NU Online News Service, Oct. 28, 2003, 5:54 p.m. EST — Washington
Recent comments by Senate Finance Committee Chairman Charles Grassley, R-Iowa, that criticized life insurance industry lobbying on corporate-owned life insurance reflect frustration by the chairman that his committee had to flip-flop on COLI, an industry representative says.
Kim Dorgan, senior vice president of federal affairs at the American Council of Life Insurers, Washington, says it is never a good sign when a committee has to flip-flop on legislation just one week after the legislation was approved.
The controversy surrounds language approved by the committee in September that would severely restrict the use of COLI by taxing the death benefits on policies covering employees who die more than one year after leaving employment.
This treatment would not apply to policies covering key employees.
The language was sponsored by Sen. Jeff Bingaman, D-N.M.
After the language was approved, the insurance industry launched a massive lobbying campaign, and the committee agreed to hold a separate hearing on COLI as well as another vote.
But, during the hearing, which was conducted Oct. 23, Grassley blasted the industry. He said the industry knew that Bingaman had a longstanding interest in COLI.
The committee staff asked the industry to work out a compromise, but the industry refused, Grassley said.
Then, Grassley said, the industry expressed surprise that Bingaman had so many votes.
But Dorgan responded that while Grassley criticized the industry for being late in its lobbying, the fact is that Bingaman filed the amendment on virtually every germane piece of legislation that the committee considered, but never actually offered it for a vote.
It got to be routine, Dorgan said.
Then, Dorgan said, Bingaman suddenly called for a vote at the Sept. 17 session.
Dorgan said she was surprised by Grassley’s statement at the hearing. Life insurance, she said, is a huge industry in Iowa. The industry hoped for a little more support from the chairman.
Bob Plybon, president of the Association for Advanced Life Underwriting, Falls Church, Va., said the AALU appreciates the hearing and believes that the witnesses from the Treasury Department, the General Accounting Office, the industry and other witnesses helped get out the facts about COLI.
But, in addition to criticizing the industry’s lobbying, Grassley questioned the industry about the availability of information about the uses of COLI.
Grassley said the GAO tried to conduct a study of COLI uses but was unable to complete it because some companies in the life insurance industry either did not have any information about the issue or had information that was not in a usable form.
He said some companies report that COLI represents 25% of their business. How is it, Grassley asked, that life insurance companies do not have information about 25% of their business?
But Plybon said the industry cooperated fully with the GAO.
Indeed, Davi D’Agostino, director of financial markets and community investment at the GAO, testified at the hearing that the industry did cooperate and that the ACLI encouraged its members to participate in the study.
In addition, Plybon said, the industry is working with Sen. Kent Conrad, D-N.D., to put together an amendment that addresses any perceived problems regarding the use of COLI.