NAIFA Blog

INNMCover_0313 InsuranceNewsNet's March cover story provides a call to action for insurance advisors to use their grassroots influence with Congress to preserve the tax status of life insurance and annuity products.

The article provides a rundown of NAIFA’s historical involvement in the protection of life insurance, beginning in 1913 with passage of the federal income tax code. It then explains the present threat as Congress considers tax-reform proposals in 2013.

The article raises the point that advisors have heard about warnings about efforts to tax their products several times through the decades.

Diane Boyle, NAIFA vice president of federal government relations, explains that the industry’s success at protecting life insurance in the past doesn’t mean the threat this time is not real.

“Frankly, our products are on the line every year and we’re successful at having them taken off the table,” she told INN. “So it’s not so much crying wolf as it is being prepared and making sure that folks on the Hill understand.”

From the article:

“Members of Congress are having to deal with so many issues that they rely on their constituents who have an understanding in a given area to explain what the realities are with some of the decisions that they’re having to make. And that’s what our agents do. And that’s the value of bringing them in and having them share the story.”
-NAIFA Vice President Diane Boyle

“What I find useful is sharing situations of how our products have helped people here within the community – people within [the member of Congress's] own district.”
-NAIFA Member Hyatt Erstad

“I talk to [members of Congress] about the savings rate in America today, and how poor it is, and then point out that over 20 percent of the savings in America today is represented by our products. To do anything to discourage people from taking responsibility and using our products, all that’s going to do is further deteriorate the savings rate of Americans today.”
-NAIFA Member Bob Roach

The INN article reports that life insurance organizations, including NAIFA, formed SecureFamily.org to educate Congress and the public on the issue.

It also reports on NAIFA's Congressional Congress April 8-9, a grassroots event in which 1,000 advisors will visit congressional offices to discuss life insurance, annuities and tax issues.

Read the full article on the INN web site.

There won't be many celebrations marking today as the 100th anniversary of the passage of the 16^th Amendment to the U.S. Constitution, giving Congress the authority to enact an income tax. No parades. No fireworks. Not many speeches by public officials.

It didn't even make History.com's "This Day in History" list (where it doesn't rate up there with such momentous events as Cassius Clay's knockout of Sonny Liston in 1964, the opening of the first drive-in movie theater in Miami in 1938, and the British surrender of Fort Sackville during the American Revolution in 1779).

Yet, the ratification of the Amendment and Congress's subsequent passage of the income tax code, called the Revenue Act of 1913, later that year are very important in the history of life insurance.

The 1913 Revenue Act was considered a major reform that was championed by Southern and less populated states and opposed by Northeastern states. (How’s that for a reversal of red versus blue?) For life insurance practitioners of all political stripes, the practical reality was that the Revenue Act’s income exclusion for life insurance encouraged people to purchase needed life insurance coverage. That need always existed, of course, and skilled life insurance professionals of the day were quite capable of selling the need. But the fact that the income tax code highlighted life insurance with a special provision helped spread the word about life insurance to people in all economic strata.

The tax treatment of life insurance and annuities has been around so long that it is easy to forget why it was created in the first place. This may be true for some current members of Congress and their staff. That’s understandable since none were around in 1913, and Congress has a lot on its current plate.

This lack of institutional memory will be one of the challenges facing the NAIFA members who will be attending the NAIFA-sponsored Congressional Conference April 8-9. The NAIFA members will have to bring the members of Congress to the sales table, so to speak, to help them understand how life insurance and annuities uniquely meet the needs that most people have for personal, family and business financial security.

Real life stories of how life insurance and annuities saved families, businesses and individuals from living too long or dying too soon or provided for cash-flow needs in between are very moving. Each Congressional Conference participant will have such stories. Tell them.