April 28th, 2009
Congressional Democrats have finalized their non-binding budget agreement for fiscal year 2010 and beyond; the agreement includes freezing the estate tax at 2009 levels. Over the last eight weeks, AALU has conducted more then twenty lobbying visits with Senate Finance and House Ways and Means members, three pieces of estate tax legislation have been introduced that include reunification, and with our upcoming Capitol Hill Club day on May 5th, we have an excellent opportunity to further discuss the important social policy behind reunification.
AALU is encouraged that lawmakers are now focusing on the planning simplification features associated with reform, rather than just the rate and exemption levels. AALU has been the primary organization encouraging Congress to make a decision in favor of permanent and sustainable reform, and to ensure reunification is a part any proposal considered by Congress.
In brief, Senate Finance Chairman Max Baucus’s (D-MT) middle class tax cut bill (S.722) includes reunification, and House Ways and Means Member Jim McDermott’s (D-WA) estate tax bill (H.R. 2023) also includes reunification, which the Joint Committee on Taxation (JCT) scored at a cost of only $4 billion over ten years; roughly 1.5% of the overall cost of the Freeze 2009 plan ($3.5 million/ 45% rate) included in President Obama’s budget, which was scored by the CBO at $256 billion.
AALU understands the fiscal pressures associated with reform, but the low cost of reunification compared with the critical social policy of preventing the perverse incentive to hold assets until death rather than gifting those assets during life is an extremely beneficial policy for AALU members, their clients, and the general public.
We look forward to you joining us at the upcoming Annual Meeting in Washington, D.C.
Best Regards,
David J. Stertzer, FLMI
AALU CEO
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April 24th, 2009
Given everything we have at stake, our advocacy efforts have become more proactive and more successful – particularly our Legislative Circle Program (LCP). Our 2009 LCP Endorsed Candidates were selected based primarily on the degree of influence they have on core issues to AALU members – protecting the tax status of life insurance products; enacting legislation the enhances estate planning opportunities; protecting insurance-funded nonqualified deferred compensation; and impacting the nature of regulatory reform. Click here to view the 2009 LCP Brochure outlining this year’s Legislative Circle Program and qualification guidelines.
We are having tremendous success utilizing an AALU member to serve as a “campaign chair” for each Endorsed Candidate. This increases our effectiveness in three ways: (1) we provide more support for each Endorsed Candidate; (2) campaign chairs engage more AALU members; and (3) the campaign chair serves as a spokesperson on key issues and builds their relationship with the Endorsed Candidate for the benefit of all of us.
We are now assembling ‘campaign teams’ to assist the campaign chairs by increasing support for each Endorsed Candidate and by participating in a candidate event. Being a campaign team member is a tremendous opportunity to take action and become personally involved (while not being overly time consuming) in communicating the social and economic value that life insurance not only provides to your clients, but to our macro-economy. The bottom-line is that it is easy to grow frustrated after listening to Washington. It’s important to channel that frustration into action and this program makes it easy to do so. Join us!
I’ve often said that we need more members to be involved to be successful in Washington. Currently, about 24% of us participate in the LCP. I hope that this number will grow as you realize the program’s importance to you. I further hope that you’ll join a campaign team. To do so, simply e-mail Justin Brown of AALU at brown@aalu.org and tell him where you’d like to participate. You can also see him or other members of our Government Affairs team at the CHC/LCP desk outside of the General Session venue at the Annual Meeting or at the AALU Knowledge Center on the Exhibit Hall Floor.
