Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Financial Planning > Tax Planning > Tax Reform

Republicans Still Press For Estate Tax Reform

Your article was successfully shared with the contacts you provided.

Efforts by the Senate Republican leadership to slip estate tax reform into the pending pension reform bill has the insurance industry concerned that the political weight could sink the entire ship.

Insurance industry officials are anxious for passage of the defined benefit pension overhaul bill because it also has defined contribution provisions attached to it that could provide a whole array of new products for the industry to sell.

Timing is critical because pressure is mounting on Congress to act on pension reform and accompanying legislation before Congress departs for the July 4 recess on June 28. Still, much work remains to be done.

“With the full support of House and Senate leadership to resolve the remaining differences in the pension legislation, we are optimistic that agreements can be reached on all key issues prior to the July 4 recess,” said Kenneth Cohen, senior vice president and deputy general counsel, Massachusetts Mutual Life Insurance Company. “Pension issues have taken months to resolve. Adding additional controversial issues to the package could kill the chances for enactment this year.”

Jack Dolan, a spokesman at the American Council of Life Insurers, said he believed it unlikely that estate tax reform would be added to the pension bill.

“We strongly support the pension bill,” Dolan added. “It has a variety of provisions that would boost Americans’ retirement security.”

David Stertzer, chief executive of the Association for Advanced Life Underwriting, explained that adding estate tax reform is possible.

“Conference reports are not amendable, and this would be a circuitous way to move estate tax reform forward without providing opportunity for consideration of alternatives on the Senate floor,” he said.

Of greater concern is that what the Republicans are pushing would cost nearly as much as 90% of the cost of full estate tax repeal.

The AALU supports “reasonable and sustainable estate tax reform that would exempt the vast majority of Americans from estate tax liability while allowing the remaining few subject to the tax to plan with certainty,” Stertzer said.

The pension legislation, H.R. 2830, is being drafted by a conference committee seeking to reconcile different House and Senate versions. Besides reforming the defined benefit system, the bill is now expected to contain a number of provisions extending expiring tax cut provisions and permitting insurers to enhance products they can offer in the defined contribution market.

Sen. Charles Grassley, R-Iowa, a member of the pension bill conference committee, said that pensions and the estate tax may eventually be joined, though he cautioned that Senate Republican leaders are trying to find ways to avoid that.

Sen. Max Baucus, D-Mont., ranking minority member of the Senate Finance Committee, said June 14 the environment for reaching an agreement has not improved since a vote on the issue June 8.

But such Republicans as Sen. Trent Lott, R-Miss., are trying to force the issue.

Lott is the primary advocate for attaching estate tax reform to the pension bill. He said June 13 he does not think a deal can emerge in the Senate, so he would eye a conference report as the vehicle. He said he would not vote for a proposal that taxed any estate higher than 30%.

The latest Republican compromise proposal is for a $5 million-per-person exemption and a 15% rate, last modified to 30% on estates over $30 million.

Insurance agents also strongly support a provision in the House bill that provides plan sponsors a safe harbor from fiduciary liability for investment advice from an independent investment advisor.

Another provision highly sought by the insurance industry and contained in the House bill would allow cash buildups in life insurance and annuity contracts to be used to fund long term care costs or pay the premiums for LTC insurance policies, or allow combinations of these products.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.