Life insurance trade groups say they will oppose enactment of proposals in the Bush administration’s 2007 budget document unveiled Feb. 6 that would create certain new forms of tax-free accounts.
The National Association of Insurance and Financial Advisors said, in reiterating its opposition to the proposals, one of the concerns is that if they are adopted, support would be unavailable for sustaining provisions in the tax law that underlie products the industry now sells or would like to sell.
“There is a competition for tax provisions that shelter retirement income,” said Michael Kerley, senior vice president, federal relations, for NAIFA. “Adoption of the proposals in the president’s budget would crowd out the tax benefits of products we sell.”
One of the insurance industry’s priorities is to win support in an upcoming conference of proposals in differing pension benefit reform bills the industry supports.
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Kerley said the Senate version contains provisions codifying tax deductions for corporate-owned life insurance and establishing certain best practices for its sales that the industry considers a priority.
The House version of the bill contains a provision allowing insurance agents to provide advice to employees of companies about the most appropriate way to invest their 401(k) money, which the industry also strongly supports.
The pension reform provisions in the bill are important but have many advocates, Kerley said. “But the COLI provision and the investment advice provision will not be included without our efforts, and those of the American Council of Life Insurers and the Association for Advanced Life Underwriting,” he said.
The Bush budget document also calls for outright repeal of the estate tax, something the industry consistently has opposed.
At the same time, the ACLI said it would support initiatives in the budget document that would make permanent those parts of the tax code that temporarily increase the amount workers can save in tax-qualified retirement savings plans.
The proposals the industry opposes ask Congress to create Lifetime Savings Accounts (LSAs), Retirement Savings Accounts (RSAs) and Employee Retirement Savings Accounts (ERSAs). Efforts by the administration in prior budgets to create these accounts have been rebuffed by Congress.
The ACLI said those accounts “would discourage long-term savings and pension plan maintenance and creation.”
In a statement, Frank Keating, president and CEO of the ACLI, said the industry will oppose creation of these programs because “they do not represent wise ways to address our nation’s retirement security crisis.”