NAIFA GovWatch

Obama Administration Submits FY 2011 Federal Budget Proposal to Congress

Provisions hit life insurance and annuity products, life insurance companies, NAIFA members as business people, and clients

Issue: Budget/Tax Proposals

Date: February 2, 2010

Action Taken: The Obama Administration yesterday sent Congress its proposed budget to fund the federal government for the FY 2011, which begins October 1, 2010. While the budget technically applies to the budget year 2011, many of the spending and tax revenue proposals project spending and tax programs running from 2011 through 2020. Thus, the budget provides insight into tax and spending priorities of this Administration into the future.

NAIFA focuses on the tax revenue side of the budget since it is the tax treatment of life and health insurance, annuities and retirement plans that impact the ability of NAIFA members to help their clients achieve financial security. And general tax policies impacting individuals and businesses also influence the ability of clients to identify the funds necessary to acquire the products and services that promote financial independence. There are a number of proposals that impact all these segments in the revenue proposals. Of particular concern to NAIFA are proposals that negatively impact the use of life insurance by businesses and a very technical provision called the Dividends Received Deduction (DRD) that siphons value from variable life insurance and annuity contracts.

Background: For a NAIFA-drafted outline of the tax revenue aspects of President Obama’s budget proposal, click here. The memo is a brief description of proposals that could impact life, health, annuity products and retirement plans, life insurance companies, NAIFA members as business people and their clients. For the complete list of tax revenue proposals set forth by the Administration and a technical explanation of each, click here for a copy of The Green Book prepared by the Congressional Joint Tax Committee. This is the “bible” that will guide the way through the tax budget battles ahead.

Next Steps: The submission of the Administration’s budget proposal is the official start to the budget process that frequently takes the rest of the year to complete, and sometimes is not completed at all. As it has for many years, NAIFA will vigorously defend the preferential tax treatment that taxpayers receive for owning life, health, disability income and LTC insurance, annuities and retirement products that are crucial to the financial security of 75 million American families. NAIFA will continue to keep you informed of key tax issues as the budget and tax process unfolds in the coming months.

NAIFA Staff Contact: Michael L. Kerley, Senior Vice President – Federal Government Relations; or Dani Kehoe, NAIFA Outside Counsel.

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