Clinton's run for presidency may raise profile of stalled bill

Sen. Hillary Clinton's bid for the White House may rekindle momentum behind a bill she co-sponsored last year that would offer a tax break on some annuities, according to a retirement trade group.
FEB 11, 2008
Sen. Hillary Clinton's bid for the White House may rekindle momentum behind a bill she co-sponsored last year that would offer a tax break on some annuities, according to a retirement trade group. The Retirement Security for Life Act of 2007 would provide a tax incentive to individuals investing in a life-contingent annuity and opting to receive a guaranteed stream of income, or "paycheck for life." Specifically, the bill would exclude federal taxes on half of the annual income from a life annuity, up to a maximum of $20,000. "Sen. Clinton is one important co-sponsor among many others," said David Mack, a spokesman for Americans for Secure Retirement in Washington. "It will continue to drive support should she make it to the White House." Americans for Secure Retirement is a coalition of consumer, minority and business organizations, including insurance and annuity lobbying groups. A companion bill was also introduced in the House last year and has so far garnered bipartisan support from 60 representatives. The earliest iterations of the bill date back to 2004, with the latest version being backed by Ms. Clinton. With the New York Democratic senator in the presidential race, Americans for Secure Retirement believes that the odds of the bill's making it through Congress and signed into law could improve.

A NATIONAL DEBATE

"She's an early co-sponsor of the bill who understands the need to do more to ensure that Americans are in the position to enjoy a secure retirement," said Mr. Mack. "[Having a major candidate's support] helps to elevate the retirement security debate to a national level." Standing in the bill's way, however, is the effect the exemptions would have on the federal deficit, according to the National Association of Insurance and Financial Advisors in Falls Church, Va. The group, which supports the act, believes that there won't be much activity on the bill until next year. "If, in fact, we end up with a Democratic Congress and White House, major reforms on the tax system will be looked at," said Bill Anderson, vice president of NAIFA. Some advisers believe that the latest version of the bill could become law — especially since it would provide a financial benefit to aging baby boomers. "It's interesting to me that as boomers needed to save for retirement, [individual retirement accounts] and 401(k)s became popular," said Barry Glassman, a certified financial planner and senior vice president of Cassaday & Co. Inc. of McLean, Va. "It would surprise me in the next 20 years if retirees didn't have some tax advantage while harvesting their retirement income." A tax break on annuity payouts may lead some advisers to recommend annuities to their clients. "We'd look more favorably on annuitization because of the breaks," said Phil Carrasco, a certified financial planner and wealth adviser at Cornerstone Advisor. The Hagerstown, Md.-based firm manages $130 million. Mr. Carrasco said he would also consider putting a larger amount of client assets into immediate annuities to provide a guaranteed-income source that would fit with the bill's provisions. For example, a client could put $1.2 million toward an immediate annuity with a 20-year payout before capping out of the $20,000 annual limit for the exemption, he said. Advisers are also expecting to see more innovative products coming out of the insurance industry. "I foresee that as retirees need more income, we're going to see more convergence of supply and demand, with new products available for boomers through retirement," Mr. Glassman said. "And the government is making them even more attractive." Regardless of whether Ms. Clinton makes it into the Oval Office, Americans for Secure Retirement expects the bill to move forward. "There isn't so much of an active opposition [to the bill], but rather, it's about raising the profile of retirement issues for Congress," said Mr. Mack. "This is a short year, but we're still working to make sure we're heard in a very loud environment." Darla Mercado can be reached at [email protected].

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