March 2022 Issue:
Register Today: NAIFA Annual Congressional Conference Set for May 23-24
NAIFA’s annual Congressional Conference—the first in-person since the COVID pandemic began two years ago—is scheduled for May 23-24, 2022, in Washington, DC. The Congressional Conference is an important way to maximize NAIFA’s influence with Congress and is both professionally and personally rewarding for those who participate in it.
NAIFA's Congressional Conference helps NAIFA members establish and grow relationships with lawmakers, share the expertise of NAIFA members from all 50 states, and educate them on the value that NAIFA members bring to their clients and the solutions they provide for 90 million American families.
The Congressional Conference draws hundreds of insurance and financial advisors from all around the country. Participants are briefed on currently pending issues, taught how to effectively lobby their own Members of the House of Representatives and Senators, and then sent to Capitol Hill to educate lawmakers on the critical issues of the day.
In addition to the important constituent level grassroots advocacy that takes place during the Congressional Conference, participants network with their colleagues from around the NAIFA federation, enjoy the Nation’s Capital, and have a whole lot of fun.
This year the Congressional Conference starts at 1 p.m. on May 23 at the Marriott Renaissance in downtown Washington, DC. It continues through the afternoon and evening. Then on May 24, participants will meet with their Members of Congress.
Register for the 2022 Congressional Conference today!
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
Biden Renews Calls for Tax Increases on Big Corporations, Wealthy Individuals
In his March 1 State of the Union (SOTU) speech, President Biden renewed his call on Congress to enact legislation that would, among other things, increase taxes on large corporations and wealthy individuals. The President did not name his Build Back Better (BBB) plan but pulled out numerous elements of it as ways to fight inflation (“lower costs, not wages”), control the deficit, and invest in middle-class America.
Among the elements he called on Congress to enact were:
- A 15 percent corporate minimum tax—as included in BBB, this tax would apply only to very large corporations; as he talked about it in the SOTU speech, there were no size limits mentioned.
- “Closing loopholes” so that the very wealthy pay more tax—this was tied to a renewed promise that no tax increase would fall on households making less than $400,000/year.
- Permanent increases in Affordable Care Act (ACA) subsidies, authority to negotiate the cost of prescription drugs.
- A paid federal leave program.
- Enactment of the PRO Act, the legislation that is designed to make it easier for workers to unionize. The PRO Act contains the troublesome “ABC test” for determining whether a worker is an independent contractor or an employee. It would be adverse to many NAIFA members and is an issue NAIFA has lobbied hard to have dropped from the legislation. The PRO Act did not make it into the House-passed version of the BBB, H.R.5376.
- An increase in the federal minimum wage to $15/hour.
- More support for childcare programs, subsidies to individuals to help pay for childcare, reinstatement of the child tax credit, increased funding for education (including free pre-K for 3- and 4-year-olds), and help for elder care and care for those with disabilities (including support for long-term care).
- International tax reform.
- Clean energy and climate change provisions.
- Provisions to encourage “made in America” practices, to solve supply chain problems.
The President also focused heavily on the crisis in Ukraine, and on America’s response to it (aid to Ukraine and stiff economic sanctions on Russia and its rulers). He touted “worldwide unity” on the issue of Ukraine, and encouraged unity and bipartisanship on domestic issues, too. He also described what he called the successes of his year-old Administration—enactment of the American Rescue Plan, the bipartisan infrastructure bill, the nomination of the first African American woman for the Supreme Court, a military justice reform measure, and others.
Prospects: On March 2, Sen. Joe Manchin (D-WV) noted that the SOTU speech did not change anything, referring to his unwillingness to support H.R.5376 (the BBB as passed by the House). Hence, despite the President’s clarion call for the provisions contained in the BBB, it appears unlikely that Congress will enact legislation as sweeping as the programs contained in the BBB or that President Biden called for in his SOTU speech.
But it remains possible that negotiators will agree on a pared-down reconciliation bill that can pass with only Democratic votes. Such a package will likely include the revenue-raising tax increases on big corporations and the wealthy, and perhaps additional tax increases, too, if the package adds a deficit reduction element. Deficit reduction is something the Administration is looking at to win Sen. Manchin’s vote, a vote that is crucial to enactment of any package in a 50-50 Senate where all 50 Republicans oppose the initiative.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
Congress Enacts Government Funding Bill
On March 10, the Senate cleared a House-passed $1.5 trillion omnibus government funding bill that will provide a more than six percent increase in funding of government agencies and programs for the rest of this fiscal year (i.e., until September 30, 2022). The bipartisan votes were 68 to 31 in the Senate; 260 to 171 in the House.
