The Internal Revenue Service is suggesting that adopting a proposed variable annuity reserving guideline could have tax consequences.
The IRS makes that suggestion in IRS Notice 2008-18, which identifies IRS and Treasury Department concerns about the possibility that states might adopt the proposed Actuarial Guideline VA-CARVM.
The IRS also raises concerns about the possibility that states might adopt a principles-based reserving, or “PBR,” system now being developed by regulators at the National Association of Insurance Commissioners, Kansas City, Mo.
AG VACARVM is a model that would establish rules for reserving for variable annuities with guarantees.
The PBR project is an effort to develop a reserving system that would depend less on statutory formulas and more on use of general principles and sound actuarial judgment.
The NAIC has been working on the PBR project for 3 years together with actuaries, life insurers and state insurance regulators.
Both advocates and critics of the AG VACARVM and PBR efforts have emphasized the importance of finding out how the Treasury Department will view any changes and how those views might affect the taxes that life insurers and their customers pay.
In the new notice, IRS officials say they are thinking about the following topics: