Reps. Rob Portman, R-Ohio, and Ben Cardin, D-Md., are expected to introduce legislation this week that would increase the incentives for retirement savings and possibly include a provision encouraging retirees to purchase annuities.
The main thrust of the long-expected legislation is to build on the Portman-Cardin bill of the last Congress, which increases the contribution limits to 401(k) and similar plans and allows older workers to make additional “catch up” contributions.
But sources tell National Underwriter that the new Portman-Cardin legislation will also contain a provision creating a tax incentive for retirees with qualified plans to receive their retirement funds through a “lifetime income option.”
Although details were still sketchy at press time pending formal introduction of the legislation, sources say the provision will allow retirees to receive a certain percentage of their retirement income on an annual basis from an annuity, which would be taxed at a rate lower than the current individual rate.
However, sources say, the precise tax rate on annuities had not been determined by press time.
The provision appears to be a variation of a proposal long supported by the life insurance industry, called Lifetime Annuity Payouts, that would tax annuity payouts at the capital gains rates, as opposed to the higher individual rate.
Industry representatives declined to comment on the new Portman-Cardin bill until it is formally introduced.
In other news, legislation strongly supported by the life insurance industry reforming the class-action legal system is advancing in the U.S. Senate.
The Senate Judiciary Committee at press time was preparing to approve S. 274, legislation which would give federal courts jurisidiction over major class-action lawsuits.
Jack Dolan, a representative of the American Council of Life Insurers, Washington, says that reform of the class-action system is long overdue.
The legislation, he says, is aimed at curbing problems posed by a few bad actors.
Many insurance companies, Dolan says, are concerned that even their most innocent actions will be challenged in court by some trial lawyers.
Moreover, Dolan says, some state courts hearing major class-action lawsuits impose their own local rules nationally, regardless of the insurance codes or regulations of other jurisdictions.
Under the legislation, U.S. District Courts would have jurisdiction over any class action in which the amount in controversy exceeds $2 million and in which any member of the class of plaintiffs is a citizen of a different state from any defendant.