Despite a strong bipartisan push by Ways & Means Committee leaders (Reps. Richard Neal (D-MA), chair; and Kevin Brady (R-TX), ranking member), the bill does not include the committee-approved Securing a Strong Retirement Act (SSRA), H.R.2954. The SSRA is now likely to go to the House floor, where it has wide bipartisan support, on its own later this year.
It will then be reconciled with the Senate version of the generation-two retirement savings bill. The Senate committees of jurisdiction (Finance and Health, Education, Labor, and Pensions) are working towards a mark-up of their legislation by mid-April. In-play in the Senate (but not included in the House bill) is a NAIFA-proposed rule that would allow those with multiple retirement savings accounts to aggregate their required minimum distribution (RMD) obligations so that they can pay their total RMDs from the account(s) of their choice. Key Senators have not yet decided whether to include the RMD proposal in their package.
The funding measure provides almost $14 billion in aid for Ukraine as well as funds for the government agencies covered through the 12 regular-order appropriations bills. However, due to late-breaking opposition to the structure of the offsets (clawing back money already appropriated for the states), the bill excluded new COVID-related assistance.
Prospects: Enactment of the omnibus appropriations bill clears the way for Congress to resume negotiations on a reconciliation bill aimed at “social infrastructure” investments. Already passed by the House, this Build Back Better (BBB) initiative (H.R.5376) is stalled in the Senate. Potential changes (in addition to the initiative’s name) to the House-approved BBB include new tax increases because key Senate support is contingent on allocating half the money raised in the bill to deficit reduction and fighting inflation. NAIFA is on high alert watching for whether there will be new tax proposals adverse to life and/or health insurance, annuities, retirement savings, and/or employer-provided benefits.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Michael Hedge– Director – Government Relations, at mhedge@naifa.org.
Will BBB Revive? Sen. Manchin Gives It a Shot
On March 2, Sen. Joe Manchin (D-WV)—the principal roadblock to passage of the Build Back Better (BBB) bill in the Senate—took a shot at reviving work on the stalled social spending/tax-the-rich/corporations measure. Here’s a summary of what Sen. Manchin is suggesting.
- Tax reform—Democrats agree that the 2017 Tax Cuts and Jobs Act resulted in unfairly low tax liability on big corporations (many of whom pay no federal income tax despite reporting billions in profits, they say) and very wealthy individuals, said Sen. Manchin. He would vote for legislation—using the Democrat-only reconciliation process—that “fixes” this unfairness, he added.
- Revenue raised from fixing the tax code should then be split, 50-50, between deficit reduction/inflation control and funding for ten years of one or more of the programs in the BBB initiative. Sen. Manchin suggests enactment of the clean energy/climate change package. But he said he’s open to any programs around which Democrats could rally, so long as only half the revenue raised by fixing the tax code is allocated to that. The other half, he said, must go to fighting inflation and reducing the federal deficit.
- The package should include granting authority to Medicare/Medicaid to the government to negotiate the price of prescription drugs.
Sen. Manchin’s Democratic colleagues are having some initial kicked-in-the-stomach feelings about his proposal. It is far less than the $2.2 trillion BBB passed by the House (H.R.5376), which is in turn significantly smaller than the $3.5 trillion initially approved by the House committees of jurisdiction. But these lawmakers are currently grappling with the question of whether “something is better than nothing.” It is clear that the House-passed BBB cannot pass the Senate. So, the choice does appear to be something much smaller (in terms of the social spending side of the legislation), or nothing at all.
Of course, there is a third option, the politics of which have not yet been put to the test—that would be using “fixing the tax code” to raise more than the House bill’s approximately $1.6 trillion in new taxes. Many Democrats are on board with more new taxes on the wealthy (those with household incomes of $400,000 or more), but whether virtually all of them are remains to be seen. Remember, to be enacted, the legislation requires all 50 Senators who vote with the Democrats, and all but four of the House Democrats.
