Efforts to sell annuities with long term care insurance riders got a boost and a slap Wednesday from the House Ways and Means Committee.[@@]
Committee members voted 23-17 to pass an amended version of H.R. 2830, the Pension Product Act of 2005.
One provision of the bill, which could go to the House floor for a vote as early as this week, would regulate the sale of annuity products that include LTC insurance riders.
But advocates of annuity-LTC combination products say the drafters of the LTC rider provision decided to treat the LTC component of combination products as life insurance. That move would set the deferred acquisition cost rate for the LTC component of a combination product at 7.7%.
The DAC rate for an annuity is 1.75%, and insurers would like to see the 1.75% annuity DAC rate apply to the LTC component as well as to the underlying annuity.
The version of H.R. 2830 approved by Ways and Means Wednesday would not let taxpayers deduct the premiums paid for a combo product as medical expenses, but tax-free conversions of existing life, annuity and LTC products into annuities with LTC riders would be permitted.
The insurance industry seems to be inclined to lobby for the LTC rider measure while lobbying for better tax treatment.
Because of the current disarray in Congress, the ultimate fate of H.R. 2830 is unclear, but supporters of the annuity-LTC combo provision say the mere fact that the Ways and Means Committee has included the provision in a bill is a giant first step.
In addition to regulating sales of annuity-LTC combo products, the version of H.R. 2830 approved Wednesday would:
- Encourage employers to allow automatic enrollment of new employees in 401(k) plans.
-Encourage employers to offer employees access to professional investment advice.
- Extend the annual contribution limits for individual retirement accounts and qualified pensions first enacted by Congress in the Economic Growth and Tax Relief Reconciliation Act of 2001 to 2010.
-Extend provisions in EGTRRA that created additional “catch-up” contributions for individuals 50 and older.
- Extend EGTRRA incentives that are supposed to encourage small employers to offer pension plans.
- Let employees roll over up to $500 of unused flexible spending account funds each year. The unused funds could be moved into another FSA or into a health savings account.