powerful chairman of the House Ways and Means Committee
, is expected to embrace certain changes in tax law related to retirement security products beneficial to the industry in
comments Tuesday morning before the U.S. Chamber of Commerce
. His speech signals that the House will support President Bush in his efforts to have a Social Security reform package on his desk before Congress recesses in August.
that, the House Republican leadership seemed reluctant to tackle the president’s initiative in the face of polls showing that support for the President’s Social Security reform plan is only about 33% of the electorate.
The American Council of Life Insurers
offered some of the suggestions Rep. Thomas is likely to say Tuesday he will support. The ACLI made these suggestions in response to comments by Rep. Thomas in March that he would be amenable to including strong incentives for Americans to increase retirement savings as part of legislation that would include reform of the Social Security system–legislation that presumably would include personal accounts, an issue on which the industry is neutral.
However, despite the President’s demands
, and Rep. Thomas’ ability to win his Committee’s support for legislation he initiates, industry lobbyists and congressional staffers generally agree that prompt action on the proposals is unlikely.
They point to the reluctance of House Republicans
, both within and outside the Ways and Means Committee, to support the President and Rep. Thomas , and the fact that Democrats won’t negotiate unless the President takes personal accounts off the table.
In his comments, Rep. Thomas is expected to touch on tax law changes he wants to include in his Social Security reform package, proposals that would allow inside buildup on long-term care insurance
and facilitate transfer of funds without paying taxes at time of transfer between LTC contracts and such other industry products as life insurance and annuities.
Other components of the package
which Thomas is considering include the so-called “paycheck for life” program, which would allow half of the proceeds of an annuity, variable or fixed, up to $40,000, to go to the annuitant tax-free if redeemed in equal monthly installments after retirement.
Additional provisions of the industry’s broad retirement security agenda of which Thomas could voice support include automatic enrollment in 401(k) plans for new employees
, and more flexible distribution rules for 401(k) and IRA accounts. For example, under current law the industry seeks to change, money must start to be withdrawn from 401(k)s and IRAs at 70
The industry also is encouraging Thomas to include language in the
broad package that would make all of the retirement savings and pension reforms contained in the 2001 tax relief law permanent. At the same time, one downside is that the package being drafted by Rep. Thomas is likely to include creation of the dreaded Lifetime Savings Accounts, a Bush administration favorite that many in the industry, including insurance agents, strongly oppose. The critics within the industry are concerned because they view LSAs as tax-favored savings accounts with few limitations that will compete favorably with deferred annuities.