Some Senate Democrats have already balked at certain tax increases, including a hike in the corporate, capital gains, and top individual tax rates. Whether these proposals will re-emerge as Congressional tax-writers seek to “fix the tax code” in light of Sen. Manchin’s new proposal is an open question. So, too, is the question of whether those who previously opposed tax rate increases (and other tax-the-rich proposals) would continue their opposition if it means no reconciliation bill at all.
There are significant risks to NAIFA interests in this new round of BBB negotiations. (Although, note: it’s almost certain that the BBB name will disappear—whatever comes next, if indeed anything can come next, won’t be called “Build Back Better.”) New tax hike proposals that impact high-income taxpayers and/or corporations are possible, as is revival of earlier proposals that were dropped when the House voted on H.R.5376. These include changes to grantor trust rules, wealth taxes, and estate tax changes (in addition to capital gains tax changes and rate hikes).
Prospects: There’s at least a 50-50 chance that Congressional Democrats will swallow hard and accept the narrower reconciliation bill package as outlined by Sen. Manchin. Democratic tax writers (and Budget lawmakers, too) are already working, with the White House, on trying to put together a package that will pass muster with all Congressional Democrats. Specific proposals could emerge at any time. We are watching this one very closely.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
Ways & Means Member Calls for Grantor Trust Rule Changes Impacting Step-Up in Basis Rules
On March 8, senior Ways & Means Committee member Rep. Bill Pascrell (D-NJ) wrote to Treasury to encourage regulations that would shut down the availability of step-up in basis rules when heirs inherit irrevocable grantor trust-held assets.
In his letter, Rep. Pascrell called the current law authority to transfer at death grantor-held trust assets a “loophole.” He noted his bill, H.R.2286, would close this loophole, but said since the bill has not passed, Treasury should take advantage of its regulatory authority to make sure heirs of grantor trust assets pay tax on the value of the inherited asset by calculating the difference in its value when the asset was acquired by the decedent and its value when it is inherited.
Prospects: Grantor trust and estate tax rules changes were considered during the process of putting together the House-approved version of the Build Back Better reconciliation bill. However, lawmakers decided against including those adverse changes in the House bill. This Pascrell effort, combined with a new need to raise revenue in the reconciliation bill for deficit reduction and inflation-fighting purposes, may revive interest in the issue. We’re watching this carefully.
NAIFA Staff Contact: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org.
IRS/Treasury Release Proposed RMD Regulations
On February 23, the Internal Revenue Service IRS) and Treasury released proposed regulations on the SECURE Act’s required minimum distribution (RMD) rules changes. The proposed RMD regulations do not allow for any additional aggregation of total RMD obligations, as NAIFA is asking Congress to consider doing. In fact, the proposed regulation specifically states that multiple defined contribution plans (like 401(k)’s) cannot be aggregated for purposes of determining whether RMD obligations are met.
Rather, the proposed regulations implement two principal changes made to the RMD rules in the SECURE Act (enacted into law in December 2019). The two changes are a provision raising the age for when RMDs are required from 70 ½ to 72; and a change in the five-year rule to a ten-year rule in connection with when inherited retirement savings accounts must be distributed.
Generally, the proposed rules get complex with respect to situations involving the death of the retirement savings account holder prior to reaching the new RMD age. There is also complexity surrounding when and how the new ten-year total distribution rule kicks in, largely centered on whether there is an eligible designated beneficiary (one who is exempt from the RMD rule and thus eligible to take lifetime distributions from inherited retirement savings accounts rather than taking the entire inherited amount by the tenth year of the decedent’s death). And the proposed regulations describe how to meet RMD obligations when the beneficiary is a trust, especially a see-through trust.
Other issues addressed in the proposed regulations include clarification that the RMD five-year rule applies to defined benefit plan beneficiaries; authority to plans to allow their participants to choose whether to elect use of the ten-year rule or the lifetime distribution rule; definitions of what constitutes an eligible designated beneficiary—i.e., “disabled,” “chronically-ill,” and “minor child;” how to apply the RMD rules if there are multiple beneficiaries, some of whom are eligible designated beneficiaries, and some of whom are not; and how to treat remaining balances when a plan participant dies prior to full distribution of a retirement savings account.
In addition, there are rules for special situations, such as qualified domestic relations orders (QDROs). The proposed regulations do not change rollover rules but specify that a rollover to a Roth IRA triggers income tax liability, but not the ten percent penalty tax.
