May 2021 Issue:
Virtual Congressional Conference to Defend against Adverse Tax Proposals
NAIFA’s May 25-26 Congressional Conference is less than two weeks away! If you haven’t already, please register now for this virtual conference and join NAIFA colleagues from all 50 states to hear from members of Congress, industry leaders, and NAIFA lobbyists about the federal issues facing your business and your clients.
The conference will begin on May 25th with speakers, optional training sessions, and an IFAPAC event, and culminate on the 26th with a “Day on the Hill” that will include meetings with Senate offices. These meetings will give NAIFA members the opportunity to speak to lawmakers and staff on issues including tax treatment of life insurance, retirement savings, and worker classification. To give these offices an accurate idea of how many constituents will be attending these virtual meetings, please register ASAP. Your constituent input is vital to a successful defense of the products and programs that underlie middle America’s economic security.
Register today!
Prospects: It’s looking like the riskiest, most challenging time in years for NAIFA interests. Register now, if you haven’t already, to add your voice to the thousands rallying to protect the important work NAIFA members do to make sure middle America can assure their families and businesses secure financial future.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Maggie Buneo – Grassroots Director, at mbuneo@naifa.org
Biden Speech, Congress’ 2021 Legislative Agenda Pose Many Challenges
Per legislation already introduced, and in light of President Biden’s April 28 address to a joint session of Congress, it appears that there will be many challenges for NAIFA members this year. Among them are multiple adverse tax proposals, the PRO Act with its worker classification provisions, and a national paid leave initiative.
The second of two planned Build Back Better proposals, the $1.8 trillion American Families Plan (AFP), was released on April 28. It focuses on what the President is calling “human infrastructure.” It proposes paid leave, childcare, education, and other “human infrastructure” programs. The AFP’s proposed offsets come from individual tax hikes. They include:
- A hike in the capital gains rate for those earning $1 million or more in a year to 39.6 percent.
- A repeal of step-up in basis—which likely includes a rule that would characterize transfer as a result of death as a taxable event.
- An increase in the top individual income tax rate to 39.6 percent.
The first Build Back Better proposal, the $2.5 trillion American Jobs Act (AJP), focuses on traditional infrastructure spending (road, rail, port, bridge projects, etc.), paid for by proposed corporate tax increases. A key offset proposal would raise the corporate tax rate from 21 percent to 28 percent. The AJP, released this past March, also includes a new corporate minimum tax and proposed changes in international tax rules.
The AJP also includes a call to Congress to enact the PRO Act, which contains a worker classification rule that could prove adverse to most NAIFA members. (Generally, the PRO Act worker classification provisions would force recharacterization of many insurance agents and financial advisors as employees rather than as independent contractors.) The AJP also includes provisions to expand broadband and to improve senior caregiver jobs.
Neither the AJP nor the AFP has yet been put into legislative language and may not be. Instead, it appears likely that the relevant Congressional committees will write the actual legislation, which will reflect the (potentially many) changes to the proposals that lawmakers appear convinced need to be made.
President Biden says his Build Back Better agenda (both the AJP and the AFP, and their offset packages) is open to negotiation. Changes to it “are certain,” he said. He says he is open to alternative ways to pay for the cost of the infrastructure projects contained in his AJP proposal, but not to making it materially smaller. The President has been crisscrossing the country to tout the AJP and the AFP, saying that the plans are needed to rebuild the pandemic-ravaged economy and to create more and better jobs for America’s workforce.
Currently, there are bipartisan negotiations underway on the AJP—Congressional Republicans have crafted a $560 billion traditional infrastructure proposal paid for by “participants” in the projects to be authorized—revenue offsets include things like a miles-traveled fee, a gas tax, and unspent coronavirus aid law funds. Generally, Democrats and the President are insisting on a larger package and are arguing in favor of the corporate tax increases contained in the President’s AJP.
As of now, there is no visible path to a compromise on the AJP—virtually every Republican lawmaker opposes the AJP’s tax increase proposals, and most also want an infrastructure package significantly smaller than the one proposed by President Biden. Democrats want more, both in the size and scope of the infrastructure portion. There aren’t even serious conversations on the AFP—the GOP says the education, childcare, paid leave and other “human infrastructure” proposals in the AFP are a Democratic “socialist” agenda, and they are united in opposition to it. Most Democrats support it, although many want changes to it.
