From the White House to Your Desk

Last month, President Bush signed an economic stimulus package that will put money in the hands of many Americans and provide tax incentives for many businesses. Unfortunately, the news from the administration isn’t all good. The Labor Department recently proposed burdensome new requirements on employee benefit plan service providers that negatively impact independent agents. In response, the Big “I” has submitted a formal comment letter with complaints about the proposal and suggestions for improvement.

In February, the President signed into law H.R. 5140, the Economic Stimulus Act of 2008. This economic stimulus package authorizes rebate checks to middle and lower-income individuals and families, provides temporary tax incentives for businesses and increases loan limits on government-backed mortgages. These measures are designed to provide a boost to the economy.

The rebate checks will consist of two parts: a basic rebate and a rebate per qualifying child. The total of these rebates will be reduced for higher income earners. First, qualifying recipients will receive a minimum basic rebate of up to $600 (individuals) or $1,200 (married couples). Those receiving the basic rebate will also receive an additional $300 per child. The total of these two parts of the rebate will be reduced at a rate of 5% of adjusted gross income above $75,000 (individuals) or $150,000 (married couples).

Businesses will also benefit from the stimulus package through temporary increased elective expensing limits and bonus depreciation. Currently, small businesses may elect to expense the cost of qualified assets they purchase in the year when the assets are placed in service, within certain limits. For taxable year 2008 only, the stimulus package increases the expensing limit to $250,000 (up from the current $128,000) and the phase-out threshold to $800,000(up from the current $510,000). In addition, and also for taxable year 2008 only, the stimulus package allows a trade or business to depreciate an additional 50% of the cost of an asset acquired and placed into service in 2008.

Finally, the stimulus package raises Federal Housing Administration’s (FHA) and the government sponsored enterprises’ (Fannie Mae and Freddie Mac) loan limits (the dollar amount of a mortgage that FHA can insure).This measure is intended to increase credit availability in the mortgage market.

The Department of Labor recently proposed an amendment to the requirements of ERISA section 408(b)(2),which would impose significant and burdensome compensation and conflict of interest disclosure requirements on ERISA-covered employee benefit plan service providers, including independent insurance agents and brokers. The Big “I” filed a comment letter criticizing the proposal and suggesting improvements.

ERISA’s Prohibited Transaction Rule generally prohibits the furnishing of goods or services between an employee benefit plan and a party in interest to the plan. However, ERISA sec. 408(b)(2) exempts from the Prohibited Transactions Rule service contracts or arrangements between a plan and a party in interest if the contract is reasonable, the services are necessary and the compensation is reasonable. The proposed amendment attempts to clarify the meaning of “reasonable” contract or arrangement in order to provide both plan fiduciaries and service providers with regulatory guidance.

The scope of the proposed amendment would apply to independent insurance agents and brokers who provide services to employee benefit plans and would require, among other things, that the contract or arrangement for service be in writing and disclose the services to be provided to the plan and all compensation to be received. In addition, the service provider would be required to provide numerous disclosures concerning conflicts of interest.

In response to this proposed amendment, the Big “I” filed a comment letter criticizing the proposal as it relates to independent insurance agents and suggesting changes to improve it from the agent perspective. A chief concern was the inappropriate application of the proposed amendment to insurance service providers in light of the clear focus on pension and 401(k) plans. The comment letter also criticized the overly broad and detailed compensation requirements as they relate to independent agents, pointed out the compliance challenges and urged a more distant effective date.

Jason Spence (Jason.spence@iiaba.net) is Big “I” assistant vice president of government affairs.

Three Reasons to be in D.C.

The Big “I” Legislative Conference& Convention is fast approaching—and we need your voice on Capitol Hill. Still need a reason to attend?

Strength in numbers on Capitol Hill. More independent agents on the Hill means more legislators hear our voice. When legislators receive personal visits from their constituents, they take notice and listen.

The Big “I” makes it easy. The Big “I” provides attendees with a thorough briefing, talking points and transportation to the Hill. This is YOUR chance to influence the future of the industry on issues such as insurance regulation, agent licensing, flood insurance, and many other issues.

In the hot seat—you see them on TV, now see them live. Paul Begala, CNN Political Analyst, and Tucker Carlson, political analyst with MSNBC, discuss the 2008 election. If you haven’t yet registered to attend the 2008 Big “I” Legislative Conference &Convention, go to www.independentagent.com and click on “Meetings &Events.” There you will find all the information you need to plan your visit to Washington, D.C., including event registration, hotel information and a detailed schedule.
—Katie Butler