Finally, the proposed regulations ask for comments on a variety of issues, including whether to impose IRA-like reporting requirements on RMDs from 403(b) annuities. Currently, regulations require IRA trustees to report account balances, and RMDs required (using Form 5498) to both the IRS and to the plan participant.
The proposed regulation’s applicability date is for calendar years beginning on or after January 1, 2022.
The proposed regulations and frequently asked questions (FAQs) are posted online.
The proposed regulations are open for comment. Comments due, via electronic submission, 90 days after publication (on February 23) in the Federal Register. Comments should be submitted to www.regulations.gov Specify IRS, REG-105954). There will be a public hearing on the proposed regulations on June 15, 2022.
Prospects: Initial industry reaction has been unhappy, saying that the proposed rules are unnecessarily complex and confusing, particularly with respect to the ten-year rule applicable to those who inherit retirement savings accounts. The proposed regs changed initial guidance regarding whether the ten-year rule requires complete distribution by the tenth year after a decedent’s death when the decedent has reached the RMD age prior to dying, or whether annual contributions are required. Thus, it is likely there will be comments and possible that those comments will trigger changes before the regulation is finalized.
NAIFA Staff Contact: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org.
Complex RMD Rules Trigger Confusion
Initial reaction to the Treasury/Internal Revenue Service (IRS) required minimum distribution (RMD) proposed regulation issued on February 23 suggests that the complexity of the RMD rules is triggering confusion. Some in the retirement savings community are even wondering whether the RMD rules ought to be scrapped entirely.
The new proposed RMD regulation changed initial guidance that stated that those heirs subject to the ten-year rule had to take complete distribution of inherited IRAs by the end of the tenth year after the decedent’s death to a rule that requires annual RMDs, with complete distribution required at the end of year ten. One retirement advisor termed this change in the rules as “beyond unnecessarily complex.”
Adding to the RMD rules’ complexity is the newly revamped life expectancy tables used to calculate RMDs. And the House Ways & Means Committee-approved H.R.2954, the Securing a Strong Retirement Act (SSRA), would phase in another increase in the RMD age to 75. Plus, there is an effort underway (strongly supported by NAIFA) to include in the new generation two retirement savings legislation (nicknamed SECURE 2.0) being developed in the Senate a rule to allow owners of multiple retirement savings accounts to aggregate their RMD obligations and pay them from the plans/IRAs of their choice.
This is leading to what one observer has called a “simmering debate” over how much tax-advantaged retirement savings complexity is “too much.” These folks are arguing that RMD rules have “outlived their purpose” and that they result in “increasingly unpalatable tax liabilities” on beneficiaries and their heirs. “The complexities put a strain on professionals who follow the IRS’ annual distribution twists and turns carefully and are nearly impossible for average consumers to keep up with,” said one retirement planning advisor.
However, RMD rules raise revenue, and revenue to offset the cost of other positive retirement savings rules is always needed. But what some argue is inadequate reporting and notice rules have raised questions about whether RMD rules reporting requirements need a further look. According to a 2015 Treasury audit, the U.S. lost more than $100 million in tax revenue due to missed or mistaken RMDs. And that audit did not look at 401(k) or 403(b) plans, which are also subject to RMD rules. Add in the 50 percent excise tax on RMD amounts not taken, and the revenue issue could turn out to be significant, these stakeholders argue.
Prospects: Congress is expected to revisit retirement savings rules this spring/summer, and changes to RMD rules are definitely in the mix. While it is unlikely that lawmakers will repeal RMDs, changes to when they are required and how they are calculated are possible. NAIFA will keep you posted.
NAIFA Staff Contact: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org.
District Court Strikes Down Surprise Billing Reg’s Preference for Median Rate
On February 23, a Texas federal district court struck down the portion of the surprise billing regulation that would have favored a process whereby arbitrators choose the amount closest to the median in-network rate when deciding a dispute between out-of-network medical providers and the entity (e.g., insurer or self-insured plan) paying for a claim. The decision, which is subject to appeal, resurrects a key source of controversy over who pays, and how much, when an individual incurs an out-of-network charge for medical care without having been notified in advance about the (usually) higher out-of-network expense.
