The insurance industry has secured broad business trade group support for its effort to modify or kill provisions in Senate legislation that could devastate deferred compensation plans.
The Association for Advanced Life Underwriting, Falls Church, Va., and the American Council of Life Insurance, Washington, call the provisions “draconian” in a letter sent Tuesday to House leaders and to all members of the Senate.
Earnings on past deferrals would be treated as additional deferrals for purposes of the annual limitation. Because of this, “violations of the new rule could occur merely as the result of the passage of time, and not as a result of any action by the employee or the company,” AALU and ACLI officials write.
The AALU and the ACLI have persuaded groups such as the American Bankers Association, Washington, and the National Association of Manufacturers, Washington, to help them oppose the deferred comp provisions.
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But implementation of the provisions would hit life insurers especially hard, because many deferred comp plans use life insurance as a funding vehicle, says Michael Kerley, a senior vice president at the National Association of Insurance and Financial Advisers, Falls Church, Va.
“Other financial vehicles are used, as well, of course, but life insurance is a mainstay,” Kerley says.
Members of the Senate Finance Committee added the deferred comp provisions along with a package of small business tax cuts to an amended version of H.R. 2, the House minimum wage bill.