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Move To Permanently Repeal The Estate Tax Collapses

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Move To Permanently Repeal The Estate Tax Collapses



An attempt to permanently repeal the estate tax, which was supported by President Bush, collapsed almost the moment it got started.

In his fiscal year 2003 budget, Bush proposed permanently extending estate tax repeal because of the impact the current law has had on estate planning.

Under the current law–the Economic Growth and Tax Relief Reconciliation Act of 2001–the estate tax will phase out on Jan. 1, 2010.

However, due to a sunset provision in the 2001 act, the estate tax will come back into being, exactly as it existed prior to enactment of the 2001 act, on Jan. 1, 2011.

Sen. Jon Kyl, R-Ariz., attempted to place language calling for permanent estate tax repeal in an economic stimulus package that was pending in the Senate.

However, the effort died when Senate Majority Leader Tom Daschle, D-S.D., effectively killed the package.

Maria Berthoud, senior vice president of federal affairs for the Independent Insurance Agents of America, which supports permanent repeal, says IIAA appreciates Kyls attempt.

One life insurance industry source, who asked not to be identified, says the Kyl repeal effort failed because it cost too much.

He says that if Congress was unable to permanently repeal the estate tax last year, when the nation was experiencing a budget surplus, it will not be able to do so now that the budget is in deficit and the country still is in a recession.

In other news, industry representatives are praising Bush for several proposals aimed at enhancing retirement security, but are also urging caution over doing anything that could discourage employers from offering 401(k) plans.

Specifically, Bush again calls for providing an above-the-line deduction (meaning it is available to all taxpayers, whether or not they itemize) for the purchase of long term care insurance.

In addition, the president expresses strong support in his budget for H.R. 2269, the Retirement Security Advice Act, which would allow insurance companies and agents that provide certain services to employer sponsored pension plans to also provide investment advice to employees, subject to strict disclosure rules.

“We are seeing positive movement on these retirement security issues,” says Jack Dolan, a spokesman for the American Council of Life Insurers, Washington.

David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, praises the Bush administrations support for H.R. 2269.

A competing bill pending in the Senate, S. 1677, is unacceptable to NAIFA, he says, because state-licensed insurance agents would not be among those who could provide investment advice.

In addition to the Bush administration, Winston says, H.R. 2269 is supported by virtually the entire financial services industry.

However, other proposals by the administration to reform the pension system in the wake of the Enron controversy are drawing words of caution.

For example, Bush is proposing that while employers should have the option of making matching contributions using company stock, workers must be free to choose how to invest their retirement savings.

Bush says workers should be able to sell company stock and diversify into other investment options after they have participated in a 401(k) plan for three years.

Bush is also calling for reform of so-called “blackout periods,” which are times when workers are denied the ability to sell company stock in their 401(k) plans.

Any consideration of changes to the private pension system in the wake of Enron should be done slowly, Dolan says. It is important, he says, to get to the bottom of what caused the Enron problem before changing a system which has served millions of workers very well.

Finally, more details are emerging on an optional federal chartering bill expected to be introduced soon by Rep. John LaFalce, D-N.Y., ranking Democrat on the House Financial Services Committee.

The LaFalce bill, unless it is changed before formal introduction, contains several differences from an optional federal chartering bill introduced in the Senate by Sen. Chuck Schumer, D-N.Y.

(For some arcane parliamentary reason, the Schumer bill, even though it has been introduced, does not yet have a bill number.)

For example, unlike the Schumer bill, the LaFalce bill will not call for national licensing of insurance agents and brokers who sell insurance for national companies.

All insurance agents would remain state-licensed. However, the federal insurance regulatory body, called the Office of National Insurers, would have the authority to enforce unfair trade practice rules against state licensed agents who sell for national companies.

In addition, the LaFalce bill contains what one industry attorney, who asked not to be identified, calls a “mild” Community Reinvestment Act provision.

Specifically, the LaFalce bill requires national insurers to establish and follow a written investment policy that must be reviewed and approved annually by the board of directors.

In reviewing and approving the policy, the LaFalce bill requires the board to consider the amount of investments the company has in communities where it sells insurance or has offices.

Thus, while there is no mandatory community investment standard, the LaFalce bill requires consideration of such investments by the board.

Reproduced from National Underwriter Life & Health/Financial Services Edition, February 11, 2002. Copyright 2002 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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