The court ruled that the regulations did not comport with the plain language of the No Surprises Act. The No Surprises Act, enacted in December of 2020, provides that unnotified individuals are not responsible for out-of-network charges in excess of in-network charges, and sets up an arbitration process for providers and payors to use when the amount of the out-of-network charge is in dispute. The Act took effect on January 1. An interim final regulation implementing the arbitration provisions was released by the Centers for Medicare and Medicaid Services (CMS) on September 30, 2021.
The court ruled that the law as written includes several factors that the arbitrators can consider when determining the appropriate amount to be paid to an out-of-network provider, and that the law does not give priority to any of these factors. Rather, the court said, the law leaves it to the Independent Dispute Resolution (IDR) entity’s discretion to determine how to balance the statutory factors and the facts and circumstances of any specific case.
Principal authors of the No Surprises Act, Reps. Richard Neal (D-MA), chair of the House Ways & Means Committee, and Kevin Brady (R-TX), the committee’s ranking member, issued a joint statement praising the decision. The February 23 decision, said the two lawmakers, “affirms that the No Surprises Act, as written, will continue to protect patients but must swiftly be implemented according to the letter of the law to ensure fairness in resolving surprise medical billing disputes. A level playing field is essential. Processes that tip the scales towards either party are untenable, and will result in worse outcomes for patients.”
Prospects: Arbitrated resolutions of disputed out-of-network charges was set to begin March 1. This court decision—which could be overturned on appeal—will make IDR decision-making more difficult, at least until the dispute is resolved.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
House Committee Hearing Looks at ESG, Mental Health Parity Rules
On March 1, the House’s Education and Labor Committee’s Subcommittee on Health, Labor, Education, and Pensions held a hearing on appropriate rules for fiduciaries considering ESG (environmental, social, and governance) factors in selecting investments. The hearing also looked at mental health parity rules applicable to health plans.
Not surprisingly, Committee Republicans and their witness said that ESG factors should be allowed only when they also reflect the best financial choice for the investor. Democrats, on the other hand, supported the proposed Biden rule that allows ESG factors to be considered. One committee Republican, Rep. Virginia Foxx (R-NC) noted there may be a constitutional problem with the proposed rule. She referenced a 2014 Supreme Court case that held, she said, that only financial factors could be considered when fiduciaries are selecting plan investments.
The Department of Labor (DOL) proposed a rule last year that would allow retirement plan investment advisors to “often require an evaluation of the economic effects of climate change and other environmental, social or governance factors on the particular investment or investment course of action.” The pending proposed rule would overturn a Trump-era ESG rule that curtails use of ESG factors in the investment selection process. DOL has received more than 29,000 comments on its proposed ESG rule.
On the issue of mental health parity, the subcommittee members heard testimony about the potential need to strengthen mental health parity regulations. Citing a study that found widespread lack of compliance by health plans with mental health parity rules, witnesses encouraged Congress to enact laws giving DOL authority to deal directly with insurers and insurers acting as third-party administrators.
“If there are violations of mental health parity requirements, either in plan documents or through plan administration, they are likely to show up in all plans insured or administered by the same carrier,” said one witness. “DOL could leverage its limited resources if it could correct the problems at the insurer-third party service provider level, rather than seeking compliance for each employer individually.”
Prospects: Both ESG rules and mental health parity rules are capturing a growing level of lawmaker interest. However, the issues are competing with many other high-priority issues (e.g., Ukraine, government funding, the reconciliation bill, etc.) and so chances of Congressional action in this election year are slim at best.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
NRSC Chair Offers Tax Plan that Sparks Disagreement from GOP Senators
On February 22, Sen. Rick Scott (R-FL), chair of the National Republican Senatorial Committee (NRSC), has offered an 11-point plan that he said embodies what Republicans should prioritize if they regain control of the Senate and/or the House after the November elections. The plan includes a proposal to require all Americans, regardless of their income level, to pay at least some amount of federal income tax. The plan was immediately rejected by some of Sen. Scott’s Senate colleagues, including Majority Leader Sen. Mitch McConnell (R-KY). Sen. Scott then said the plan is his alone, not one backed by the NRSC.
The Scott plan reflects the positions of the most conservative GOP lawmakers. It reflects the ongoing debate among Republicans about just how far right they should go in their campaign to regain control of Congress. (It is the GOP version of the similar struggle that is ongoing among the most liberal Democrats and their more centrist colleagues).
