The Association for Advanced Life Underwriting is applauding the Senate Finance Committee for extending by one year the effective date of a nonqualified deferred compensation proposal currently pending in the committee.
Bob Plybon, president of the Falls Church, Va.-based AALU, says the deferred compensation provision will now apply to amounts deferred in taxable years beginning after Dec. 31, 2004.
“AALU has been working hard in favor of making the effective date fully prospective to allow orderly amendment of existing plans, and we are optimistic that the House will adopt a similar effective date,” Plybon says.
Plybon notes that two NQDC proposals are pending in the House and Senate. The House proposal, he says, would limit the times at which distribution from plans are permitted, require deferral elections to be made before the year in which services are performed, and prohibit provisions securing payment of deferred compensation upon a change in the employers financial health.
The proposal also would limit the use of foreign trusts, Plybon says.
Meanwhile, he says, the Senate proposal would, in addition, limit the investment choices available to participants and repeal existing statutory rules prohibiting the Treasury Department from issuing guidance on NQDC.
AALU, Plybon says, continues to urge adoption of the House version.
Meanwhile, Plybon says the industry is awaiting proposed IRS regulations and guidance on life insurance valuation for 412(i) pension arrangements and other contexts.
The IRS action will likely consist of 4 parts, says AALU. One will be a proposed regulation that will deal with the valuation of life insurance policies distributed from qualified plans, says AALU.
The other 3 parts, AALU says, will involve revenue rulings or guidance that deal with Section 412(i), qualified plan operational rules and the income tax treatment of life insurance distributions.
Plybon says that while the portion of the package consisting of the proposed regulations will be prospective in nature, the rest may have some degree of retroactive application.
While some parts of the guidance, he adds, may be largely a reinforcement and reiteration of existing rules and how they are applied, other parts may contain a significant revision to the rules regarding the valuation of life insurance.
This could generate controversy, Plybon says, and could call for a sharply focused input from AALU.
AALU also is concerned, Plybon says, about a provision in the Bush administrations fiscal year 2005 budget relating to incentives for charitable giving. The administrations proposal contains a number of provisions that appear in the Charitable Giving Act, which has been pending in some form in the House and Senate since 2001, he notes.
Of the incentives contained in the proposal, Plybon says, the one of particular interest to AALU members would permit tax-free lifetime distributions from both regular and Roth individual retirement accounts to certain charities.