Hearings on the Build Back Better agenda are underway—on May 12, the House Ways & Means Committee’s Subcommittee on Select Revenue Measures held a hearing on how and why “the rich” should pay more taxes. Lawmakers say they will try to forge a bipartisan agreement—or at least make good progress on one—by Memorial Day. After that, they say, they will look to using a process that will sidestep the Senate’s rules that require a 60-vote majority to advance a bill (probably a reconciliation bill, but filibuster reform has not been ruled out).
If Democrats move to a partisan process, they will have to forge consensus among their own ranks. And in this closely divided Congress, that is almost as tall an order as a bipartisan agreement would be. In the Senate, all 50 Democrats would have to agree to support a bill. In the House, only four Democrats saying “no” would scuttle the effort.
Prospects: The Build Back Better initiative is at the top of President Biden’s priority list. And it is something most Democrats strongly support. Accordingly, it would be foolish to bet against the Democrats finding a way—whether it be bipartisan or solely among themselves—to enact it. But it is full of proposals that are controversial even among Democrats, and it is hard to see the contours of an agreement that could win all 50 Senate Democratic and all but three House Democratic votes. And it will take quite some time, with many new (and probably adverse) tax proposals emerging from the process.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations, at jcarsrud@naifa.org, or Michael Hedge – Director – Government Relations, at mhedge@naifa.org
DOL Rescinds Trump-Era Worker Classification Rule
On May 5, the Biden Department of Labor (DOL) officially rescinded the worker classification rule finalized in the last two weeks of the Trump Administration. The now-cancelled rule, using an “economic reality test,” would have expanded the ability of workers to function as independent contractors rather than as employees. Currently, DOL—which says it will beef up enforcement against companies that misclassify their workers—will use the historical multi-factor “control” test that has been established by the courts to determine when a worker/workforce is properly characterized as employee or as independent contractor.
The Biden DOL has not announced a new rulemaking, but one is expected—and it’s expected to substantially narrow the definition of independent contractor, creating a real risk for the many NAIFA members who are not employees of their carriers/broker-dealers. Washington insiders anticipate that the new worker classification rule will closely resemble California’s “ABC” test, which so tightens the definition of independent contractor that most NAIFA members would not be able to comply with it—and thus, unless it is amended to accommodate the special circumstances of insurance agents and financial advisors, would have to be characterized as employees of their insurance companies and broker-dealers.
Prospects: Worker classification is a hot topic these days. It is a live issue in the PRO Act; it is part of a new unemployment system reform measure, and it is likely to be the subject of a new rulemaking initiative at DOL. The narrower new test—the California-originated ABC test—contains an exception for insurance agents in California. And the securities and insurance laws and regulations that govern life insurance agents/financial planners add potency to the argument that this industry merits different rules. This is an issue NAIFA is working hard, along with allies among insurance and other financial services companies.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org or Michael Hedge – Director – Government Relations, at mhedge@naifa.org
Worker Classification Morphs into Wide-Ranging Issue
Currently pending are two federal legislative proposals and the potential for a regulatory initiative that poses a risk for the working relationship between most NAIFA members and their companies. Here is a round-up.
PRO Act: H.R.842, the PRO Act, contains a provision that would impose a rule that would force most insurance agents/financial planners to become employees of their companies, at least for purposes of the Fair Labor Standards Act (FLSA). Currently, more than 90 percent of the respondents to NAIFA’s worker classification survey reported that they receive 1099 income from their carriers and consider themselves independent contractors (and want to remain so classified).
Wyden Unemployment Reform Proposal: Senate Finance Committee Chair Sen. Ron Wyden (D-OR) and member Sen. Michael Bennet (D-CO) released discussion draft legislation last month that contains a provision that would impose a national worker classification standard that parallels the California ABC test (without the exceptions, including one for insurance agents, that California included in its worker classification law). The provision is applicable only to unemployment rules, but would set a risky precedent, especially in the current environment where the issue is front and center in many contexts.
NAIFA is working with Sens. Wyden and Bennet to explain how adverse the ABC test—which requires that to be an independent contractor, the worker be under virtually no control by the entity contracting for the work to be performed—is to insurance agents/financial advisors. There is as yet no timetable for moving past the discussion draft stage to bill introduction and/or action on the proposal.
Regulation: As reported above, the Department of Labor (DOL) has rescinded the Trump-era worker classification rule. Although it has not announced a new rulemaking initiative, it is anticipated that the Biden DOL will tackle the issue fairly soon. It is also expected that the Department will start with the California ABC test.
