The three-pronged battle over life insurance taxation remained in a holding pattern last week with the industry awaiting possible legislation on corporate-owned life insurance, a hearing on split-dollar and a Senate vote on repeal of the estate tax.
“We are expecting an examination of some of our products as a result of the Enron debacle,” says Jack Dolan, a spokesman for the American Council of Life Insurers, Washington.
Unfortunately, Dolan adds, the country is also back in a deficit, and a budget deficit puts extra pressure on certain industries. “We will be fighting to ensure that Congress does not unfairly attack consumer-oriented insurance products,” he says.
On COLI, Sen. Jeff Bingaman, D-N.M., is expected to introduce legislation aimed at curbing alleged abuses involving policies that cover low-wage workers, so-called “janitors insurance.”
While details of the legislation have not been presented, sources tell National Underwriter Bingaman is examining an approach that would deny a business any tax-favored treatment involving a COLI policy unless the employees directly benefit from it.
That contrasts sharply with the legislation introduced recently by Rep. Gene Green, D-Texas, H.R. 4551, which would simply require companies to provide a written notification to employees covered by a COLI policy that discloses the insurance company, the face value of the policy and the named beneficiary.
David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, Falls Church, Va., says NAIFAs policy on COLI goes beyond that, stating employers should inform and obtain the consent of employees covered by a COLI policy.
Turning to split dollar, an expected Senate Finance Committee hearing still has not been scheduled and may not be until after Congress returns from its Memorial Day recess on June 3.
Split dollar came under Congressional scrutiny when it was disclosed that former Enron Chairman Kenneth Lay benefited from a large split-dollar policy.
Committee Chairman Max Baucus, D-Mont., said he would try to schedule a hearing on split dollar and its relationship to the politically hot issue of executive compensation before Memorial Day.
However, sources said there does not seem to be enough time for the committee to put together a hearing prior to the recess.
Finally, on estate tax repeal, a Senate vote is possible before Memorial Day. Under an agreement with Republicans, Senate Majority Leader Tom Daschle, D-S.D., agreed to schedule a vote on permanent estate tax repeal, with the proviso that 60 votes would be needed to prevail.