Confirmation by the incoming Obama administration last week that it will support maintaining the estate tax going forward at the same level it is scheduled to be for this year, is good news for the life insurance industry.

At the same time, while that news is welcome, confirmation that President-elect Obama and the Congress are on the same page on estate taxes does not mean it is time for the life insurance business to break out the champagne.

That’s because a huge slew of issues in which the life insurance industry is either directly or indirectly caught up will have to be taken up by the current Congress, and there is no clear sign now as to how they will ultimately be dealt with.

The two greatest concerns are taxes and regulation.

Regarding estate taxes, The Wall Street Journal on Jan. 12, confirmed a story first reported by National Underwriter on Dec. 10 in an article that disclosed the agenda of Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, for the coming year.

In answering a question from National Underwriter that day, Baucus said work on a tax bill that would include making the 2009 estate tax schedule permanent, indexed for inflation, would be the second order of business for the Congress this year.

Specifically, he said Congress would move to make permanent a $3.5 million per person exemption from the estate tax, indexed for inflation, and a 45% maximum tax rate.

He also said work would start on tax legislation that would include a middle class tax cut and language making the 2009 estate tax level permanent, immediately after Congress completes work on the stimulus package legislation which it is working on now.

And that is where the problems begin.

First, the devil on the estate tax issue is in the details. The industry wants the gift and estate tax provisions unified. Specifically, according to the Association for Advanced Life Underwriting, under current law, the estate tax exemption increases to $3.5 million this year, while the gift tax exemption is locked in at $1 million.

Of even greater concern to the industry is the future of non-qualified deferred compensation plans.

Executive compensation has become a whipping boy for legislators under intense pressure to relieve the foreclosure mess and other debt crises facing many of their constituents.

It is much easier for members of Congress to change the subject by railing against executive compensation than to admit that the foreclosure and related debt crisis is one of their own doing.

As stated by David Walker, former Comptroller General of the Government Accountability Office recently, the Bush Administration and the Congress have failed to show fiscal leadership and are leaving President-elect Barack Obama “in one of the toughest situations an incoming President has ever faced.”

How a Congress more skilled at deflecting blame than being held accountable will factor non-qualified deferred compensation into its machinations is unclear and a huge problem.

And, how Congress decides to pay for the multi-trillion dollar aid package it is currently drafting is another issue that should concern life insurance interests.

Not only NQDC, but also limits on inside buildup could be on the chopping block next year.

Moreover, future regulation of the industry, and the potential that multiple levels of federal oversight of insurers and agents could be heaped on top of the current state regulatory scheme, is certainly possible.

For example, a systemic risk regulator like the Federal Reserve Board could be established to oversee all financial institutions in an effort to prevent the risk to balance sheets created by overleveraging and through acquisition of attractive but risky financial instruments.

And, the Madoff scandal could result in greater oversight, perhaps by the Securities and Exchange Commission and/or the Financial Industry Regulatory Authority, of agents and financial advisors.

President-elect Obama, in an interview with CNBC several weeks ago, said his administration would disclose an outline of how it proposes to regulate financial services companies by April 1, in advance of a meeting of the so-called “G-20,” the leaders and central bank heads of top 20 advanced and emerging economies.

“Our regulatory system has not worked the way it’s supposed to,” the president-elect then said.

“So it’s going to be a substantial overhaul,” he added, saying specifically that “we’re going to have better enforcement, better oversight, better disclosure, increased transparency.”

How that ultimately works out for life insurance companies and agents is very important. Stay tuned for the answer.