Prospects: With worker classification efforts coming from many directions, it is and will continue to be a top priority for NAIFA. We will keep you posted.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org
House Committee Advances Second-Generation Retirement Savings Bill
On May 5, on a unanimous and bipartisan basis, the House Ways & Means Committee approved H.R.2954, a second-generation retirement savings bill usually referred to as “SECURE 2.0.” The “Securing a Strong Retirement Act” (the bill’s official name) makes over 40 largely helpful rule changes to enhance retirement savings opportunities. SECURE 2.0 is now ready for a vote by the full House. When the bill comes to the floor, it is expected to pass with bipartisan support.
Among the provisions contained in H.R.2954 are:
- A rule that would require new 401(k) plans to include an automatic enrollment provision—subject to a rule that allows employees (participants) to opt-out
- An increase in the age at which required minimum distributions (RMDs) must be taken from 72 to 75 (phased-in—the age would go to 73 in 2022, to 74 in 2029, and to 75 in 2032)
- An increase (to $10,000) in catch-up contribution authority for those aged 62, 63, and 64—under Roth rules—for 401(k) and 403(b) plans, and to $5,000/year at ages 62, 63, and 64 for SIMPLE plans; in addition, the bill would index the IRA catch-up contribution limit for inflation
- A reduction in the time a long-time part-time worker must work prior to being eligible to participate in an employer’s retirement savings plan from three years to two years
- Authority for 403(b) plans to participate in MEPs and PEPS (Multiple Employer Plans and Pooled Employer Plans)
- Enhancement of the small employer retirement plan start-up cost tax credit—the tax credit would increase from 50 percent to 100 percent for employers with up to 50 employees, plus the amount of the credit would be increased for five years by a percentage of the amount contributed by the employer on behalf of its employees, up to a per-employee cap of $1,000 (the percentage starts at 100 percent in years one and two and phases down by 25 percent per year until it ends in year six)
- A rule that would allow student loan payments to qualify for employer matching payments
- A rule that would require plan statements to be distributed on paper once per year (quarterly statements could be transmitted electronically)
- A missing participant program administered by the PBGC (Pension Benefits Guaranty Corporation) that would make it easier for plan participants to find “missing” vested retirement benefits—this provision also increases the mandatory cash-out cap from $5000 to $6000
- Modification of the rules that allow direct-from-the-plan contributions to charities that would comply with the RMD rules
- Modification of the error resolution/excess contribution rules that would reduce the penalty for corrected RMD failures to 25 percent (10 percent if correction is within two years of the error)
- A new start-up rule for 401(k) plans for the self-employed and single-employee LLCs
H.R.2954 is expected to move under regular order, both in the House and in the Senate. It is bipartisan, as are the retirement savings initiatives pending in the Senate. Senate staffers predict committee (Senate Finance and/or Senate HELP) action by fall, although probably not before mid-summer at the earliest. House and Senate Democratic and Republican pension staffers are working together on this initiative.
Prospects: There is as yet no date set for full House consideration of H.R.2954, but House action is expected. So, too, is approval by the Senate, although there may be differences between the House and Senate bills that will have to be resolved. Still, Washington insiders expect a bill that closely resembles H.R.2954 to be enacted into law later this year, or perhaps next year.
NAIFA Staff Contact: Judi Carsrud – Assistant Vice President – Government Relations, at jcarsrud@naifa.org
DOL Issues Guidance on Fiduciary Rule; Promises Amendments to the Rule
On April 13, the Department of Labor (DOL) issued guidance on its fiduciary rule, and said it anticipates proposing amendments to the investment advice fiduciary regulation. The guidance includes advice to investors to “ask pointed questions” before accepting advice about their retirement savings accounts, including whether the advisor is a fiduciary. It also includes frequently asked questions (FAQs).
The fiduciary rule, finalized late in the Trump Administration, has not been challenged by the Biden DOL. The Trump-era rule uses the historical five-part test for determining whether an advisor is a fiduciary. It includes a prohibited transaction class exemption that allows investment advisors, broker-dealers, banks, insurance companies, and their affiliates to offer advice that is in the investor’s best interest even if the investment being recommended is one for which the advisor will receive compensation (something the DOL characterizes as “conflicted” advice).
The guidance is posted on the EBSA website, at https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/choosing-the-right-person-to-give-you-investment-advice.