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2009 AALU Endorsed Candidate Slate & Campaign Chair(s)
Endoresed Candidate Campaign Chair
Senator Harry Reid (D-NV) Michael Goldstein
Senator Mitch McConnell (R-KY David Byers
Representative Steny Hoyer (D-MD) David Stertzer
Representative John Boehner (R-OH) George Blaha & Terry Horan
Representative Eric Cantor (R-VA) Joe Pombriant & Marc Cadin
Senator Max Baucus (D-MT) Campbell Gerrish
Senator Chris Dodd (D-CT) Jerry Harnik
Senator Kent Conrad (D-ND) Tom Van Riesen
Representative Barney Frank (D-MA) Bob Karam
Representative Charile Rangel (D-NY) Nat Perlmutter
Senator John Cornyn (R-TX) Bob Carter
Representative Chris Van Hollen (D-MD) Stuart Youngentob
Senator Richard Burr (R-NC) Chris Foster
Senator Tom Carper (D-DE)
Senator Mike Crapo (R-ID) Eleanor Johnson
Senator Byron Dorgan (D-ND)
Senator John Ensign (R-NV) Mark Murphy
Senator Charles Grassley (R-IA) Rod Sager
Senator Orrin Hatch (R-UT) Fred McNair
Senator Patty Murray (D-WA) Rod Bench
Senator Bill Nelson (D-FL) Rick Thomas
Senator Chuck Schumer (D-NY) Forrest ‘Gib’ Surles
Senator Ron Wyden (D-OR) Fred Jonske
Representative Dave Camp (R-MI) Larry Raymond
Representative Ron Kind (D-WI) Nick Boylan
Representative John Larson (D-CT) Anthony Domino
Representative Sander Levin (D-MI) Larry Raymond
Representative Richard Neal (D-MA) Aviva & William Sapers
Representative Paul Ryan (D-WI) Mike Corry
Representative John Tanner (D-TN) Dave Culley
Representative Pat Tiberi (R-OH) Larry Boord
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April 7th, 2009
Last night, in a symbolic, non-binding gesture relating to the budget debate, the Senate voted 51-48 to approve an Amendment, proposed by Senator Jon Kyl (R-AZ) and Senator Blanche Lincoln (D-AR), that would provide room in the Senate Budget for a $5 million exemption and a top rate of 35%. The exemption would be indexed for inflation, would also reunify the lifetime credit for the estate and gift tax, and provide portability.
While the outcome of the vote was somewhat surprising, it was mitigated by the passage of an Amendment introduced by Senator Dick Durbin (D-IL), by a vote of 56-43, which creates a point of order that would disallow any additional estate tax relief – beyond that which was contained in the President’s Budget (Freeze 2009) – unless an equal monetary amount of tax relief was first provided to individuals earning less than $100,000.
Most of what can be learned from last night’s vote had been well known to AALU for awhile. There is an appetite in the Senate to go beyond Freeze 2009, but this will be mitigated by the majority in the House of Representatives who have shown a strong preference not to allocate additional revenues, particularly in this environment, on couples who have wealth starting in excess of $7 million. It’s important to note, yesterday’s votes are nonbinding and it is very possible, if not likely, that they will be stripped from the final budget resolution when it is voted on at the end of April.
It’s also notable that this vote, coupled with the proposal introduced by Chairman Baucus, reported on in our Bulletin 09-36, an overwhelming majority of the Senate Finance Committee has expressed support of reunifying the lifetime gift and estate tax exemptions. We continue to believe the Chairman Baucus’ proposal strikes the right balance and we will be aggressively supporting it in our lobbying visits during the Annual Meeting. I hope to see you there!
Best Regards,
David J. Stertzer, FLMI
AALU CEO
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April 2nd, 2009
The 111th Congress will reveal its first Optional Federal Charter proposal today, with the National Insurance Consumer Protection Act (NICPA), introduced by Congresswoman Mellissa Bean (D-IL) and Congressman Ed Royce (R-CA). In brief, the legislation would establish a national regulator which would be optional for insurers, insurance agencies, and insurance producers, while states would maintain the responsibility of regulating those that are state licensed. The national regulator would operate from the newly created Office of National Insurance (ONI), housed within the Treasury Department. We will have a Washington Report Bulletin out shortly detailing the legislation.
In broad strokes, the 122 page bill would establish guidelines for the supervision of nationally regulated producers, including granting several regulatory powers to the Presidentially-appointed Commissioner of the ONI. The bill would also establish national market conduct standards, implementing NAIC model laws, and would establish a Division of Consumer Affairs within the ONI as well as an office in each state. Furthermore, the bill would establish a national guaranty fund for national insurers and would be industry funded.
The bill would require the federal Commissioner and state insurance commissioners to provide information with a Systemic Risk Regulator, which would recommend corrective actions to these regulators to deal with any state or nationally regulated insurance company whose attempted actions would have an adverse affect on the overall financial stability of the marketplace. If insurance regulators do not act, the Systemic Risk Regulator may do so directly on an emergency basis upon approval from the Coordinating Council for Financial Regulators, which would be Chaired by the Secretary of the Treasury, and include the national Commissioner and the heads the Federal Reserve, SEC, CFTC, OTC, FDIC, OCC, and three state regulators appointed by the President.
