Legislationrounduppostal

No such legislation has yet been introduced, but, prompted Rep. Thomas, other lawmakers and the industry have been looking at ways to amend the tax code so that this new type of product could enter the market.

It is unclear whether the industry would seek to add other favorites to the defined pension benefit reform legislation, if Congress decides, after all, to deal with it this year.

"The pension package moving through two Senate committees right now focus on defined benefit plans," said Jack Dolan, a staff official of the American Council of Life Insurers. "We're hoping that the bill will be expanded to include defined contribution issues, as well as incentives for lifetime income from both non-qualified annuities and tax-qualified retirement plans."

But other candidates would include automatic signup for 401 (k)s when a person joined a company which offered such programs as well as a savers' credit.

The defined benefit bill reported out by the Senate Finance Committee also contains provisions on Corporate-Owned-Life-Insurance which would have the effect of establishing uniform sales practices for this product.

Fundamental tax reform, which would replace existing systems with a sales, flat, value-added or other consumption-based scheme and was an administration priority, is also a victim of Hurricane Katrina.

Another key bill is the budget reconciliation document, which contains language temporarily extending expiring tax provisions. These include the 15 percent rate on capital gains and dividends. The provisions expire in 2008 and the administration wants them.

Passage is now problematical, especially in the Senate, because of opposition to extension of the tax provisions. One of the provisions of interest to the industry is the so-called long-term-care partnerships, which allow people to purchase LTC policies before qualifying for Medicaid coverage of nursing home services.

Regarding the estate tax issue, David Stertzer, executive vice president of the Association for Advanced Life Underwriting, said that when Congress resumes active consideration of it, a key AALU focus will be on the importance of sustainable estate tax policy.

"AALU members are actively engaged in helping clients with highly complex, multi-decade plans that provide for families, assure preservation of assets and continuation of businesses and other enterprises," Mr. Stertzer said. "It is essential that estate tax reform be sustainable over a long period of time, so that clients can plan with certainty and be confident their crucial financial objectives will be achieved."

That's because, Mr. Stertzer said, "that estate tax repeal or reform with a high exemption level and low tax rate could be unsustainable for the long-term–particularly in light of other pressing national needs like Social Security reform, national defense and homeland security, and broad-based tax relief such as addressing the alternative minimum tax (AMT)."

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