Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Financial Planning > Tax Planning

Tax Bills Come And Go, Insurers Say, But VAs Are Here To Stay

Your article was successfully shared with the contacts you provided.

Tax Bills Come And Go, Insurers Say, But VAs Are Here To Stay


Still smarting from a congressional decision to leave variable annuities out of a tax bill that cut taxes on dividends, insurers say they will continue to stress the many features of the product and what they can do.

In mid-May, a $350 billion tax cut that reduces taxes on dividends was passed by Congress (see NU, May 26.)

While interviews with National Underwriter indicate hope that the issue will be revisited, for the time being, the message is that the product offers an excellent way to achieve retirement goals.

While other products will have a tax advantage over VAs, there are benefits that will be discussed with the client including the ability to annuitize, says Tom Shade, senior vice president, product and market development, with AXA Financial, New York. That option will be increasingly important given the growing retirement segment of the population, he continues.

And the need for protection, as embodied in guarantees such as the guaranteed minimum death benefit, is one that consumers want, he adds.

“We have talked to a number of clients and they say it is not a big deal one way or another,” says John Walters, executive vice president and director in the investment products division of Hartford Life Insurance Company, Hartford, Conn.

Annuities are a long-term investment that extend a lot longer than the five years the dividend tax change will be in effect until it sunsets in 2008, he adds.

Distributors are saying there will not be a long-term impact, he adds. Part of the reason, he says, is that more than half of Hartford Financials sales are in qualified accounts and IRAs will not be affected, Walters adds.

Long-term planning will continue to be emphasized in the sale of the product because “it is risky to change the way you are selling a product because of a temporary tax change,” he continues.

Walters says that “we are reaffirming buying [VAs] for reasons other than tax deferral.”

For instance, he notes the demand for guarantee features. Over 80% of those buying VAs from Hartford buy additional features including guarantees, according to Walters.

And, he continues, the industry is seeking more equitable tax treatment in other tax bills or potential legislation such as a Lifetime Annuity Payout proposal.

Efforts will continue to be made to seek more favorable tax treatment for VAs, according to Bryan Haviland, a spokesman for Nationwide Financial Services, Columbus, Ohio.

“Weve known for a long time that VAs have valuable features aside from tax deferral and that we have and will continue to promote these features. VAs are a unique way to save for retirement,” he adds.

Reproduced from National Underwriter Edition, June 9, 2003. Copyright 2003 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.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.