After a busy and sometimes contentious legislative year in 2003, the life insurance industry is hoping to see resolution of some issues in 2004 while remaining on the alert for potentially serious challenges.
Issues such as corporate-owned life insurance and class-action legal reform may be resolved early in the second session of the 108th Congress, industry representatives say.
Both would represent major victories for the industry. However, Bush administration savings proposals also are expected to resurface, posing a challenge to annuities.
Jack Dolan, a spokesman for the American Council of Life Insurers, Washington, notes that 2004 is an election year, with control of both the White House and Congress at stake. This always poses uncertainties for legislation, Dolan says, but on the issue of COLI, the industry is cautiously optimistic of an early markup in the Senate Finance Committee.
Bob Plybon, president of the Association for Advanced Life Underwriting, Falls Church, Va., praises Sen. Kent Conrad, D-N.D., for developing a solution that assures proper use of COLI. “We are optimistic the Senate Finance Committee will mark up and approve a fair COLI proposal as part of the pension bill in early 2004,” he says.
The other issue that could be resolved early in 2004 is class-action legal reform.
Bill Anderson, senior vice president of law and government relations for the National Association of Insurance and Financial Advisors, Falls Church, Va., says formal legislative language on a compromise between 3 Democratic senators and the sponsors of class-action reform has not yet been released.
However, he notes, the support of the 3 Democrats should be enough to overcome a filibuster. Earlier this year, the class-action bill, S. 1751, was blocked when a cloture motion lost by only one vote.
Dolan says ACLI is expecting a vote on S. 1751 early in 2004. He notes that ACLI, along with other business groups, has expended a tremendous effort on class-action reform for many years.
Turning to the Bush savings proposals, Treasury Secretary John Snow says that early in the year, the administration will again promote Lifetime Savings Accounts and Retirement Savings Accounts.
LSAs allow individuals to place up to $7,500 annually in an account, earn tax-free interest and withdraw the money at any time for any purpose.
RSAs are similar except that the money cannot be withdrawn without penalty until age 59.
Anderson says life agents are “dead against” LSAs because of the impact on retirement savings.
There is a reason for the current tax treatment of annuities, Anderson says, and that is to encourage people to save for retirement. “We are the only providers of products that are there for retirement.”
AALU President-elect Gus Comiskey adds that if improvements can be made to enhance long-range savings, AALU would welcome them.
“At the same time, we think caution is warranted to make sure we do not disrupt proven ways Americans are saving for retirement,” he adds.
The administration also supports permanent repeal of the estate tax, an issue AALUs Plybon says is of “vital importance.”
The proponents of repeal, he says, will redouble their efforts in 2004 and invest many millions of dollars in a campaign targeted at permanent repeal.
Plybon says that while AALU expects a battle both for public opinion and in the U.S. Senate, 60 votes are needed in the Senate to get the legislation through. “We do not think the issue will be resolved in 2004,” he says.
Another pending tax issue is deferred compensation. AALUs Comiskey says the legislation is a work in progress.
AALU, he says, supports a proposal put forth by House Ways and Means Committee Chairman Bill Thomas, R-Calif., that imposes reasonable restrictions to assure the proper use of deferred comp while protecting the viability of deferred comp as a retirement savings vehicle.
The Senate Finance Committee also is considering deferred comp, Comiskey notes, and while its proposal is similar to the House proposal, AALU is concerned by some Senate provisions.
In particular, he says, the Senate proposal contains restrictions on permissible investments and lifts the moratorium on Treasury Department guidance on deferred compensation.
AALU, Comiskey adds, wants to make sure that any legislation passed in 2004 provides fair notice to both employers and employees, including a fully prospective effective date.
On insurance regulatory reform, Anderson of NAIFA says the House Financial Services Committee will continue to address the issue and there certainly will be legislation introduced.
The indication, he says, is that the committee can no longer tolerate the patchwork environment that characterizes state regulation and wont wait 4 or 5 years for the National Association of Insurance Commissioners and the states to create an interstate compact.
Dolan says there certainly will be a lot more action on regulation in 2004, but ACLI is not anticipating enactment of legislation.
“We want to keep moving the ball forward and educate members of Congress on the needs of the life insurance industry,” Dolan says.
In addition to the House Financial Services Committee, he adds, ACLI hopes to encourage the Senate Banking Committee to conduct a hearing. “We want to demonstrate the need for an optional federal charter and hope to lay the groundwork for serious movement on OFC in the next Congress.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, December 19, 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.