A cadre of Senators, backed by life insurance and retirement product associations and interest groups, have introduced a resolution that calls for maintaining the tax incentives in place now that spur retirement savings.
The resolution comes at a time when the fiscal cliff negotiations to reduce the deficit could strike at the heart of various tax treatments of savings products underwritten by life insurers and sold by producers nationwide to individuals as well as in retirement plans.
Sens. Richard Blumenthal (D-Conn.) and Johnny Isakson (R-Ga.), introduced the resolution, stating that tax incentives for retirement savings play an important role in encouraging employers to sponsor and maintain retirement plans and encouraging employees to contribute to their plans, as others in Congress have done before them.
“A reformed and simplified tax code should include properly structured tax incentives to maintain and contribute to such plans and strengthen retirement security for all Americans,” Sens. Blumenthal and Isakson said in the resolution.
“In 2009, 79 percent of federal tax incentives for defined contribution plans were attributable to taxpayers with less than $150,000 of adjusted gross income, and 65 percent were attributable to taxpayers with less than $100,000 of adjusted gross income,” the resolution states.
The potential elimination of many life insurance-friendly tax preferences is one facet of today’s fiscal cliff discussions that is often overlooked. Current proposals include provisions that could result in the imposition of taxes and the elimination of deductions for both individual and corporate-owned life insurance policies, the proceeds of which are received tax-free under existing law, noted authors Robert Bloink and William H. Byrnes for National Underwriter Advanced Markets, a LifeHealthPro partner.
Members of the Senate joining Sens. Blumenthal and Isakson as co-sponsors include Sens. Chuck Grassley (R-Iowa), Rob Portman (R-Ohio), Jon Tester (D-Mont.), Daniel Akaka (D-Haw.), Sherrod Brown (D-Ohio), Benjamin Cardin (D-Md.), Jeff Bingaman (D-N.M.), Kay Hagan (D-N.C.) and John Boozman (R-Ark.)
Sens. Blumenthal, Isakson, Brown, Tester, Grassley, and others have been very supportive of life insurance industry interests recently, signing a letter to top federal banking regulators, including Ben Bernanke, chairman, Board of Governors of the Federal Reserve System, warning them that the application of a bank-centric capital regime to the insurance industry would fundamentally alter the nature of the business, undermine prudential supervision and unintentionally harm insurance policyholders, savers and retirees.
That issue involves looming capital standards directed at insurers as well as banks from a regulatory smorgasbord of new rules that grew out of the 2010 Dodd-Frank Act (Dodd-Frank).