Federal Roundup
March 19, 2014 by Capcity Associates
Tax Reform
As expected, Congress recently raised the debt ceiling with little contentious debate. This move comes after a bipartisan omnibus spending measure passed in January. With these policy debates being settled, Congress is now in a position to refocus attention on tax reform. However, the recent bipartisanship is expected to fade fast as strong differences remain over tax policy, and the approaching fall elections will further escalate tensions. Additionally, the Senate has a new Finance Committee Chair, Senator Wyden (D-OR), and it isn’t clear how he will proceed. In the House, Chairman Camp released his draft reform proposals and NAFA’s Government Relations Committee has been reviewing it, identifying potential issues that may impact fixed annuities. In addition, NAFA is working with SecureFamily.org, a coalition of trade associations banding together to ensure life and annuities aren’t negatively impacted, as well as promote positive changes. We anticipate more substantive tax reform action in the House and Senate during the second and third quarter. Most likely action will consist of hearings and markups at the committee level in an effort to lay a foundation for action after elections during the so-called lame duck session.
Federal Insurance Office
The House Financial Services Committee recently held an oversight hearing about the FIO insurance industry modernization report, and witnesses expressed support for many of FIO’s recommendations for state action and areas for a federal role. In general, there was consensus that state regulation of insurance is working, but the NAIC took a few jabs and clearly some folks are leaning toward a greater federal government/FIO role in the insurance market. A number of policy issues were the focus, including NARAB II, international matters, and product approval. Themes of lack of uniformity, efficiency and subsequent adverse impacts on costs to carriers and consumers will be underscored in ongoing policy discussions. The Senate Banking Committee is expected to hold an oversight hearing on the FIO report in the next several months. NAFA will continue to monitor for developments.
Fiduciary Standards Debate
The SEC and DOL continue their work on fiduciary standards. In a recent SEC 2014-2018 strategic plan, consideration of standards of conduct is listed, but with no formal details. However, while the SEC hasn’t committed to crafting a uniform fiduciary standard under its Dodd-Frank Act Section 913 authority, many financial services’ interested parties are urging that the SEC take the lead and publish a rule before the DOL finalizes its rule. DOL has officially marked August this year as the target date for release of its revised fiduciary rule, but sources confirm that the DOL is still conducting cost/benefit analysis and crafting exemptions. Some observers believe that if DOL doesn’t finish its work soon that the August date will slip by, possibly until 2015, given the fall elections. Meanwhile, FINRA and the SEC are reviewing rollover rules, which should be of interest to DOL and it adds a new facet to the ongoing policy deliberations.