue of tort reform.

The Banking Committee, backed by the Bush administration, supports legislation barring non-economic and punitive damages in any legal actions arising from a terrorist attack.

A draft of the Banking Committees bill includes a provision for a life insurance study.

The Commerce Committee is said to strongly oppose limiting non-economic and punitive damages, sources say.

The Commerce Committee has not yet produced a draft bill. It is unknown at this point whether that committee supports a life insurance study.

Reproduced from National Underwriter Life & Health/Financial Services Edition, November 26, 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.

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