Senate Bill Passes With Provision Streamlining Annuity Process
September 20, 2010 by Jesse A. Hamilton
September 17, 2010 | BestWire Services
In the small-business lending bill that has now passed the U.S. Senate was a provision that eases an individual’s ability to receive annuity payments from a portion of his or her non-qualified annuity contract. It streamlines the process that insurers saw as difficult, making it an easier single step.
The provision would allow owners of these annuities, which are outside retirement plans, “to annuitize a portion of their annuity contract while allowing the remaining amount to grow tax-deferred,” said Frank Keating, president and chief executive officer of the American Council of Life Insurers, in a statement thanking the Senate. “Currently, annuity owners can partially annuitize their contracts but have to go through a cumbersome process to do it.”
The bill, HR 5297, which passed 61-38, is similar to an earlier version passed by the House of Representatives, and reflects an idea that has been around since first proposed by Rep. Earl Pomeroy, D-N.D. “This is something that has been proposed before,” said Whit Cornman, an ACLI spokesman, who said that Sens. John Kerry, D-Mass., and Max Baucus, D-Mont., took it up on the Senate side. But it’s unclear how quickly differences between these two latest versions could be resolved between the two chambers as lawmakers head toward the November elections.
The current system is “cumbersome,” Cornman said. “This provision sort of simplifies that process,” he said, providing “important flexibility for people to meet their retirement income goals.”
According to Congress’ Joint Committee on Taxation, the annuities provision would generate revenue of $956 million over ten years, from 2011 to 2020.
In the same week, annuities had also received attention from federal agencies. Insurers at a hearing held by the U.S. Department of Labor argued the positives of wider annuity use in Americans’ retirement accounts. The Labor Department, in conjunction with the Department of the Treasury, has been examining the potential benefits of greater annuity use, and though the agencies had already received written comments from the industry, the hearing was a chance to deliver direct testimony (BestWire, Sept. 15, 2010).
(Jesse A. Hamilton, Washington bureau manager: Jesse.Hamilton@ambest.com)
