Revised legislation designed to revive expired tax cuts includes a provision, long sought by the life insurance industry, that would simplify the rules dealing with partial withdrawal of funds contained in an annuity contract.

The legislation would benefit both annuity owners and the IRS, said Thomas Currey, president of the National Association of Insurance and Financial Advisers.

A spokesman for the American Council of Life Insurers (ACLI) agreed.

“ACLI supports partial annuitization of nonqualified annuity contracts,” said Whit Cornman, the spokesman. “We appreciate the work of Senate Finance Committee Chairman Max Baucus, D-Mont., and Sen. Kerry, D-Mass., for their work on this provision.”

The bill is H.R. 5297, the Small Business Jobs Act.

According to Currey, this is not the same proposal as the so called “paycheck for life” proposals for which the industry has also sought support over the last several years. NAIFA supports that, too, Currey said.

The changes were made to win Republican support for the legislation, which has been bogged down as Republicans remain united in opposition to any legislation that would add to the budget deficit.

Sen. Mitch McConnell, R-Ken., the Senate minority leader, has indicated that Republicans will seek to block the bill, according to congressional staffers.

The revised bill also includes two other provisions helpful to the industry. One would allow self-employed people to deduct their health insurance premiums. But NAIFA officials voiced concern that this would be only a one-year change and would not be made permanent under the provision.

Another would allow individuals with traditional 401(k), 403(b) and 457 retirement plans to roll over their accounts to Roth versions of the same programs.

“Currently, beneficiaries can only roll the proceeds over to Roth IRAs,” Currey said. “This expands the universe.”

Currently, owners of non-qualified deferred annuities have to exchange their contract for two contracts and then annuitize either of those contracts to receive annuity payments from a portion of their contract.

Industry officials say this process is cumbersome and discourages people from doing this.

The proposed provision would allow the individual receive annuity payments from a portion of their contract in a single step.

“This works out better for the taxpayer,” according to Currey, who notes the provision would encourage taxpayers to take partial withdrawals.

“This results in some tax being paid, thus the provision is scored as a revenue gain.”

The healthcare provision would allow self-employed individuals to reduce their Self Employed Contribution Act (SECA) contributions by deducting the cost of health insurance from their SECA taxable income.

“This will encourage self-employed people to buy health insurance by freeing up income to make the purchase,” Currey said.

Self-employed individuals have been permitted to deduct 100% of the cost of health insurance from federal income taxes for a number of years, he noted.

“NAIFA views the SECA proposal as a logical next step,” Currey said.