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Federal Government Affairs Update October 2013

DC Gridlock

On October 1, the federal government shutdown for the first time in 17 years after the House and Senate were unable to reconcile differences over language related to the Patient Protection Affordable Care Act that was contained in a continuing resolution that would fund the federal government. This shutdown was not surprising given escalating partisan rhetoric in recent years between both chambers and parties on a growing number of policy issues. Most D.C. observers anticipate this tense atmosphere in the House and Senate will continue especially given the ongoing ideological differences over how to proceed on federal spending. In the short-run Congress will resolve these policy crises out of necessity for the stability of the country and given upcoming 2014 election dynamics. Indeed legislation and regulatory log jams can break quickly and work will proceed on NAFA issues, so we must remain vigilant and prepared to act.

Tax Reform

The prospects for comprehensive tax reform are uncertain at this time given the debt limit and federal funding debate. Furthermore, there remains a strong difference between Republicans and Democrats over revenue neutral vs. revenue raising policy approaches. Regardless, Chairman Camp (R-MI) of the House Ways and Means Committee has been voicing his intent to move forward with a comprehensive tax proposal in October. However, there might be differences with Republican Leadership and the Republican Conference over how to proceed as moving tax reform will intensify partisan debate, which further complicates budget and debt ceiling discussions. In the Senate, Chairman Baucus (D-MT) of the Finance Committee has also stated he wants to move forward with legislation, but he has similar challenges.

The good news is that there appears to be some common agreement among Republican and Democratic policymakers that inside build-up is important to preserve, but we still hear of possible means testing and non-qualified plan changes. Additionally, there are rumors of proposed death benefit tax and corporate tax changes that would be harmful to the life insurance industry. The message now that we must reinforce with Congress is: “hands off the life insurance industry.”

Additionally, on a positive note, NAFA has officially joined a coalition called Americans to Protect Family Security with the ACLI and a number of sister trade groups. This coalition has been working hard to promote awareness of the life insurance industry and the role it serves for millions of Americans.

DOL Fiduciary Rule Re-Proposal Temporarily Delayed

It appears that push back from some lawmakers and the recent appointment of Thomas E. Perez to be the new Secretary of Labor has temporarily delayed efforts by Assistant Secretary Phyllis Borzi to release a revised ERISA fiduciary standards rule. Additionally, some sources have reported that DOL staff has commented that they are still working on final details of a new proposed rule and they are not ready to send anything to the Office of Management and Budget (OMB) for review.  OMB has to review rules like this to ensure it is consistent with Administration policies, etc., before it is sent on for public comment. Therefore, given the time it takes OMB to work through the process there is some consensus that the re-proposal will not occur until after the first of the year. This is a reasonable expectation, but we cannot rule out that DOL might move faster and push it through OMB before year-end. NAFA is monitoring this situation closely so please stay tuned!

SEC Fiduciary Rule

The SEC is actively reviewing comments about standards of conduct for broker-dealers and investment advisers to determine if it is going to propose a new uniform fiduciary rule. Most sources believe that the SEC will propose a rule next year. NAFA wants to make sure there is no creeping into the fixed annuity marketplace. On a related note, the House is scheduled to pass H.R. 2374, the Retail Investor Protection Act, introduced by Rep. Wagner (R-MO). This bill would stop the DOL from prescribing any fiduciary rule until 60 days after the SEC issues a final standards of conduct rule.

An update, on October 28 the U.S. House passed a bill to delay fiduciary rules at SEC and Labor Department. If you’d like to read more about what happened, click here.

Federal Insurance Office

NAFA still eagerly awaits a long overdue report from the Federal Insurance Office that will make recommendations on modernizing regulation of the insurance industry. We continue to hear the report is close to be finalized. As soon as it is released, NAFA will respond as needed.

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