Senate Takes Aim At Mr. Big, Misses Mark
Deferred compensation provision in H.R. 2 would be felt by large segment of workforce
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Lee Allen
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WASHINGTON, DC (Feb. 1, 2007) — The National Association of Insurance and Financial Advisors responded to action taken today by the U.S. Senate, warning that capping the favorable tax treatment of deferred compensation plans misses its intended target—the most successful business executives—and hits a much larger segment of the workforce.
The Senate passed H.R. 2, which would raise the federal minimum wage, also provides tax incentives intended to benefit small businesses in the hopes of offsetting the impact of raising the federal minimum wage. To offset the tax revenue lost by the incentives, senators targeted non-qualified deferred compensation plans in a way that “limits the opportunity for many ordinary workers and middle managers to save for their future financial security needs,” said David F. Woods, CLU, ChFC, LUTCF, NAIFA’s chief executive officer. “Essentially, the senators took aim at Mr. Big but hit a lot of others.”
The provision targeting executive compensation, added Woods, “could also make life harder for smaller businesses trying to compete with larger companies to attract and retain top talent.”
NAIFA has expressed its concerns with and educated key lawmakers about these “unintended consequences.” Fortunately, based on comments made by two key senators, Chuck Grassley (R-IA) and Ron Wyden (R-OR), the Senate version of H.R. 2, predicts Woods, “will not likely be the final word.”
Since the House version of H.R. 2 has no provision related to non-qualified deferred compensation, NAIFA is cautiously optimistic that House and Senate leaders will find a way to eliminate the Senate’s deferred compensation language entirely. The exact process to reconcile the differences appears to be under discussion. Traditionally, a conference between House and Senate tax writers would be the mechanism of choice, but House and Senate leaders may opt for an alternative process.
About NAIFA: Founded in 1890 as the National Association of Life Underwriters, the National Association of Insurance and Financial Advisors comprises 800 state and local associations representing the business interests of 225,000 members and their employees nationwide. Members focus their practices on one or more of the following: life insurance and annuities, health insurance and employee benefits, multiline, and financial advising and investments. NAIFA’s mission is to advocate for a positive legislative and regulatory environment, enhance business and professional skills, and promote the ethical conduct of its members. NAIFA is also a founding member of and contributor to the Life and Health Insurance Foundation for Education.