Life and health trade groups are celebrating the passage of many sections of H.R. 4, the pension reform bill that Congress passed earlier this month. But the groups will work next year to have Congress reconsider a flexible spending account rollover provision that failed to make the final cut.
President Bush is expected to sign the Pension Protection Act of 2006 sometime this week.
The authors of the bill wrote it primarily to improve the finances of defined benefit pension plans and the Pension Benefit Guaranty Corp.
Life insurers that sell the group annuities backing many defined benefit plans have a huge stake in the welfare of the traditional pension system.
But at life groups, the sections of H.R. 4 that will impose new marketing rules on sellers of corporate-owned life insurance and encourage 401(k) plan sponsors to provide individualized advice seem to be getting more attention.
In addition, insurers are looking at what was deleted from H.R. 4 before its passage and voicing the most concern over the decision to delete a flexible spending account rollover provision, presumably because of its cost.
Janet Trautwein, executive vice president of the National Association of Health Underwriters, Arlington, Va., says she is disappointed about the exclusion provision that would let workers roll over up to $500 in unused FSA assets each year.
Under current use-it-or-lose-it rules, money left in the FSA at the end of the year is forfeited to the employer. “Allowing for a minimal rollover re-funds the account for the following year, providing peace of mind if one becomes sick early in the year,” Trautwein says.
NAHU hopes the next Congress will take another look at the FSA rollover issue and let workers use employer cafeteria plans to buy long term care insurance, she adds.
The COLI provision will require employers to get rank-and-file employees’ consent before insuring those employees’ lives, and it will discourage employers from applying COLI to employees who are not highly compensated.
The “COLI ‘best practices’ provision had the support of a broad, bipartisan majority of both Senate and House tax-writing committees,” says Frank Keating, president of the American Council of Life Insurers, Washington, a group that has spent years working on the issue.
The Association for Advanced Life Underwriting, Falls Church, Va., also supported the COLI provision and other H.R. 4 provisions, and it has opposed H.R. 5970, the trifecta bill that includes the kind of estate tax reduction measure that the AALU has opposed.
Shortly before the Senate passed H.R. 4, supporters of H.R. 5970 tried and failed to get 60 votes to protect H.R. 5970 from a filibuster. The vote on the cloture motion kept the bill from coming up for a vote in the Senate.
“The results of both votes were proof positive that robust political involvement and collaborative advocacy efforts can and do make a difference in Washington,” says AALU Chief Executive David Stertzer.
David Woods, CEO of the National Association of Insurance and Financial Advisors, is welcoming the passage of H.R. 4 sections that deal with efforts to offer financial advice to 401(k) plan members.
The provision would encourage 401(k) providers to help workers with investment decisions by having agents meet with plan participants face to face or by offering an approved computer software program. Prohibited transaction rules associated with the Employee Retirement Income Security Act now make it difficult for plan providers and agents to give retirement plan members personalized advice.
Enactment of the investment advice provision “would dramatically improve the chances that much-needed investment advice for participants of employer-sponsored 401(k) retirement plans will be made available,” Woods says.
“Studies show us that there are as many as 20 million workers with 401(k) accounts who don’t get the advice they need to make informed investment decisions about their retirements,” Woods says. “And they need help because the choices aren’t easy.”