Prospects: DOL’s Employee Benefits Security Administration (EBSA) is preparing to propose amendments to the current fiduciary rule. “The Department anticipates taking further regulatory and sub-regulatory actions, as appropriate, including amending the investment advice fiduciary regulation…and amending or revoking some of the other existing class exemptions available to investment advice fiduciaries,” EBSA said in its April guidance.
NAIFA Staff Contact: Judi Carsrud – Assistant Vice President – Government Relations, at jcarsrud@naifa.org
Biden Considers New Health Reforms
While health issues were largely left out of the President’s Build Back Better initiative, President Biden has signaled his intention to propose health reforms later this year. He has promised to build on the Affordable Care Act (ACA) and is also entertaining thoughts of lowering the Medicare eligibility age.
Among the possibilities that may be proposed by the President are provisions to expand ACA premium subsidies, grant authority to the government to negotiate drug prices, and making people aged 55 or 60 eligible for Medicare. Another real possibility is a proposal to make a government-run health insurance option available through ACA exchanges.
Some Congressional Democrats in both the House and Senate are urging the President to include these proposals in the currently-under-construction Build Back Better plans, but President Biden says only that he will propose health reforms before the end of the year.
Prospects: It will likely be quite a while before we see concrete proposals on health reform from the Administration. However, it is possible, although unlikely, that negotiations on the currently pending Build Back Better proposals will result in inclusion of one or more health proposals. The two that appear to have the greatest (albeit small) chances for inclusion are a lowering of Medicare eligibility age to 60 and drug price reforms.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at hedge@naifa.org
Biden, Key Lawmakers Propose Federal Paid Leave Program
Not only has President Biden proposed a federal paid leave program, but so too has the chairman of the House Ways & Means Committee. They join a number of influential lawmakers who are supporting a national paid leave program. Thus, odds that Congress will enact a federal paid leave law have gone way up.
Biden Paid Leave: The Biden paid leave proposal is in Part 2 of his Build Back Better initiative. It is in the American Families Plan (AFP). It would create a federally run program, paid for out of general revenues, that would phase in over ten years, topping out with a maximum benefit of 12 weeks, at up to $4,000/month, for people who take time off due to their own illness, the need to care for a family member, for maternity/paternity leave, to contend with military deployment, or as a result of needing to seek safety from sexual assault or domestic violence. The Biden proposal also includes a call for Congress to enact the Healthy Families Act, which would require employers to allow their employees to accrue up to seven paid sick days/year, at the employer’s expense.
The paid leave benefits would be subject to a sliding scale, based on the beneficiary’s income level. While leaving the implementing details to Congress to decide on, the broad proposal calls for paying workers at least 66 percent of their wages while they are on leave. The wage replacement rate would rise to 80 percent for the lowest-income workers.
Neal Paid Leave: On April 27, House Ways & Means Committee Chairman Rep. Richard Neal (D-MA) released a discussion draft paid leave proposal. Under the Neal plan, workers could get up to 60 days of paid family and medical leave. It would replace up to 85 percent of monthly wages for those making less than $15,000/year (indexed). The replacement wage rate would phase down as income goes up, with the benefit ending at five percent of wage replacement for those with income of $100,000/single or $250,000/married.
The plan would also “guarantee” access to childcare and would permanently extend the child tax credit that was enacted in last month’s American Rescue Plan. That tax credit provides a one-year $3,000 ($3,600 for children under the age of 6) benefit, payable monthly through a refundable tax credit, for eligible parents. The Neal plan would also make permanent a one-year expansion of the earned income tax credit for childless adults, and a one-year expansion of the child and dependent care tax credit.
Neal’s proposal would also provide a new refundable tax credit for childcare providers. In addition, it would provide $15 billion in grants to improve childcare facilities and would boost funding for state-run child care programs for fiscal year 2022. It would also create information networks to help parents find available and affordable childcare and to help workers access their paid leave, unemployment, and childcare benefits.
Under the Neal proposal, state paid leave programs (there are currently ten of them, with more states considering enacting paid leave programs) would be allowed to continue if they are at least as generous as his proposed federal program.
Other paid leave proposals suggest allowing workers to borrow from future Social Security benefits for current paid family leave, or against future child tax credits, and an employer-employee tax designed to fund the paid leave benefits.
Generally, paid leave programs and proposals are paid for (in actuality or as proposed) through general revenues, a payroll tax (on employers, employees, or both), or through permitting borrowing from future Social Security or child tax credit benefits. Both the Biden and the Neal plans would fund the national paid leave program through grants from U.S. general revenues.
