Federal Roundup: House and Senate Move Tax Reform Legislation
After years of table setting and releasing various blue prints and frameworks, House and Senate leaders along with the Administration moved comprehensive tax reform bills prior to the Thanksgiving recess. For the last several months, Republicans promised swift action in November, and they delivered with a bill passing the full House several weeks ago and the Senate poised to pass legislation after Thanksgiving. Once the Senate acts, there will likely be a conference committee in December to resolve differences in the bills in an effort to send a final bill to the President by the end of the year.
The process has been partisan, fluid and unexpectedly challenging for the life insurance industry. NAFA and many stakeholders in the retirement space have been focused on preserving inside build up and current retirement savings tax policy. For months, sources revealed that House and Senate leaders were seriously considering a move to so called “Rothification,” but ultimately the House bill had no such language, and language in the Senate bill was removed. However, surprisingly life insurance carriers and nonqualified deferred compensation (NQDC) policy were adversely impacted in what appeared to be unintended consequences presented by language in initial versions of the House and Senate tax bills. In particular, language was included for life insurance carriers to add new taxes on deferred acquisition costs (DAC), dividends received deduction (DRD) and reserving. The intended pay-for scoring for this language was roughly $23 billion, however as introduced the impact would have been significantly more.
Accordingly, agreement has been reached in the House and Senate to make modifications although the details are still be crafted. The NQDC provisions were removed from both bills.
Switching gears from tax reform, NAFA was pleased to see that the DOL sent its rule to delay the Fiduciary Rule to the Office of Management and Budget on November 1st. This reviewing process should conclude any day now which will pave the way for final publication of the delay rule, which has stakeholders on edge as January 1, 2018 is approaching fast. We anticipate a delay of 18 months. During this 18 month period, the DOL will seek further input and will likely propose modifications to the Fiduciary Rule. For NAFA, our main focus will be ensuring FIA’s and FA’s are treated the same via PTE 84-24. On a related note, the DOL will hopefully have a new head to oversee these revisions. Specifically, Preston Rutledge is up for nomination to be the new head of the EBSA. The Senate Health, Education, Labor and Pensions Committee held a nomination hearing and is expected to confirm him in December.