The bill’s sponsors have clearly acknowledged that this bill is a work in progress and want to continue to seek the support of the industry as it is refined. AALU is working closely with ACLI and NAIFA to gauge the effect of the legislation on the marketplace and will work with the sponsors to ensure meaningful input is provided on your behalf.
Best Regards,
David J. Stertzer, FLMI
AALU CEO
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April 1st, 2009
Senator Blanche Lincoln (D-AR) and Senator Jon Kyl (R-AZ) plan to introduce an Estate tax amendment on the Senate’s budget. In short, the amendment would permanently increase the exemption level to $5 million, lower the top rate to 35%, reunify the lifetime credits for estate and gift taxes, and provide portability of exemption between spouses.
Every year in recent memory, when dealing with the Budget process, amendments on the estate tax are offered and this year is no different. It’s important to note the budget resolution does not carry with it the force of law, rather, it is a guideline that provides parameters on spending and tax issues that will be considered later in the year. We continue to expect estate tax legislation to be considered this year and are supporting Finance Committee Chairman Baucus’s estate tax proposal, reported on in Washington Report Bulletin 09-36. In our view, Chairman Baucus’ proposal strikes the right balance on estate tax legislation that should be made permanent.
Amendments to the Senate Budget Resolution are currently being voted on in the Senate and the Lincoln/Kyl amendment is slated to be voted on tomorrow. We will report back to you on any developments that occur with regard to this amendment.
Best regards,
David J. Stertzer, FLMI
AALU CEO
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February 17th, 2009
The nation’s budget policies are unsustainable as evidenced by a number of reports (see the CBO report, GAO report, OMB Director Peter Orszag report, and CBPP report).
The Center on Budget and Policy Priorities (CBPP), a reputable Washington, D.C. think tank, recently reported to the AALU Board of Directors on the long term imbalances brought on by our entitlement programs, namely Medicare, Medicaid, and Social Security.
It is alarming that by 2031, assuming tax cuts are extended without offsets and spending is sustained at current levels, government would run out of revenue; this does not include paying the interest on our debt (click here to see the graph). Additionally, by 2050, the federal debt would skyrocket to nearly 300% of GDP. To provide context, our current debt, without the economic stimulus, is 46% of GDP and there was 110% debt to GDP during World War II.
AALU members would be directly impacted by these budget shortfalls in so far as the government must find both new sources of revenue and decrease spending. President Obama has pledged to close the chronic gap between the government’s income and its spending, starting with a summit on fiscal responsibility planned for Feb. 23, the day before he addresses a joint session of Congress.
To comment on this report, click “comment” below.
Best Regards,
Michael P. Corry, CLU
AALU President
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February 12th, 2009
Dear AALU Member,
As all eyes focus on the stimulus, we are keeping a close watch on provisions which may affect your business.
We have reviewed the most recent draft (click here for the draft as of last night). It does not appear the tax provisions would directly affect the advanced markets.
In our Washington Report Bulletin (click here), we reported on a number of executive compensation developments; as of right now, it does not appear that any provisions related to executive compensation were included in the final compromise, specifically Senator McCaskill’s (D-MO) amendment that no executive could be paid more than the President ($400,000).
We take this issue seriously, not only because of its impact on producers, but its broader impact on clients, businesses, employees, and the public generally. We are taking efforts to refine our message in light of current developments and will remain vigilant because the controversies surrounding the federal government’s bailout of financial institutions could spur similar compensation limits for non-TARP companies.
Leave your comments on executive compensation below.
Kind Regards,
David J. Stertzer, FLMI
AALU CEO
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February 6th, 2009
New executive compensation limits for TARP recipients enacted by Treasury and the Obama Administration, coupled with Senator Chris Dodd’s (D-CT) amendment in the economic stimulus package, indicate lawmakers’ willingness to provide a quick response to mounting consumer backlash (click here for the Treasury Press Release). Reforming regulation of the financial services industry, which would include insurance companies, agents, and producers, is heating up and AALU is monitoring the situation closely – working with industry partners to coordinate responses and advocate for regulation that would be most beneficial to you and your clients.