The insurance industry is working with lawmakers to make sure any paid leave program does not adversely impact employer-sponsored long-and short-term disability programs.
Prospects: There is considerable support for a national paid leave program—many employers, especially large, multistate firms, would prefer a national program over the patchwork of state laws either already enacted or pending. However, there is also considerable disagreement about the scope of such a program and about how to pay for it. However, with President Biden’s support, along with support from the powerful Ways & Means Committee chairman, a national paid leave program has a better-than-even shot at being enacted into law.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at hedge@naifa.org
Business Expenses Paid with PPP Loan Money Can Be Deducted Retroactively
On April 22, the Internal Revenue Service (IRS) issued new guidance clarifying that business expenses paid in 2020 with Paycheck Protection Program (PPP) loan money can be deducted retroactively. The guidance comes in Rev. Proc. 2021-20.
According to the Rev. Proc., taxpayers can take a deduction for those expenses on their original federal tax or information returns for the first taxable year following their 2020 taxable year instead of filing an amended return or administrative adjustment request.
Prospects: Congress enacted legislation last year overturning an initial IRS position that business expenses paid with tax-free PPP loan money could not be deducted. This guidance not only implements the new law, but also makes it as convenient as possible to claim the deductions.
NAIFA Staff Contact: Judi Carsrud – Assistant Vice President – Government Relations, at jcarsrud@naifa.org
Senate Confirms Gensler as Head of the SEC
On April 14, the Senate confirmed Gary Gensler’s nomination to be head of the Securities and Exchange Commission (SEC). The Senate vote was 53 to 45. Gensler was sworn in to his new office immediately.
An alum of the Obama Administration, Gensler is a former head of the Commodity Futures Trading Commission (CFTC). He also served as Treasury’s undersecretary for domestic finance in the Clinton Administration. Most recently, he was a professor at the MIT Sloan School of Management. His work experience also includes nearly 20 years at Goldman Sachs.
Prospects: NAIFA issued a letter of congratulations to Gensler and promised to work closely with him on issues of importance to investors and those who advise them.
NAIFA Staff Contact: Judi Carsrud – Assistant Vice President – Government Relations, at jcarsrud@naifa.org
NAIFA Signs on to Support Letter for SECURE Remote Online Notarization
NAIFA joined industry partners in a letter to Senate sponsors of the SECURE Remote Online Notarization Act urging support for the importance of the legislation. Bipartisan legislation (S. 5355, H.R. 6364) was introduced by Sens. Cramer (R-ND) and Warner (D-VA), and Reps. Reschenthaler (R-PA) and Dean (D-PA).
The legislation would allow businesses and consumers to utilize Remote Online Notarization (RON) laws to execute critical documents using two-way audiovisual communication. Current requirements for a signer to physically be in the presence of a Notary are antiquated and unnecessary in a time of heightened awareness and social distancing. Thirty-four states have already recognized the benefits of RON technology and passed legislation, while many more are currently considering similar proposals.
To address physical restrictions in place during the COVID-19 outbreak, this legislation would allow consumers and businesses to continue operations in certain transactions. Given the ongoing difficulty of financial advisors, agents, and mortgage brokers to meet with their clients, NAIFA and its coalition partners continue to advocate the importance of the legislation becoming law.
NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org
New York Appellate Court Rules Regulation 187 Unconstitutional
The New York Supreme Court, Appellate Division, has ruled that state Insurance Regulation 187, “Suitability and Best Interests in Life Insurance and Annuity Transactions,” is unconstitutional. A 2018 amendment to Regulation 187 imposed a complicated new standard of care on annuity recommendations and broadened the scope of the regulation to include life insurance as well as annuity products.
NAIFA’s New York chapter (NAIFA-NY) advocated against the amended regulation and then filed one of two legal challenges. The current decision is the result of a case brought by the Independent Insurance Agents and Brokers of New York. The Supreme Court decision references the NAIFA suit “seeking similar relief” and “on the same merits” several times.
The ruling is a win for insurance and financial advisors in New York, as well as the consumers who rely on them for products, services, and guidance. However, unlike at the national level and in many other states, the Supreme Court is not the highest Court in New York, and the New York State Department of Financial Services could decide to appeal the decision to the Court of Appeals.
