NU Online News Service, Feb. 24, 3:50 p.m. EST

WASHINGTON–Life insurance industry representatives attacked proposed health care legislation today that would tax mid-to-upper income individuals on income earned from annuities and other investments.

The concept was outlined in the health care reform legislation released by President Obama Monday as a method to help fund the Medicare program.

The industry's opposition was voiced in a letter sent to Treasury Secretary Timothy Geithner by Frank Keating, American Council of Life Insurers president and CEO.

It voices the industry's "deep concern" about the proposal.

In the letter, ACLI officials also took the opportunity to again promote its support for legislation that would provide a tax benefit for people who invest in annuities that provide a guaranteed lifetime income payment.

Specifically, the president's proposed amendments to the Senate health care reform legislation, the Patient Protection and Affordable Care Act, would impose a 2.9 percent assessment on income from interest, dividends, annuities, royalties and rents for individuals earning more than $200,000 or families making more than $250,000.

The proposed tax would also apply to capital gains, an administration official confirmed. That would push the rate to 22.9 percent in 2011, up from 15 percent currently and 20 percent scheduled to take effect next year.

President Obama also embraced the Senate proposal for an increase in the Medicare payroll tax on the highest earners.

"Currently, Americans face unprecedented difficulties securing their retirement income in an environment that has shifted longevity, savings and other retirement risks onto the individual," Mr. Keating said in his letter to Secretary Geithner.

"In such a landscape, policy-makers should not create a disincentive for annuity products that help Americans address these risks," he said.

"I would encourage you to reevaluate this proposal that increases taxes on an important retirement security tool," he added.

Mr. Keating urged, "To help counter Americans' lack of confidence in their future, policy-makers should consider tax policy that encourages additional retirement savings and that encourages individuals to take their savings in an income stream that cannot be outlived."

He said the administration's proposal to tax annuity income "would counter both of those goals and negatively impact" an important tool used to accumulate retirement savings and to secure lifetime retirement income–particularly for the 78 million working Americans who lack access to an employer-sponsored plan.

Special Reports /

Insurers Hit Obama Health Plan Provision To Tax Annuity Income

Related Stories

Recommended For You