A provision in federal legislation that allows insurance companies and their agents to provide investment advice to beneficiaries of 401(k) programs they administer is proving a tough sell, especially to key members of the Senate Finance Committee.
The provision is one of four keenly sought by the life insurance industry. All four are contained in either the Senate or House versions of pension reform legislation a conference committee now is debating.
Before last week, it had been expected that work on the bill would be completed by April 7 at the earliest or April 17 at the latest. The latter is the date when public companies have to calculate their liabilities for the Pension Benefit Guaranty Corp. But that date is falling by the wayside, and industry officials and congressional staffers now are predicting passage of the bill may be delayed until Memorial Day.
The conference committee staff now is saying there is "no way the panel can complete its work by April 7," said Michael Kerley, senior vice president, federal government relations for the National Association of Insurance and Financial Advisors.
That is especially so since Congress has spring recess planned and will not return to Washington until April 24.
"The committee is having a really hard time reaching consensus on the basic pension issues contained in the two bills," Kerley said. "They are worlds apart. If they can't come to agreement on those, it is clear that agreement on our issues will have to wait."
The life industry provisions in the bill are so important to NAIFA that it will have key members of the group in town on April 4 for the specific purpose of lobbying its issues, Kerley said.
While the investment advice provision is meeting skepticism because of potential conflicts of interest it might create, two other provisions are being greeted with skepticism by conference committee members for a more mundane reason–they have been scored by the Congressional Budget Office as costing the government a great deal of future revenues, according to industry officials.
These are provisions allowing for a long term care rider to annuities and allowing workers to roll over up to $500 in their Flexible Spending Accounts.
A fourth provision of the legislation on the industry's priority list is inclusion of language codifying the tax treatment as well as best sales practices for corporate-owned life insurance. That provision is regarded as less controversial. It is contained in the Senate version of the bill, while similar legislation in the House has broad and bipartisan support.
But the investment advice language is seen as the toughest sell. It is described by one industry lobbyist as being viewed by key conference committee members as "not ready for prime time."
Such key conference committee members as Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, and Jeff Bingaman, D-N.M., a ranking member of the panel, are concerned that removing current barriers regarding who can provide investment advice to plan members will prove too tempting, according to NAIFA officials.
Current laws bar any employee of a company administering a 401(k) program from providing investment advice to plan participants. A provision lowering the bar for plan providers to give such advice either directly or through their agents is contained in the House version of the bill. It is strongly supported by Rep. John Boehner, R-Ohio, former chairman of the House Education and the Workforce Committee and now Majority Leader. He pushed it through his committee when he headed it last year.