“The amendment to Regulation 187 created unintended consequences that placed unnecessary barriers between Main Street New Yorkers and the insurance and financial services professionals who serve them,” said NAIFA-NY State President Gary Cappon. “This ruling is a very encouraging sign, but NAIFA-NY will work with our industry allies as well as state regulators and legislators to protect New Yorkers’ ability to receive needed financial services and advice. We believe agents and advisors are necessary to help New Yorkers attain financial security and achieve their financial goals. Regulations must enhance those relationships, not hinder them.”
NAIFA-NY has an all new leadership team that took office earlier this year. They are committed to building coalitions and working with industry partners to amplify NAIFA-NY’s advocacy mission. A priority is ensuring that regulations protect consumers and require financial professionals to work in their best interests, while safeguarding the ability of Main Street consumers to obtain advice and allowing agents and advisors to continue with various business models that serve their clients well.
NAIFA supports the adoption in every state, including New York, of the National Association of Insurance Commissioners (NAIC) model regulation on annuity transactions. The NAIC model requires financial professionals to act in the best interests of consumers during annuity transactions and aligns with the Securities and Exchange Commission’s Federal Regulation Best Interest.
“The court’s ruling on Regulation 187 gives New York a fantastic opportunity to make a fresh start and create a regulation to protect consumers based on the NAIC model,” Cappon said. “NAIFA-NY firmly believes that insurance and financial professionals must act in the best interests of their clients. It’s a requirement every NAIFA member subscribes to when they agree to abide by our association’s Code of Ethics. The NAIC model achieves this goal without the unworkable requirements and restrictions of Regulation 187.”
“NAIFA takes a comprehensive approach to public policy, advocating at federal, interstate, and state levels for laws and regulations that protect consumers and preserve the ability of insurance and financial professionals to serve their clients,” said NAIFA President-Elect Lawrence Holzberg, who is a NAIFA-NY member. “NAIFA advocacy also works at all three branches of government – the Legislative, Executive, and Judicial – at the federal level and in all 50 state capitals. For example, NAIFA partnered with the American Council of Life Insurers and other groups to bring legal action that eventually resulted in a federal court vacating the U.S. Department of Labor’s Fiduciary Rule.”
NAIFA Staff Contacts: Maeghan Gale – Policy Director – Government Relations, at mgale@naifa.org; or Julie Harrison –State Chapter Director – Government Relations, at jharrison@naifa.org
NAIFA-NC Holds Virtual Advocacy Day
NAIFA’s North Carolina chapter (NAIFA-NC) held a virtual Advocacy Day, Monday, April 26. Insurance and financial professionals who attended benefited from an update on state legislative and regulatory activity by NAIFA-NC lobbyists Michelle Frazier and David Ferrell.
NAIFA’s national Senior Vice President for Government Relations Diane Boyle and Government Relations Director Michael Hedge provided an update on the federal PRO Act, which has passed the House of Representatives but has not yet passed the Senate. The legislation would reclassify many NAIFA members as “employees” rather than “independent contractors” under federal labor laws, having harmful consequences impacting their business models and ability to serve the best interests of their clients. Boyle and Hedge highlighted the results of a recent survey indicating that well over 90% of NAIFA members who currently operate as independent contractors do not want to be reclassified as employees.
Highlighting NAIFA-NC Advocacy Day were discussions by state Senator Todd Johnson (R-Union) and Rep. Chris Humphrey (R-Lenoir, Pitt) on the importance of political involvement and ways NAIFA members can develop impactful relationships with lawmakers. They also spoke about bills before the Legislature that are of interest to NAIFA members and answered attendees’ questions.
NAIFA Staff Contacts: Maeghan Gale – Policy Director – Government Relations, at mgale@naifa.org; or Julie Harrison –State Chapter Director – Government Relations, at jharrison@naifa.org
NAIFA State Advocacy in Action: Montana Rate-Setting Law Signed
Montana Governor Greg Gianforte has signed legislation that revises state nondiscrimination laws to allow insurers to consider insured individuals’ gender and marital status when setting rates for insurance premiums. NAIFA’s Montana chapter worked with state Commissioner of Securities and Insurance Troy Downing to craft and promote the legislation. NAIFA-MT members testified on its behalf at hearings in the state. The Commissioner cited research by NAIFA-MT in his press release on the legislation.
Montana is the only state that prohibits insurers from considering gender and marital status when setting rates across all insurance lines. Downing and NAIFA-MT showed that this has resulted in artificially inflated rates for women purchasing life, auto, and other types of insurance in the state.
