Besides the tax reconciliation bill that has stymied it since last winter, Congress will be dealing with a number of other issues, including pocketbook ones, critical to the life insurance industry when it resumes work this week.
For example, the issue of reforming the defined benefit pension system is still on the table. Insurers provide products that fund defined benefit programs and also administer them, but the legislation Congress is wrestling with contains a number of other provisions important to insurers, including several that will add to their product offerings and facilitate greater marketing of their products to owners of 401(k) plans.
Additionally, the Senate is again scheduled to take up legislation next month that would phase out the estate tax. For its part, the insurance industry supports reform rather than repeal of the estate tax.
Among sensitive issues in the pension reform legislation the industry is supporting is a provision in the House version of the bill that would allow agents and brokers to provide owners of 401(k)s with investment advice. There is strong concern about this provision among senators who are members of the committee seeking to reconcile the differing House/Senate versions of the bill.
The industry also is voicing strong support for provisions allowing a long term care rider to annuities and allowing workers to roll over up to $500 in their flexible spending accounts.
As conferees left for recess, the hospital industry launched a campaign to add a provision allowing employers to offer LTC insurance through cafeteria plans and FSAs.
As a staff official for America’s Health Insurance Plans pointed out, this provision is not in the bill, but it should be. “It doesn’t have a high price tag but would benefit millions of people who ultimately would need long term care,” an AHIP official said. A letter signed by Sen. Olympia Snowe, R-Maine, is being circulated for signatures by other members of the conference committee, the AHIP official said, which would allow employers to offer LTC insurance as a non-taxable benefit as part of a cafeteria plan or FSA.
Another provision of the legislation on the industry’s priority list is inclusion of language codifying the tax treatment as well as best sales practices for corporate-owned life insurance. That provision, regarded as less controversial, is contained in the Senate version of the bill, while similar legislation in the House has broad and bipartisan support.
A provision that would make permanent increases in IRA and 401(k) contribution limits and catch-up provisions for those over 50 contained in a 2001 tax bill are also of great interest to the insurance industry.