Industry is quietly starting to gear up to protect inside buildup
By Arthur D. Postal
The life insurance industry is quietly gearing up to protect inside buildup in core whole life policies out of concern that dominant congressional Republicans might use a limitation on inside buildup in policies for the affluent in order to pay for making repeal of the estate tax permanent.
The industrys concerns were brought to the surface last Monday when Senate Republicans revealed their list of 10 priority bills they hope to push through Congress this year. These include creation of private accounts for Social Security and facilitating purchase of health insurance for the uninsured.
Other components of the top-10 legislative priorities that would involve insurance products include reform of the tax code and making permanent the repeal of the estate tax. A proposed provision the industry wholeheartedly supports is an above-the-line deduction for long term care insurance premiums. (See story on page 7.)
The priorities were laid out by Senate Majority Leader William Frist, R-Tenn., at a press conference. A document laying out the details of the priorities also was released later in the day.
Details of how private accounts proposed for Social Security would be structured were not disclosed, making it difficult to determine if such reform would benefit or hurt life insurers. And the industry has made clear it does not support total repeal of the estate tax because it would hurt sales of the tax-advantaged products it sells.
Regarding Social Security reform, Jack Dolan, a spokesman for the American Council of Life Insurers, said the insurance industry would like “to bring our expertise to the table. Our position on personal accounts is that if that idea is adopted, we would support a lifetime income option through purchase of an annuity for at least a portion of the assets accumulated in a personal account.”
Dolan said the industry hasnt taken a position on the issue of personal accounts. “But, if Congress decides to adopt them, we would support the lifetime income option for at least a portion of the assets accumulated in personal accounts.”
The industry also has a concern about another provision of the Republican priorities, permanent repeal of the tax on stock dividends. The insurance industry is lobbying to win an expansion of the current language to provide a pass-through for dividends paid into variable annuities. That is a priority for the insurance industry, although it is opposed by the House and also by the Treasury Department.
But it is the provision in the Republican Senate priorities regarding the estate tax that most concerns the industry.