Administration Plans To Push Its Savings Proposals Again Next Year
The Bush administration is planning a new effort to enact tax-favored individual savings vehicles that could create a disincentive for consumers to purchase annuities.
Treasury Secretary John W. Snow says that next year, the administration intends to take action to reduce regulatory burdens on retirement savings.
Two simple accounts backed by the administrationLifetime Savings Accounts (LSAs) and Retirement Savings Accounts (RSAs)will make saving for everyday life and retirement security easier and more attractive, Snow says.
“Today, there are six different savings accounts with confusing and seemingly endless rules,” he says. “The direct result is that the tax code makes it more difficult for Americans to save for retirement, or save for other key life events, such as education, health care and unexpected emergencies.”
Snow made the comments in a recent speech to the Tax Foundation.
LSAs allow individuals to save up to $7,500 annually and earn tax-free interest. Money in LSAs can be withdrawn at any time for any purpose without penalty.
RSAs allow individuals to save an additional $7,500 annually and earn tax-free interest, but the money cannot be withdrawn without penalty until age 59.
Jack Dolan, a spokesman for the American Council of Life Insurers, Washington, says that a serious, national dialogue on the best means to boost savings and the retirement security of Americans is long overdue.
Thus, he says, ACLI applauds the administration for highlighting this issue and welcomes the opportunity to stress the vital role of long-term savings in family financial planning.
“Long-term savings also are an essential source of capital for sustained and strong economic growth,” Dolan adds.
“We would be concerned,” he says, “with any initiative that would not properly prioritize long-term savings.”
In addition to LSAs and RSAs, Snow says the Bush administration will once again lobby for permanent repeal of the estate tax.
“The death tax falls on income that has already been taxed,” Snow says. “It diverts resources into tax avoidance and enforcement that could be spent in economically productive activities.”
In other news, ACLI is applauding Congress for reauthorizing the Fair Credit Reporting Act.
Allen Caskie, chief counsel with ACLI, calls final passage of the legislation “a huge victory for common sense and efficient business.”
He notes there was a lot of pressure from some anti-business factions to make the legislation much more onerous than it turned out.
The legislation creates a national set of rules regarding the use of credit information among businesses and preempts inconsistent state laws.
However, in one new twist, the legislation requires financial institutions to provide customers with notice and opportunity to opt out of receiving solicitations from affiliates of their financial institutions.
Caskie says that while ACLI would have preferred this provision not be in the legislation, he does not think that as a practical matter, it will be very burdensome.
Looking at the Gramm-Leach-Bliley Act as a model (GLB requires notice and opt-out opportunity for information sharing among nonaffiliates), Caskie notes that only between 2% and 3% of consumers do opt out.
In this case, where there is already a business relationship, he says, most people will not want to opt out.
Caskie notes that the life insurance industry also won an important victory regarding the use of medical information.
The legislation specifically allows the sharing of medical information for purposes relating to insurance.
Turning to civil justice reform, four Democratic senators told Senate Majority Leader Bill Frist, R-Tenn., that they want to continue working with the Senate leadership to reach an agreement on class-action legal reform.
The senators say they agree with the thrust of the legislation now pending in the Senate, S. 1751, and believe they are not far from having a bill they can support.
Under S. 1751, most major class-action lawsuits would be tried in federal, rather than state courts.
The bill also creates a so-called class-action bill of rights calling for clear notification to individuals that they are members of the class and judicial review of noncash settlements.
The senators signing the letter include Mary Landrieu, D-La., Chris Dodd, D-Conn., Charles Schumer, D-N.Y., and Jeff Bingaman, D-N.M.
ACLIs Dolan praises the letter.
“This shows a shared goal among a filibuster-proof majority for class-action reform,” he says. “We are remaining optimistic that it can get done.”
Finally, the Senate adjourned for Thanksgiving without taking up a compromise agreement on corporate-owned life insurance (see NU, Nov. 24).
There had been some hope that the Senate Finance Committee would mark up the agreement prior to Thanksgiving, but it did not do so.
However, sources tell National Underwriter that the COLI agreement may come up in December when Congress returns to session to take up some remaining appropriations bills.
Reproduced from National Underwriter Life & Health/Financial Services Edition, November 26, 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.