Setting Standardthe

NAIFA’s political advocacy program has set the standard for excellence in protecting the industry and creating a favorable business environment for you and your clients.

By the NAIFA Government Relations Team

NAIFA’s three-part government relations program is the gold standard for advocacy of life and health insurance, annuities, retirement savings and employer-provided benefits. Our grassroots allow us to have an influential presence across every congressional district. Our top-rated, vigorous political action committee (IFAPAC) supports candidates for elective office who share our values and priorities, and our talented and dedicated lobbyists in D.C. and in state capitals are relied-upon policy experts. This strategic combination helps ensure that laws and regulations are beneficial to financial advisors and the clients they serve.

Examples of the efficacy of NAIFA’s government-relations success abound. Below is just a sampling. The key is the steadfast support of NAIFA members. Your involvement at the constituent level, your contributions to IFAPAC and your responsiveness to calls for action underpin NAIFA’s spectacular record of success.

Here’s a look at NAIFA GR in action this past year.

Tax reform

NAIFA continues our robust defense of the current tax treatment of life insurance. Despite multiple prior attempts by Congress and state legislatures to impose new or current taxation on the annual accumulation of life insurance cash values, the current laws that permit the inside build-up of life insurance to grow without tax liability remain in full force. Life insurance cash values are taxed, of course, if the policyholder withdraws them prior to death. But thanks to NAIFA and our allies, death benefits paid to the named beneficiaries are received tax-free. This is in no small part due to the vigilance and involvement of NAIFA members and their representatives.

Adverse tax proposals that NAIFA has successfully stymied—often at an early, not-yet-public stage of the legislative process—include taxing loans from life insurance policies, eliminating the deduction for interest paid on company-owned life insurance (COLI) loans, limits on the size of life insurance policies that can offer tax-free accumulation of cash values, and restrictions on the use of life insurance by businesses.

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With tax reform a high-agenda item, we are more vigilant than ever in protecting the current tax rules for employer-sponsored, retirement-savings plans.

A quickly moving bill in Oregon would have taxed the inside build-up and death benefit of life insurance. Although the hearing on the bill was scheduled on less than two days’ notice, a contingent of NAIFA members dropped everything to travel several hours to Salem to testify against this bill. The result was that the bill’s sponsor himself did not vote in favor of his own bill.

Fiduciary rule

Among the most impactful issues that NAIFA battled was the Department of Labor (DOL) fiduciary rule. That issue is ongoing, with debate continuing about whether and when to change the now partially applicable final DOL fiduciary rule. But during the pendency of the rulemaking process, NAIFA worked with the DOL, the White House, FINRA and lawmakers, successfully preventing a rule that would allow clients to file lawsuits against their advisors under contract law, to make certain proprietary products could continue to be the subject of retirement advice, to protect advice on annuities from harmful restrictions, and to stave off recordkeeping and disclosure rules that were burdensome in their required detail and frequency.

The final rule is far from perfect—the burdens it places on advisors’ financial institutions, including insurance companies and broker-dealers (and subsequently advisors), cannot be minimized. But it was NAIFA, working with allies in the financial-services and retirement communities, that kept these rules from being imposed on advisors themselves for information, warranties and disclosures to which advisors have no real access.

The issue is not settled; so, NAIFA’s work is not over. Certain elements of the rule—specifically, imposition of the new definition of fiduciary advice, along with the Impartial Conducts Standard and the old version of PTE 84-24, took effect on June 9. The remainder of the rule is scheduled to become applicable on January 1, 2018.

NAIFA is fully engaged with the DOL and members of Congress to get necessary revisions to the rule and a new applicable date so that the DOL can complete the new analysis as directed by the White House. We have conducted surveys and have provided DOL with additional information in two comment letters. We will continue to work for favorable changes to the rule in the upcoming year.

In addition, NAIFA has been, and will continue to be involved in the potential examination by the Securities and Exchange Commission (SEC) into whether broker-dealers and registered investment advisors should be subject to a new, “best interest of client” version of a standard of care. This, too, is an ongoing issue on which NAIFA provides important input and education to SEC commissioners and staff, FINRA, as well as to members of Congress and their staffs.

Healthcare reform

NAIFA was also fully engaged in efforts to repeal-and-replace the Affordable Care Act (ACA). This deeply partisan, high-profile issue is another example of the influence NAIFA has on the legislative process. From enactment of the ACA in 2010, through current legislative efforts, NAIFA advocates to ensure that choice, quality, competition and access to professional service are a part of any health-care reform effort.

We have successfully prevented a single-payer or government-run health insurance system and have witnessed numerous NAIFA-backed revisions to the ACA. We have prevailed in our presentation of arguments about how high-deductible health coverage combined with appropriately-funded (and taxed) health savings accounts are worthwhile options for consumers. We kept flexible spending arrangements (FSAs) viable in the face of proposals to gut them, even as we continue to work towards elimination of the cap on FSA annual funding.