Sen. McConnell’s immediate rejection of it was an unusual public display of battle lines between the establishment-oriented, still-conservative but less conservative Republican lawmakers and those who want to move legislation much further to the right. Sen. McConnell’s position reflects his belief that to retake control of the Senate requires keeping the party closer to the political center than to the far right. Sen. Scott’s quick emphasis on the fact that the plan was his as an individual rather than an NRSC position is a sign of some strength left in the more centrist (although still conservative) establishment wing of the GOP.
Prospects: The 11-point plan may not become the official Senate Republican agenda, but it will likely influence GOP positioning in the 118th Congress (that begins in January 2023), whether the party is in the majority or minority, in the Senate, House, or both. Watch for at least some of the plan’s elements to become legislation that Republicans will try to move next year.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
COBRA National COVID Emergency Deadlines Extended
On February 18, deadlines for COBRA coverage were extended due to the ongoing COVID national emergency. The deadlines were set to expire on March 1, 2022, but are now in effect for an additional year or, if earlier, to 60 days from the end of the national emergency.
Determinations on which extensions will apply are determined on a case-by-case basis. Affected COBRA deadlines include:
- COBRA Election Notice—The national COVID emergency allows for an extension of the 14-day deadline (44 days where the employer is the plan administrator) for a plan administrator to provide a COBRA election notice to qualified beneficiaries.
- COBRA qualifying event and disability extension notices—This is the 60-day deadline by which individuals must notify their plans of a divorce/separation, disability, or child aging out of qualifying as a dependent COBRA election (the 60-day deadline to elect COBRA continuation coverage).
- COBRA premium payments—The time allowed to pay COBRA premiums (45 days for the initial payment and 30 days for subsequent payments.
- HIPAA special enrollment period—Also extended is the 30 or 60-day timeframe during which individuals may request enrollment in a group health plan due to a special event like the birth of a child, marriage, loss of other coverage, or eligibility for a state premium assistance subsidy.
- Benefit claims and appeals—the deadline for filing a benefits claim or for appealing an adverse benefit determination may also be extended.
- External review—The timeframe by which a claimant must file (or correct a filing) for an external review may be extended.
This will mark the third year of national emergency-related COBRA extensions—the first national emergency was declared by President Trump on March 1, 2020. It was extended by President Biden for 2021, and now again for 2022.
Prospects: With the COVID-19 pandemic apparently receding, it is possible that the national emergency will end prior to the end of 2022. It is therefore something that NAIFA members who are involved in the COBRA continuation health insurance market and its administration should monitor.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
NCOIL Adopts NAIFA-Supported Resolution to Preserve Independent Contractor Status for Advisors
The National Council of Insurance Legislators (NCOIL) unanimously approved a "Resolution Supporting Independent Contractor Status for Insurance Agents and Other Licensed Financial Professionals" at its Spring Meeting in Las Vegas. The resolution, sponsored by NCOIL President and California Assemblyman Ken Cooley, states that "NCOIL will encourage states and federal entities that are debating worker classification policies and that are considering adopting a strict ABC Test and or other similarly worker classification laws to continue issuing exemptions for, or exempting out, licensed insurance agents and other financial professionals."
Recently the independent contractor employment model utilized by many in the insurance and financial services industry has been challenged on federal and state levels by efforts to redefine who is considered an employee. Many efforts aim to reclassify who is viewed as an employee by utilizing the strict "ABC" policy, as was seen in the Federal Legislation of the Protecting the Right to Organize (PRO) Act. However, the insurance and financial services industry is not the primary target. The proposals are intended to address employment practices of gig economy industries that almost exclusively utilize independent contractors. NAIFA has advocated strongly against including independent insurance agents and other financial professionals in these efforts.
NCOIL has held several discussion panels on the topic, including presentations at the NCOIL 2021 Summer Meeting in Boston from NAIFA-MA President Josh O'Gara, CLU, ChFC, CFP, and NAIFA Policy Director Maeghan Gale. O'Gara and Gale provided the producers' perspective and discussed the importance of independent contractor status for independent broker-dealers and independent financial advisors. Additionally, the resolution cites work presented by NAIFA, stating that "surveys, including research by the National Association of Insurance and Financial Advisors (NAIFA), show licensed independent agents and other financial services professionals are overwhelmingly satisfied with their status as independent contractors and oppose policies that would take away their choice to work independently."
