WASHINGTON — Permanent estate tax reform might or might not make it through Congress this year, but the insurance industry certainly needs to remind lawmakers of the importance of life insurance.
Those were some of the points made here during a panel discussion at the annual convention of the Association for Advanced Life Underwriting, Falls Church, Va.
Panelists talked about congressional legislative priorities and the impact of the President Obama’s electoral victory
Rep. Chris Van Hollen, D-Md., praised a Senate bill sponsored by Senate Finance Committee Chairman Max Baucus, D-Mont., that would permanently set the estate tax exemption at $3.5 million, indexed for inflation; and that would set the top tax rate at 45%. The bill also would reunify the gift and estate taxes and provide portability.
“This legislation is in the budget,” Van Hollen said. “I’m fairly confident that we’ll be able to make the needed changes, so that we at least can provide some certainty and stability to the estate tax going forward.”
Other panel members questioned whether permanent estate tax reform will happen this year.
Kenneth Kies, a managing director at the Federal Policy Group, Washington, said Sen. Charles Grassley, R-Iowa, might have enough votes to filibuster an estate tax bill.
That would put off reform until 2010, when the current estate tax levels are due to sunset for 1 year before reverting in 2011 to the pre-2001 levels.
Steve Ricchetti, an AALU outside counsel, agreed that a permanent solution likely will not happen until 2010. The short-term prospect, he said, is that Congress will enact a 1-year patch freezing the exemption level at $3.5 million and the top tax rate at 45%.
Non-Qualified Deferred Comp
Kies said the AALU has made “much progress” in helping to advance S. 651, a bill sponsored by Baucus that would limit annual deferrals to $1 million.
The bill would not count earnings on deferrals toward the $1 million limit as long as earnings were based on a market rate of return.
“We have to stick with our message, which is that non-qualified deferred compensation is a legitimate and effective tool for encouraging people to save beyond what qualified plans allow,” Kies said. “It’s a perfectly appropriate way to compensate executives. When we go to Capitol Hill, we also need to talk generally about how important life insurance is to national savings, particularly for the 75 million Americans who now have protection. And we need to keep the message positive.”
Congress is unlikely to pass a bill restricting stranger-originated life insurance or setting up a federal alternative to the current state insurance regulatory system this year because Congress and the Obama administration are placing a higher priority on a number of other issues, Kies said.
Issues of higher priority to Congress and the administration include the federal budget, health care, education, energy, and approving a new Supreme Court nominee, Kies said.
Overshadowing all of these issues is the recession, panelists said.
Responses to the economy could include new moves to infuse capital into and increase regulation of financial services companies, the panelists said.
Meanwhile, they said, Congress and the administration have to balance the need to shore up the economy with the need to keep budget deficits from putting the nation’s fiscal health at risk.