We have successfully educated members of Congress about how adverse it would be to limit the value of health insurance that employers can provide tax-free to their workers. And we continue to fight for greater competition and fair compensation for agents.

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At virtually every level of the very complex ACA, NAIFA’s influence on improving the health-insurance marketplace can be seen.

NAIFA-Nebraska and NAIFA-Iowa successfully lobbied to reverse a decision by insurance regulators to suspend agent commissions on policies sold through the now bankrupt ACA Co-Op operating in those states. Due to those critical efforts, agents will be placed higher in the bankruptcy process of the Co-Op to retrieve payments owed.

Legislation backed by NAIFA-Tennessee was enacted, permitting advisors to charge fees with written disclosure to clients in connection with a health insurance plan if the advisor will not receive a commission as part of the transaction.

NAIFA-Arkansas successfully secured authorization from the Arkansas Department of Human Services, which permits advisors to assist consumers eligible for the Arkansas “Private Option” Medicaid expansion throughout the entire enrollment process.

At virtually every level of the very complex ACA, NAIFA’s influence on improving the health-insurance marketplace can be seen. However, NAIFA-backed proposals to further increase the accessibility and affordability of health insurance are needed to foster a robust and competitive private market to offer employers and individuals ample coverage options to meet their healthcare needs.

Retirement savings

NAIFA continues to fight for rules that enhance and improve overall retirement readiness. Unfortunately, the tax-deferred nature of many retirement-savings programs becomes an attractive target for lawmakers looking for revenue to offset other tax priorities. With tax reform a high-agenda item, we are more vigilant than ever in protecting the current tax rules for employer-sponsored retirement savings plans. Proposals that limit the amount of pre-tax contributions to plans or favor after-tax contributions to the detriment of small businesses and their employees are a current focus of our advocacy efforts.

NAIFA supports—and is persuading lawmakers to support—many favorable proposals that will help middleincome Americans save for their retirements. NAIFA-backed proposals moving toward enactment into law include:

• One that would provide employee participants with an illustration indicating approximately how much lifetime income a worker might expect from his or her current account balances during retirement

• A proposal that would lessen the cost of sponsoring an employer plan by allowing required notices and disclosures to be delivered electronically

• A proposal to allow small businesses to join together to sponsor a retirement savings plan (open MEPs)

• Proposals to streamline and/or add flexibility to the participation (non-discrimination) rules applicable to employer-sponsored, retirement-savings plans

NAIFA again successfully fought off an adverse federal proposal that would require heirs to take distributions (and pay tax) within five years of inheriting IRAs and 401(k) plan balances (absent certain exceptions). NAIFA’s efforts have also made clear that life insurance has a key role to play in a sound retirement savings plan.

NAIFA state associations, including Maine, Vermont, Utah, Georgia and Colorado, played a crucial role in successfully opposing state-run retirement plan legislation which would needlessly compete with private retirement solutions.

Working closely with NAIFA and coupled with an impressive grassroots effort, Congress passed and the President signed H.J. 66 and H.J. 67, preventing the Department of Labor from exempting local or state government-run retirement plans from worker protections under ERISA.

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Your involvement at the constituent level, contributions to IFAPAC and responsiveness to calls for action, underpin NAIFA’s spectacular record of success.

Senior financial protection

NAIFA’s efforts have resulted in a federal bill—poised for enactment at any time—that protects fragile elderly individuals from exploitation by unscrupulous people seeking to bilk them of their savings. The Senior $afe Act— largely due to NAIFA’s input—protects NAIFA members from liability when they, in good faith, report to the authorities any evidence they see that their clients and prospects may be victims of this unscrupulous exploitation. NAIFA strongly supports this important legislation, was active in its development, and continues to encourage Congress to enact it as soon as possible.

NAIFA state associations, including Louisiana, Colorado, Oklahoma and Montana, successfully amended bills designed to protect seniors from financial exploitation to include provisions that protect advisors from liability and establish a voluntary rather than a mandatory reporting of suspected elder financial abuse.

Flood/NFIP

NAIFA’s multi-line members have cause to be particularly satisfied with the value of their NAIFA membership in light of NAIFA’s successful efforts to make sure the National Flood Insurance Program (NFIP) reauthorization bill will contain provisions that allow write-your-own flood insurers to fairly compensate agents for their advice to clients on flood-insurance issues. Early NFIP reauthorization proposals suggested reimbursement levels that would have prevented—due to inadequate allowable compensation—agents from participating in the floodinsurance market. NAIFA and ally efforts appear poised to prevent that adverse result.

As it has done for decades, NAIFA will continue to provide important input to ensure that proposed laws and regulations are good for the millions of Americans who rely on the service and products you provide. We look forward to working with you to achieve laws and regulations that help your clients, stabilize the market and promote a prosperous business climate for you now and in the years ahead.