The life insurance industry is voicing deep concern about provisions dealing with deferred compensation that were added to legislation raising the minimum wage that was reported out of the Senate Finance Committee last week.
“The Association for Advanced Life Underwriting is concerned about these provisions and is communicating its concern to Congress,” said Tom Korb, vice president for public and policy affairs. “We have also helped call attention to these issues among a variety of pension-sensitive stakeholders in Washington.”
The legislation was approved by voice vote Jan. 17 with little debate. The 2 provisions would sharply limit deferred compensation plans for executives.
They were included as revenue-raisers to pay for the small business tax incentives that the Senate plans to attach to the minimum wage bill, Korb said.
At the same time, other lobbyists and congressional staffers cautioned that Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, has said he does not want any tax provisions added to the House minimum wage bill, according to several industry officials.
Regarding the provisions, Korb said, “For public and private companies alike, one new provision would restrict the amount that can be deferred annually.”
It was designed to deal with public anger about huge pay packages, but Korb, speaking on behalf of insurance underwriters as well as agents, said that “while a few individuals would be permitted to defer as much as $1 million, the new rules would limit deferrals to far less than that for the vast bulk of individuals.”
The provision capping deferred compensation at $1 million is “administratively cumbersome,” Korb said, and violation of its technical terms could result in the immediate taxation of amounts that were legitimately deferred in past years.
“For public companies, in some circumstances, a second proposal would have the effect of limiting corporate deductions when compensation is paid out to executives after they retire,” Korb said, noting that both provisions would have a “significant” retroactive impact.