Pension Bill Passes Senate With COLI “Best Practices”
AALU, ACLI, NAIFA Praise Action, Urge Enactment of COLI Reform
Contact
ACLI : Whit Cornman
(202) 624-2442
AALU: Tom Korb
(703) 641-8120
NAIFA: Lee Allen
(703) 770-8112
August 4 , 2006 – With Senate action last night, the U.S. Senate and House of Representatives have both passed comprehensive pension legislation, which includes a provision that would codify into federal law current “best practices” on corporate-owned life insurance, commonly referred to as COLI.
Strongly supported by the life insurance industry’s leading trade associations – the American Council of Life Insurers (ACLI), the Association for Advanced Life Underwriting (AALU), and the National Association of Insurance and Financial Advisors (NAIFA) – the COLI provision would effectively limit COLI to coverage of highly compensated employees and require the consent of insured individuals.
COLI is an insurance product used by employers both to protect against the financial cost of losing a “key” employee as well as providing coverage on a wider range of employees to help provide funds for the payment of employee and retiree benefits.
Among other features, the legislation would effectively:
- Limit coverage to directors and “highly-compensated employees” -- those in the top 35 percent by compensation.
- Require employers to obtain the informed consent of any employee before enrolling him or her in a COLI plan.
- Require employers to report information about their COLI plans to the Internal Revenue Service.
“COLI ‘best practices’ provision had the support of a broad, bi-partisan majority of both Senate and House tax-writing committees,” said ACLI President & CEO Frank Keating.
“We appreciate the actions of the House and Senate in codifying COLI best practices. This brings certainty that employers, employees and their families benefit from business and job protection and employee benefits from responsible use of corporate owned life insurance,” said AALU CEO David Stertzer.
"An employer that can rely on a steady stream of future income, which COLI provides, can plan for the future. It enables the employer to recruit and retain a highly qualified workforce and meet tomorrow's benefit costs. The legislation provides the confidence businesses need today to offer benefits for tomorrow. We’re looking forward to its enactment," said NAIFA CEO David F. Woods, CLU, ChFC, LUTCF.
The three life insurance industry trade groups directed particular praise to Sen. Kent Conrad (D-ND), Senate Finance Committee Chairman Sen. Charles Grassley, (R-IA), and Sen. Gordon Smith (R-OR), who played key roles in drafting the provision which was approved last November by the Senate. The groups also offer particular praise to Reps. Tom Reynolds (R-NY) and Earl Pomeroy (D-ND), who introduced the stand-alone legislation identical to the Senate provision in the House.
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About ACLI: The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association whose 377 member companies account for 91 percent of the life insurance industry’s total assets in the United States, 90 percent of life insurance premiums and 95 percent of annuity considerations. In addition to life insurance and annuities, ACLI member companies offer pensions, including 401(k)s, long-term care insurance, disability income insurance and other retirement and financial protection products, as well as reinsurance. ACLI's public Web site can be accessed at www.acli.com.
About AALU: AALU is a nationwide organization of life insurance agents, many of whom are engaged in complex areas of life insurance such as business continuation planning, estate planning, retirement planning, deferred compensation and employee benefit planning. AALU represents approximately 2,000 life and health insurance agents and financial advisors nationwide. The mission of AALU is to promote, preserve and protect advanced life insurance planning for the benefit of its members, their clients, the industry and the general public. AALU's website can be accessed at www.aalu.org
About NAIFA: Founded in 1890 as the National Association of Life Underwriters, the National Association of Insurance and Financial Advisors comprises 800 state and local associations representing the business interests of 225,000 members and their employees nationwide. Members focus their practices on one or more of the following: life insurance and annuities, health insurance and employee benefits, multiline, and financial advising and investments. NAIFA's mission is to advocate for a positive legislative and regulatory environment, enhance business and professional skills, and promote the ethical conduct of its members. NAIFA's website can be accessed at www.naifa.org.