NAIFA strongly supports the adoption of the resolution and applauds NCOIL's commitment to providing a platform to address this important issue. NAIFA hopes that this resolution will influence states and the federal government to exempt insurance and financial professionals from laws or regulations that include an ABC test or similar methods to determine whether a worker is classified as a contractor or employee.
NAIFA Staff Contact: Maeghan Gale – Policy Director – Government Relations, at mgale@naifa.org.
NAIFA Continues Support of NARAB Nomination Process
On February 17, 2022, NAIFA joined with coalition members to send a letter to Steve Richetti, Counselor to President Biden, offering the support of the insurance agent and broker community for the Administration to nominate members of the Board of Directors to establish the National Association of Registered Agents and Brokers Reform Act (NARAB).
Previously, on February 4, 2022, House Chairman David Scott sent a letter to the Administration on the issue of NARAB nominees urging the Administration to move forward with the nomination process. That letter can be found here.
NAIFA strongly supports the implementation of NARAB to streamline licensure processing, reduce administrative redundancies and provide regulatory compliance efficiencies by allowing insurance agents and brokers to conduct business in more than one state through a single application. The creation of the NARAB Board will single-handedly reduce compliance costs, promote consumer choice, and foster economic growth, all while continuing to preserve the state-based system of insurance regulation.
Prospects: Although NARAB was signed into law in January 2015, there have been no appointments to the Board as of the present. NAIFA and partners remain hopeful that the Biden Administration will move forward with nominations. NAIFA will continue to work with the White House and regulators to facilitate the establishment of the NARAB Board.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
Congress Passes Omnibus Bill that Includes RILA Language for SEC
On March 9, 2022, the U.S. House passed the omnibus appropriations bill which includes NAIFA-supported Registered index-linked annuity (RILA) language in the House FSGG report, which was adopted along with the omnibus conference report.
The report can be found here. NAIFA-supported language can be found on page 104 and reads:
“Registered Index-Linked Annuities. — The Committee is concerned that the current registration process for registered index-linked annuities (RILAs) is cumbersome and requires significant information not needed for other registered insurance products. The Committee encourages the SEC to create a tailored filing form for RILAs.”
The U.S. Senate followed on March 10, bypassing the omnibus bill and sending it to the President’s desk. It is expected President Biden will sign the bill into law. This will formally send Congress’ recommendations to the SEC.
RILA products offer a good option for some consumers who want to benefit from market growth while reducing their exposure to market losses. These are long-term, tax-deferred investments that are often well-suited for investors who are preparing for retirement, especially those who are retired or are nearing retirement and wish to reduce the impact of market downturns.
Unfortunately, the Securities and Exchange Commission (SEC) paperwork required to register RILAs is unnecessarily burdensome and confusing. It requires financial institutions to submit forms more often used for initial public offerings or other “catch-all” forms that require a great deal of extraneous information not relevant to RILAs and not readily available to insurance firms offering RILAs.
Prospects: The omnibus bill is expected to be signed by President Biden. The onus now falls on the SEC to create a form that will ease consumer access to RILAs. It is unknown what timeline the SEC will adopt when updating its forms and process.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.
NAIFA Comments on CMS Proposed Marketing Rule
The CY 2023 Medicare Advantage and Part D Proposed Rule (CMS-4192-P), as published in the Federal Register on January 12, 2022, included a proposed rule that focuses on the sales and marketing practices of Third-Party Marketing Organizations (TPMOs) of Medicare Advantage (MA) and Medicare Part D (Part D) plans.
CMS reports that it has seen an increase in beneficiary complaints concerned with the marketing practices of TPMOs who sell MA and Part D plans. Many NAIFA members faithfully serve their clients in the Medicare Advantage and Part D marketplace and have reported similar complaints to NAIFA. Often this complaint stems from an existing client who has seen a television or print ad promising too-good-to-be-true coverages and was enrolled in an inappropriate plan after responding to the advertisement.
The rule proposes to define TMPO to remove ambiguity associated with Medicare Advantage plans/Part D, add new disclaimers that would be required when TPMO's market MA/Part D plans, and update existing rules for expanded oversight associated with TPMO; NAIFA offered several suggestions and shared recommendations. You can read the entire comment letter here.
NAIFA Staff Contact: Maeghan Gale –Policy Director – Government Relations, at mgale@naifa.org.
