What will happen in the House, the industry wonders
Pension legislation passed by the Senate Nov. 16 contains a provision codifying into federal law certain “best practices” regarding the sale of corporate-owned life insurance, which is likely to dissipate the cloud hanging over the sale of this product for several years.
The pension bill was among a flurry of legislation the House and Senate dealt with late last week containing provisions sought by the insurance industry as Congress prepared to take a two-week break before returning to finish up for the year the week of Dec. 5.
But, like so much else Congress has done this year, there was a huge catch.
The pension bill, S. 1783, immediately won a veto threat from the Bush administration because it gives the airline industry 20 years to end the shortfalls in pension plans. And, the House still has not acted on the plan, and it is unclear when it will do so. The House version of the bill, passed by the Ways and Means Committee Nov. 9, does not contain the COLI provisions. Action on that bill is not expected until after the recess, if the House acts at all this year.
Besides the COLI provision, the Senate pension bill allows employers to provide “the safest available annuity” to employees in retirement plans, as well as automatic enrollment in 401(k)s.
The Senate bill also provides for the creation of a “DB(k),” which would be a new pension arrangement combining features of both traditional defined benefit plans and 401(k) defined contribution plans.
The COLI provision is strongly supported by the American Council of Life Insurers, the Association for Advanced Life Underwriting and the National Association of Insurance and Financial Advisors.
It would effectively limit COLI to coverage of highly compensated employees and require the consent of insured individuals.
COLI is used by employers both to protect against the financial cost of losing a “key” employee as well as providing coverage on a wider range of employees to help provide funds for the payment of employee and retiree benefits.
Frank Keating, ACLI president and CEO, said that if the House bill is passed this year, a conference is likely to accept the COLI provision, which the industry first won support for in the Senate Finance Committee in 2003. “COLI ‘best practices’ legislation enjoys strong support not only in the Senate but the critical House Ways and Means Committee, as well,” Keating said. “Thirty-one members of the panel support the measure–a strong majority of the panel.”
David Stertzer, AALU CEO, said, “We appreciate the actions of the U.S. Senate and the efforts of House supporters to try to ensure that this provision is enacted.”