Insurers continue to press on points the industry feels are critical in shaping a pension reform bill in Congress. But action on key provisions sought by the insurance industry in the pension benefit reform bill will not occur until late March because of a congressional recess.
Talks on the bill will not resume until March 28–with Congress looking to finish work by early April, several conferees say.
In the interim, the staffs of the conferees have been told to “find common ground” and seek “creative ways to reach agreement” on provisions in the respective pension reform bills that currently conflict.
In a sign that conferees want to keep conflicts at a minimum, Sen. Max Baucus, D-Mont., ranking minority member of the Senate Finance Committee and a conferee, declined on March 16 to discuss particular issues even as he introduced legislation that contained provisions of particular interest to the insurance industry on retirement savings.
He said he would not talk about the pension bill “outside the conference.”
The insurance industry pinpointed several areas of concern in letters written to conferees last week. In one letter, insurance agents’ groups asked members of the conference committee to include in the final bill, H.R. 2830, the House versions of provisions allowing agents to offer investment advice to participants in defined contribution plans, create hybrid annuities containing long term care riders, and offer more flexibility for the disposition of unused amounts contained in flexible spending arrangements.
In a separate letter, insurance agent and underwriter trade groups asked the conference committee members to include in the bill a provision codifying the tax treatment of corporate-owned life insurance (COLI). The provision also would codify best practices now used as the industry model for sales of these instruments. That provision is contained in the Senate version of the legislation, although, as the industry says in its letter to conferees, similar legislation has been introduced in the House on a bipartisan basis.
In the first letter, the National Association of Insurance and Financial Advisors and the Association of Health Insurance Advisors, both in Falls Church, Va., tell the conferees that, because of current conflict of interest restrictions in ERISA, only 16 percent of 401(k) participants have a financial advisory service available to them through their employer-sponsored retirement plan.
The provision in the House bill–but not the Senate bill–would eliminate restrictions inhibiting employers and financial advisors who are employed by the employer’s 401(k) plan provider from helping employees choose among the option available in their plan. “We recommend you adopt the House language,” the letter said.
Regarding the LTC provisions, NAIFA and AHIA said one way to address the catastrophic cost of long term care is by allowing cash buildups in life insurance and annuity contracts to be used to fund LTC costs or pay the premiums for LTC insurance policies, or to allow combinations of these products. “Yet, current tax law makes that difficult,” NAIFA and AHIA said. “We recommend you retain the House bill provisions that will allow the combination of life insurance or annuity contracts with LTC insurance.”
At the same time, NAIFA and AHIA said, FSAs allow workers to use pretax dollars for certain expenses and better manage their health care expenses. The letter noted that workers currently are forced to forfeit amounts remaining at the end of the year.
Allowing workers to carry forward unused benefits as provided in one of the provisions of the bill “would enhance workers’ ability to manage health care costs and savings,” the letter said. “We recommend you accept the House provision.”
In a second letter, NAIFA, the Association for Advanced Life Underwriting, Falls Church, Va., and the National Association of Independent Life Brokerage Agencies, Fairfax, Va., join with the American Council of Life Insurers, Washington, in asking that the COLI provision in the Senate bill be retained.
The Senate provisions would conform the statutory rules governing COLI to industry model uses today, the letter said. “By limiting COLI to coverage of highly compensated employees and requiring the consent of insured individuals, this legislation will address concerns that have been expressed about some past uses,” the letter said. “Today, businesses purchase insurance on the lives of employees to meet critical needs, such as funding the cost of employee benefits and protecting against the loss of business owners or key employees,” the letter writers said. “The COLI legislation will help preserve the ability of companies to meet these needs.”
Conferees on the bill hope to have a conference report ready by April 7, according to analysts at Washington Analysis, Washington.
A key deadline is that the first required quarterly pension contributions for the year are not due until mid-April. If Congress does not pass the reform measure, the rate used to calculate the contributions will be based on the 30-year Treasury bond, inflating the required payments, the analysts said.
But insurance industry lobbyists said that it is unlikely the conferees will take up the issues of interest to the insurance industry until they return March 25 from a 10-day recess, and are likely to postpone action of some of the more controversial ones, like the COLI and investment advisory provisions, until late in the process.
Conferee Committee Chairman Sen. Michael Enzi, R-Wyo., has set an April 7 deadline for completing the negotiations.
Sen. Trent Lott, R-Miss., suggested at a Washington, D.C., conference last week that a consensus bill could come together relatively quickly.
Some Industry Recommendations
–Allow financial advisory services through employer-sponsored retirement plans.
–Make LTCI options available through life insurance and annuity contracts.
–Enact industry recommendations on COLI.