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5 Facts About Big New Spending Package for Annuity Sellers

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Congress has sent President Donald Trump a 5,593 coronavirus relief and federal spending package.

The president must sign the bill containing the package, an alternative version, or a temporary government funding bill by Dec. 28, or much of the federal government will suspend operations.


  • A collection of documents related to the House vote on version of the Consolidated Appropriations Act, 2021, package that the House Rules Committee took up is available here.
  • The 5,593-page PDF file that contains the health agent and broker compensation disclosure provision, on page 4,475, is available here.
  • A general article about the spending package is available here.

Lawmakers have used the text of the Consolidated Appropriations Act, 2021 (CAA 2021) package  as a vehicle for ferrying many pieces of legislation not directly related to the COVID-19 pandemic or the federal budget through Congress.

Congress has approved the package and sent it to President Donald Trump. The president can choose whether to sign the bill containing the package or veto it. If the president decides to veto the bill, Congress could overturn the veto, send the president a revised bill, or face the prospects that parts of the government could suspend operations after Dec. 28.

The package contains large sections relating to unemployment insurance, health insurance and even horse racing. You may wonder: Is there something in there for financial professionals who help clients with retirement income planning?

Here are five things for annuity sellers to know about the CAA 2021 package.

1. The package does not appear to include the text of the “Securing a Strong Retirement Act of 2020″ bill.

House Ways and Means Committee Chairman Richard Neal, D-Mass., and Rep. Kevin Brady, R-Texas, the highest ranking Republican on the committee, introduced the “Securing a Strong Retirement Act of 2020″ bill, which is sometimes called the “Secure Act 2.0″ bill, in October.

The bill could do things like increase the required minimum distribution (RMD) age to 75, from 72 for employer-sponsored retirement plan account assets and traditional individual retirement account assets.

The version of the CCA 2021 package on the House website was clearly put together quickly and it’s possible that the official text will be different from what’s currently there. But what’s on the House website now does not include the Secure Act 2.0 text.

2. A FAFSA Simplification section mentions annuities.

The FAFSA Simplification — Division EE, Title VII — would change the rules for college students who are filling out the Free Application for Federal Student Aid (FAFSA) form. This form determines how much money a family has available to pay for college, and how much aid a student will get.

Section 478(d), which relates to the amount of retirement assets a family can exclude from aid calculations, talks about a method for calculating the value of the family’s assets. This is done by determining the present value cost of an annuity that would provide a supplemental income, at age 65, “equal to the difference between the moderate family income (as most recently determined by the Bureau of Labor Statistics), and the current average Social Security retirement benefits,” according to the text.

The rate of return of the annuity in the calculations is presumed to be 6%, and the sales commission on an annuity is presumed to be 6%.

3. A section on disaster-related use of retirement funds mentions annuities.

Division EE Title II, Section 302, set rules for disaster-related use of retirement funds.

The provision helps people take assets from retirement plans without paying penalties.

Section 302(d) makes it clear that a client can withdraw cash from an annuity, as well as from a 401(k) plan, in connection with a disaster. The provision states that “if this subsection applies to any amendment to any plan or annuity contract, such plan or contract shall be treated as being operated in accordance with the terms of the plan” during the disaster period.

4. A “minimum age” section mentions phased retirement pension plan distributions.

For income planners, one issue has been clients with good jobs, who still have defined benefit pension plans, and who want to start shifting toward working part-time after age 59.5 years.

One question for those clients has been how those clients can tap the cash in employer-sponsored retirement accounts. In some cases, employees have changed jobs or retired simply to get access to retirement plan assets.

Division EE Title II, Section 208, sets rules for the “minimum age for distributions during working retirement.”

The provision states that a pension plan trust can make distributions to an employee who has attained age 59.5 and who is still working for the employer without violating the rules that govern pension plan trusts.

5. A “Medicare extenders” section keeps anti-spousal impoverishment provisions in place.

One important retirement income planning concern that does not directly relate to annuities is what happens to the spouse still living at home if the other spouse ends up using Medicaid nursing home benefits.

The government has always let the spouse in the community keep substantial assets, but approval for that provision is temporary.

Division CC, Title II, Section 205, of CCA 2021 keeps the current spousal anti-impoverishment rules.

— Read Are Some COVID-19 Test Providers Price Gouging?on ThinkAdvisor.

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© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.