“My female clients regularly pay dramatically more in Montana for the same policy than any other American female,” said Peter Daniel Sullivan, CFP, NAIFA-MT’s Government Relations Chair.
The new law takes effect Jan. 1, 2022.
NAIFA Staff Contacts: Maeghan Gale – Policy Director – Government Relations, at mgale@naifa.org; or Julie Harrison –State Chapter Director – Government Relations, at jharrison@naifa.org
NAIFA Attends NAIC and NCOIL Spring 2021 Annual Meetings
Understandably, 2020 was a slow year for NAIC and NCOIL – with the obvious exception of COVID-19 matters. Many Working Groups, Task Forces, and Committees delayed projects and meeting altogether.
Although there still are discussions on COVID-19 topics, the recent Spring meetings of both groups generally focused on getting regular work streams back up and running.
Diversity, Equity, and Inclusion
This is one topic that has been very active over the last year. The organizations have taken different approaches to examining and addressing race in insurance. For example, NCOIL has focused its efforts exclusively on race in underwriting. NAIC, while focused to some extent on underwriting, has undertaken a more holistic examination of these issues and has divided work into five workstreams to better focus their efforts.
Notably, some of the NAIC standing committees will also focus their work on DE&I issues this year. The Producer Licensing Task Force, for example, will look at offering licensing exams in foreign languages, whether prior criminal charges are impeding individuals from obtaining a license, how cultural bias can be minimized by exam vendors, and how the number and location of producers by company compare to areas’ demographics. Both groups have devoted significant amounts of time and attention to these conversations, and, at least for NAIC, this is just the beginning of the work.
Life Insurance
The NAIC’s Life Insurance and Annuities (A) Committee had a rather quiet Spring meeting. In fact, it disbanded two of its Working Groups, the Annuity Disclosure Working Group (the Chair citing a total lack of commissioner support for this Working Group and no consensus to date – after four years – on key illustration issues for indexed annuities) and the Retirement Security Working Group, which completed its sole charge to “explore” retirement security issues.
Among the remaining Working Groups, the Annuity Suitability Working Group intends to continue working on FAQs and potential model bulletins as implementation/enforcement tools as more states adopt the Suitability Model. The Life Insurance Illustrations Issues Working Group intends to have sample policy overviews for term life policies completed and delivered to the full (A) Committee shortly.
The Committee did hold a discussion about life insurers’ underwriting practices related to COVID-19. Various consumer groups are pushing for more transparency regarding claim delays and denials surrounding COVID vaccinations. Specifically, rather than seeking a prescriptive solution for the industry, they want insurers to provide more clarity on a go-forward around why claims may be delayed or denied and generally how policies will be governed around COVID vaccine-related reasons.
Producer Licensing
The Producer Licensing Task Force is updating the Application amendment process following failure in 2018 to get draft Application changes approved by the NAIC Executive Committee. NAIC staff and Task Force leadership are reviewing the comments they received on the amendment procedures and will circulate an updated draft before the summer meeting.
32 states are now offering remote, proctored producer licensing examinations, and 16 states are in the process of implementing them, a move demanded and accelerated by COVID-19. Three jurisdictions have indicated they will not implement remote examinations. Many NAIC and NCOIL stakeholders, including NAIFA, continue to advocate for permanent remote offerings after the pandemic is over.
Privacy – Focus on Consumer Protections
The NAIC’s Privacy Protection (D) Working Group continues to be primarily in “study mode.” They are monitoring federal legislation and state activity in this space (including the ever-contentious issues of preemption and private rights of action for consumers). For now, the Working Group is surveying what has already been done and assessing emerging trends. The Market Regulation and Consumer Affairs (D) Committee, under which the Working Group falls, has instructed the group to focus in 2021 on developing insurance-specific recommendations for protecting consumer rights, including rights to opt-out of data sharing, be “forgotten,” and/or restrict insurance entities’ use of consumer information. These recommendations will be the main deliverables for the NAIC’s Fall meeting, and, if time permits, the Working Group will start drafting a policy on minimum consumer protections for data privacy in insurance.
The NAIC will meet June 12 – 27, 2021 for the 1st of a 2-part Insurance Summit, followed by the Summer Meeting August 14-17, 2021. NCOIL will meet for its Summer Meeting July 14 – 17, 2021.
NAIFA Staff Contact: Maeghan Gale – Policy Director – Government Relations, at mgale@naifa.org
