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April 17, 2008 at 10:44 AM
The New York State Insurance Department has come out with guidance on how life insurers in the state can decide whether agents and producers have “retired.”
The department looked at the definition because New York insurance laws limit the amount of compensation producers can receive while they are working, then exclude “security benefits,” such as benefits from nonqualified deferred compensation plans, from the compensation limits.
A new regulation implementing Section 409(a)(2)(A) of the Internal Revenue Code will require that nonqualified plans pay distributions only after the occurrence of 6 types of triggering events, such as the retirement of the participant, the death of the participant, or the occurrence of an unforeseeable emergency, Martin Schwartzman, chief of the New York Insurance Department Life Bureau, writes in New York Circular Letter Number 8 (2008).
Determining when life agents and brokers have retired can be difficult, because they may continue to receive trailing commissions as long as contracts remain in force, and they may occasionally originate new policies for long-time customers even after they stop seeking new business, Schwartzman writes.
