Senatorial Tempers Flare Over COLI
Senate Finance Committee Chairman Charles Grassley, R-Iowa, blasted the life insurance industry for how it opposed controversial language approved by his committee that would severely restrict the use of corporate-owned life insurance.
Industry representatives said Grassleys highly critical comments reflect frustration over the fact the committee had to flip-flop on COLI after the language was approved.
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The controversy erupted at a Finance Committee hearing on COLI that focused on the language introduced by Sen. Jeff Bingaman, D-N.M., that would tax the death benefits on COLI policies covering employees who die more than one year after leaving employment.
After the committee approved the language, which was an amendment to a pension bill, the industry mounted a massive lobbying campaign against it. Grassley then agreed to hold a hearing specifically on COLI and then a separate vote on the amendment.
But in his opening statement during the hearing, Grassley let loose on the industry. Bingaman, Grassley said, had a longstanding interest in what he sees as abuses in the COLI market.
Grassley said he personally believes all the abuses in the COLI market were eliminated in legislation passed by Congress in 1996. Bingaman disagrees with that, Grassley says, which is his right.
The Finance Committee staff, Grassley says, asked the life insurance industry to try to work out a compromise on COLI, but the industry refused. Then, he says, the industry expressed surprise that Bingaman had so many votes for his amendment.
Kim Dorgan, senior vice president of federal affairs for the American Council of Life Insurers, Washington, says Grassleys comments represent frustration. It is never a good sign, she says, when the committee has to flip-flop just one week after a vote.
Dorgan notes that Grassley was critical of the industry for allegedly lobbying late on the issue. However, she says, Bingaman continually filed the amendment on every piece of legislation where it was germane but never offered it for a vote during committee sessions. It got to be routine, Dorgan says.
Then, she says, Bingaman suddenly decided to bring it to a vote during consideration of the pension bill.
Dorgan says she was surprised at Grassleys statement, adding that life insurance is a huge industry in Iowa, and the industry would hope for a little more support from Grassley.
In addition to the industrys lobbying, Grassley also criticized the industry over the amount of information available on COLI sales.
He noted that the United States General Accounting Office, the investigative arm of Congress, tried to conduct a survey of the uses of COLI.
However, Grassley said, GAO was unable to complete the survey because some in the industry either did not have information on COLI uses or the information was not in a usable form.
Grassley said COLI represents 25% of some companies business. So how is it, he asked, that life insurers dont have information on 25% of their business?
But Bob Plybon, president of the Association for Advanced Life Underwriting, Falls Church, Va., says the industry cooperated fully with the GAO study on COLI.
In addition, he says, it also has cooperated with Sen. Kent Conrad, D-N.D., as he put together an amendment that addresses perceived problems about the current use of COLI.