LIFE INSURERS GAIN REPRIEVE ON COLI TAX FROM SENATE FINANCE.
The decision was a victory for the American Council of Life Insurers.
"When the committee acted two weeks ago to restrict the use of this widely used means of funding employee benefits, it did so without a full review of the impact its actions would have," said Frank Keating, ACLI's president and chief executive
The provision, added as an amendment on a voice vote during the Sept. 17 markup of pension reform legislation, would require corporations to pay tax on COLI benefits if the insured had not been employed by the corporation in the year preceding his or her death.
The tax would not apply if the benefits go to the employee's family, if they are used to buy back the employee's ownership in the company or if the employee could be considered a "key" individual of the company and the company has 20 or less employees.
During the markup, the committee had voted to make the new COL tax effective Sept. 17, but it agreed Oct. 1 to delay that date to when the pension legislation is enacted which appears unlikely to happen before the end of this year.
Senate Health, Education, Labor and Pensions Committee Chairman Judd Gregg (R-NH) told the National Association of Manufacturers Oct. 1 the Senate Finance Committee's bill "was too expansive and raises too many issues" to make it through Congress this year.
The Senate Finance Committee, however, scheduled its hearing on the COLI tax for the week of Oct. 13 so there still would be a possibility it could pass this year if agreement could be quickly reached about how to modify the already-approved provision.
Sen. Jeff Bingaman (D-NM), who sponsored the amendment, said he was "disappointed that the deal we brokered just two weeks ago is not being honored. I continue to believe that closing this tax loophole is the right public policy and I will not give up my effort."
But the vote on Oct. 1 showed there was bipartisan support for finding another alternative.
Sen. Kent Conrad (D-ND) said the committee had to reconsider its action because the amendment "has virtually shut down the COLI market."
He is proposing a ban on the purchase of COLI for employees earning less than $90,000 a year.
He said the challenge before the committee was "to address legitimate concerns" and to achieve "some balanced result."
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|Publication:||Liability & Insurance Week|
|Date:||Oct 6, 2003|
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