Certainly, the Optional Federal Charter (OFC) is a viable opportunity (see our Bulletin 08-32) and both Chairman Barney Frank (D-MA) and Representative Paul Kanjorski (D-PA) are very much on board with re-introducing the bill (click here for a transcript of Frank’s statements). Additionally, there is a coalition building in the House of Representatives, evidenced by a letter sent to the Treasury, urging the Office of Insurance Information (OII) (see our Bulletin 08-64), which is often regarded as an interim step to OFC. AALU understands that Congress has not yet heard back from Treasury, but the response will be critical in determining what ends up on the House floor.
Systemic risk regulation is the end game, and how the insurance industry fits into the new regulatory scheme is of paramount concern to AALU. Former Secretary Paulson’s Treasury Blueprint included an Optional Federal Charter, and it seems that everyone is waiting for Secretary Geithner’s Blueprint (set to be released in early April) – when it is released, we could see some quick moves by the House to introduce legislation.
It is important we stay engaged in this debate. Please leave comments below.
Sincerely,
David J. Stertzer, FLMI
AALU CEO
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January 29th, 2009
With investment portfolios in shambles, advanced producers have a unique opportunity to take clients by the hand and lead them through the financial crisis with risk averse investments and life products that are designed to help during times of economic stress.
I just returned from the annual meeting for the International Forum where advanced producers repeatedly reiterated that the trend of the industry was a return to the basics. Companies are redesigning products to enhance the best features of life products, such as cash value and fixed guarantees that can be borrowed upon in order to send children to college, fund buy-sell arrangements, and pay for unanticipated medical expenses.
The high volumes of premium financing and equity indexed annuities are slowing and advanced producers are gearing up for a resurgence of permanent life products as their clients retreat from the volatility of the equity markets toward safe investments. The breakout sessions at AALU’s annual meeting will explore these trends, giving producers the requisite technical knowledge to incorporate advanced techniques immediately. You can register for the annual meeting by clicking here.
I am energized to know that our valuable products provide solace to concerned clients. Financial advisors are often the first line of defense for clients who are looking for answers in the uncertain markets. The industry is strong and you can ensure your clients that guaranteed products will pay out at precisely the time they are needed.
You have a wonderful story to share and I encourage you to do so.
Please post your comments on trends in the advanced markets below.
Best Regards,
Michael P. Corry, CLU
AALU President
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January 26th, 2009
The current financial meltdown has led to reinvigoration of the debate over a federal insurance presence. In 2009, Congress will consider financial services regulatory reform that could include life insurance and AALU will be prepared and engaged in the debate.
To date, Former Secretary Paulson’s Treasury Blueprint has been the only large-scale reform proposal. To read our Bulletin on the Treasury Blueprint, please click here. Additionally, two weeks ago, the Government Accountability Office (GAO) issued a Framework Report highlighting five key changes in financial markets that have lead to an ineffective regulatory framework, and offered its own proposed framework. We also anticipate that Secretary Geithner will propose a framework on behalf of the Obama Administration in the coming months.
The flurry of proposals indicates that AALU must remain vigilant in monitoring all legislative and regulatory proposals. Congressional leadership, like Congressman Barney Frank and Senator Chris Dodd, continue to advocate for systemic oversight, which may include broad powers being housed in the Federal Reserve. This may require compliance with both federal and state regulators. Furthermore, new regulators, like Mary Shapiro of the SEC (previously head of FINRA) has made remarks in the last couple of years on the need for strong consumer protection–whether the product is insurance, securities, banking or investment advice–with standards for suitability, disclosure, advertising and qualifications and training of salespeople. As you know, the SEC has categorized indexed annuities as securities and raised a number of concerns about annuity sales to seniors. These dynamics seem ripe for potential broader future securities regulation of life insurance products.
The debates will play out over the coming months. In the meantime, there may be interim steps; last week House Representatives sent a letter urging an office of insurance information. AALU wants to make you aware of these developments and our preparedness to date: (1) the regulatory reform committee will monitor and develop policy on regulatory issues affecting the advanced markets, (2) staff and counsel will work with our industry allies to coordinate a response, and (3) the securities regulation committee will monitor all developments in the SEC and work to foster better understanding of life insurance products by securities regulators.
Please post your comments on Regulatory Reform below.
Sincerely,
Michael P. Corry, CLU
AALU President
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