The Senate’s decision to reject emphatically the creation of personal accounts in Social Security is being greeted with a discreet sigh of relief by the life insurance industry.
However, a securities analyst who covers the industry cautions that while tax proposals that would undermine the attractiveness of life insurance products keep getting defeated, they also continue to crop up.
The American Council of Life Insurers and the National Association of Insurance and Financial Advisors declined to comment directly on the Senate decision, which occurred March 16 as the Senate wrestled with the fiscal 2007 budget resolution, which is a blueprint for spending limits on next year’s budget.
The vote was 46-53, with eight Republicans, either moderate or facing challenging re-election campaigns, supporting 45 united Democrats. It also marked the first time the issue had come up on the Senate floor.
Jack Dolan, a staff official at the ACLI, said the industry had a “neutral position” on the Social Security reform issue. In general, however, he said the industry supports “long-term, meaningful reform.
“Our position is that if there is to be private accounts, workers should have the option to receive a lifetime income stream from an annuity at retirement from assets accumulated in a private account,” he said.
The insurance industry’s concern is that private accounts are a “double-edged” sword for insurance companies and agents. As security analysts and industry officials in private briefings over the past year or so have explained, while private accounts would encourage people to manage their own accounts, they also have the potential of undermining the employer-based retirement system. Specifically, such accounts would serve as a disincentive, in the view of industry officials, for people to invest in 401(k)s, insurance policies, IRAs, annuities and long term care products, for example.