Insurers Worry About Move To Put Estate Tax Section In Pension Bill

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

Industry group officials and company executives are eager for passage of the defined benefit pension overhaul bill because the bill includes provisions that could create opportunities for insurers to sell a whole array of new products.

Timing is critical, because pressure is mounting on Congress to act on the pension reform bill and accompanying legislation before June 28, when Congress plans to leave for the July 4 recess.

“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,” says Kenneth Cohen, deputy general counsel at Massachusetts Mutual Life Insurance Company, Springfield, Mass.

“Pension issues have taken months to resolve,” Cohen says. “Adding additional controversial issues to the package could kill the chances for enactment this year.”

The American Council of Life Insurers, Washington, believes it is “unlikely” that estate tax reform would be added to the pension bill, ACLI spokesman Jack Dolan says.

“We strongly support the pension bill,” Dolan says. “It has a variety of provisions that would boost Americans’ retirement security. We hope the conference concludes soon so that the measure can be enacted into law quickly.”

Although adding estate tax reform “is possible,” there are significant factors mitigating against such an approach, according to David Stertzer, chief executive of the Association for Advanced Life Underwriting, Falls Church, Va.

“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,” Stertzer says.

Another concern is the Republican estate tax compromise proposal would cost about 90% as much as full estate tax repeal.

Stertzer says 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.”

Senate Republican interest in adding an estate tax reform proposal to the pension benefit reform bill surfaced June 8, after estate tax repeal supporters failed to pass a measure that would have limited debate on the repeal bill. The Republicans came up three votes short of the 60 needed to limit debate on full repeal.

The pension bill, H.R. 2830, is being drafted by a conference committee seeking to reconcile different House and Senate versions.

Besides a provision that would revamp the defined benefit system, the bill could include a number of other provisions of interest to life insurers.

Some of the provisions that have appeared in the House version of the bill, the Senate version or both would:

–Extend expiring tax cuts.