Industry Waiting For Congress’ Next Move On Taxation Issues
After a hectic week in which life insurance taxation came under fire on several fronts, the pressure seemed to ease a bit while the industry waited to see how Congress would follow up on concerns over split-dollar and corporate-owned life insurance.
On split dollar, the hearing demanded by Sen. Blanche Lincoln, D-Ark., has not been scheduled as of press time. (See NU, April 29.)
The expectation was that the hearing would take place before Congress leaves for its Memorial Day recess on May 27, but that date could slip by.
Lincoln, who has been particularly critical of split dollar following revelations that top Enron executives had large policies, was irate after a witness who was scheduled to testify on split dollar at an earlier hearing cancelled at the last minute.
But one industry representative, who asked not to be identified, attributes the controversy over split dollar to election-year politics, rather than legitimate tax issues.
This representative says Democrats see the Enron collapse and the related issue of executive compensation as ammunition against Republicans in general and President Bush in particular at a time when very few other issues are available to Democrats.
The economy is recovering from the recent recession, this representative says, and Bush still gets high ratings for his conduct of the war against terrorism.
Executive compensation and allegations of unfairness to rank-and-file workers are seen by Democrats as areas where Republicans might be vulnerable, he says.
Thus, he continues, even though concerns about split dollar are overblown, especially since the Treasury Department is already dealing with the remaining ambiguities, the issue may cause problems for the industry through this election cycle.
On COLI, the industry is also waiting to see if and when a Congressional committee schedules a hearing on so-called “janitor policies” that cover low-wage workers.
It is possible that COLI and split dollar will be taken up during a single hearing, but again, nothing has been scheduled at press time.
The only legislation introduced on COLI is H.R. 4551, which would require companies to provide workers with written notification that they are covered by a COLI policy.
David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, Falls Church, Va., notes that NAIFAs official policy goes even further.
NAIFA, he says, believes employers should get the consent of their workers before taking out a COLI policy.
Jack Dolan, a spokesman for the American Council of Life Insurers, Washington, adds that life insurers also support notice and consent.
As the regulators of the insurance business, he says, this is an issue state lawmakers may want to pursue.
Finally, on permanent repeal of the estate tax, Senate Majority Leader Tom Daschle, D-S.D., has agreed to schedule a vote on permanent repeal by June 28.
However, under an agreement with Republicans, the legislation would require a super-majority, 60 votes, to pass. It is thus highly unlikely the legislation will prevail.
In other news, the ACLI, along with several other insurance groups, is asking the United States Trade Representative to adopt a model schedule leading to significant liberalization of insurance markets in countries that are World Trade Organization members.
“We believe the adoption of the model schedule in WTO member countries will benefit insurance consumers around the world through greater price competition, product diversity and innovation, investment options, retirement security and local infrastructure development,” the groups say.
The occasion for the request is the latest round of WTO trade negotiations. Member countries are scheduled to submit “requests” for commitments for trade liberalization to the WTO by June 30.
In a recent notice in the Federal Register, the USTR asked for comments on the U.S. negotiation strategy during the latest round.
The insurance groups responded with a detailed request that goes beyond the traditional focus on market access and national treatment.
Indeed, they say, new commitments should include regulatory transparency and “best practice” principles that will serve to complement and buttress commitments made in the areas of market access and national treatment.
The groups say the model schedule should be included in full as part of the U.S. request.
“We are concerned that the text and meaning of the schedule will be significantly diluted if it is split into different pieces, mixed with broader objectives or addressed only in general terms,” they say.
“We believe the adoption of the model schedule, in its entirety, is crucial to the ability of U.S. insurance providers to compete globally on a greater scale, provide global insurance consumers with better products and services and help sustain the competitiveness of the U.S. industry in the world marketplace,” they continue.
In addition to ACLI, the groups supporting the effort include the American Insurance Association, the Coalition of Service Industries, the Council of Insurance Agents and Brokers, the International Insurance Council and the Reinsurance Association of America.
Reproduced from National Underwriter Life & Health/Financial Services Edition, May 6, 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.