Legislative & Regulatory Update DCIA Fall Forum

Transcription

1 Legislative & Regulatory Update DCIA Fall Forum Ryan Work Senior Director, Government Relations Self-Insurance Institute of America, Inc.

2 Presentation Overview 1) Political Environment 2) ERC Activities Congress IRS/ Treasury 3) Advocacy & Outreach 4) Misc. Policy 5) Elections 2016 & Beyond

3 Framing the Political Environment A battle of political wills Policy Stagnation Legislative vs. Regulatory House vs. Senate Republican vs. Democrat IRS Politics

4 Challenges = Opportunities Misunderstanding/ Knowledge Risk Mitigation Tax Reform/ Tax Avoidance 831(b) - Enterprise Risk Captives

5 Why a focus on captives? Why do you and your clients utilize the 831(b) election? What do regulators/ policymakers think you use it? Regulators/ policymaker concerns: Small captives are being marketed only to accomplish estate planning/ wealth transfer Low frequency risks Tax shelter IRS Dirty Dozen List: Micro captives Key: Policymaker Education

6 Congressional Overview 831(b)Legislative Purpose Farm Mutuals: Increase the written premium threshold of IRC 831(b) from the current $1.2 million to $2.2. Million Senate Finance Committee Original Restrictions: 1) Prohibit use of reinsurance. 2) Limit to 20% of net written premiums to a policyholder in a taxable year. Introduced Senate - S Calls for U.S. Treasury study on the use of captives as an estate planning tool Specific legislative language to address abuse. House- HR Clean threshold increase.

7 SIIA Actions ERC Advocacy Working Group Ongoing Education Outreach Public Relations Member Grassroots Political Support

8 SIIA Working Group Proposals SIIA proposes estate planning designs curbs in three key areas: 1) limitations on the use of irrevocable trusts for purposes of estate planning; Exceptions: Trust included in estate/ trust is common owner. 2) limitation on the use of life insurance by 831(b) captives (10% deminimis exception); and 3) sunset provision of 3 years for existing captives. National Association of Insurance Commissioners (NAIC), mirrors this closely, including: 1) prohibition on the use of an 831(b) captive by irrevocable trusts; 2) agreement with SIIA on the life insurance provision; and 3) sunset provision of 2 years.

9 JCT 831(b) Specifications Joint Committee on Taxation (JCT) proposed broad policy specifications: Elimination of the 831(b) election if captive is owned by a family relation other than owner Same person would have to own both the business and the related captive. 5% deminimis exception Immediate sunsetting While JCT is focused on perceived abuses surrounding estate planning, various policy based solutions put forth would throw the baby out with the bath water.

10 JCT Specs - Concerns Industry Concerns: 1) Usurping of state insurance regulatory authority; 2) Harmful to family owned business, such as farm-mutuals; and 3) Provides only a limited common ownership situation for 831(b) electing captives that would prohibit a great majority of legitimate uses.

11 Where We Stand General: Critical policy environment Congress JCT Senate House Legislative Vehicle Tax Extenders IRS/ Treasury State Regulators

12 FHLB Legislation FHLB Actions Federal Housing Finance Agency (FHFA) proposed a rule to prevent captive membership in the Federal Home Loan Bank (FHLB), changing its definition of an insurance company. Definitional change of insurance company to include traditional insurance companies but not captive insurers. The moratorium date on captive membership in FHLBs expired several months ago. If the FHFA adopts the definition, captive membership would sunset in 5 years. More than 1,300 comments filed. Congressional Response HR 3808 introduced to: Prevent the FHFA from excluding captives from FHLB membership. Require study of the impact that FHFA membership provisions would have on the FHLB.

13 Misc. Federal Policy ACA Progress & Impacts FIO Captive Reinsurers NAIC Fall Meeting Focus Insurer-owned captives Changing captive users Self-Insurance Protection Act (SIPA) S. 775/H.R Proactive policy Hedge Against Possible Rule-Making Action by Administration Taft-Hartley/ Private/ Public Sector Grassroots Involvement

14 Advocacy Outreach Educate & engage policymakers on benefits of risk management in the captive space. Strengthen outreach activities. Build broad coalition of captive managers and others who can tell the story. Discuss potential risks and unintended consequences of 831(b) restrictions on those using captives for the right reasons. Clients are critical storytellers.

15 Political Relationships Establish policy and political relationships with Members of Congress on key commits of jurisdiction. Senate Finance House Ways and Means SIPAC

16 Policy Education Need for proactive and unified outreach approach to build industry s growth. Positioning industry as a positive policy partner. Short and long terms strategies.

17 Work Ahead Consider how you can engage with your federal policymakers or tell the story of the captives you manage. Educating federal and state policymakers, and regulators Be Prepared Policy environment can both creep along and move incredibly fast when the opportunity arises.

18 2016 Election Outlook House 246 Republicans, 188 Democrats New Speaker, Leadership Dynamics Senate Republicans must defend 24 seats, compared with only 10 for Democrats Democrats need to add 4-5 seats for majority Watch the Midwest Coat-tails Presidential 7 Democrats 16 Republicans

19 Industry Tools Self-Insurance Defense Coalition U.S. Chamber of Commerce National Association of Manufacturers Council of Insurance Agents & Brokers National Association of Health Underwriters National Retail Federation National Franchisee Association National Association of Wholesaler- Distributors Heating, Air-Conditioning & Refrigeration Distributors International National Electrical Contractors Association Self-Insurance Educational Foundation (SIEF) Capitol Hill Briefings Industry Studies & Reports Self-Insurance Political Action Committee Supporting federal candidates Media Outreach Capabilities Op-eds Expert Interviews

20 Get Involved Frame the debate Meet with policymakers Educate and tell your story

21 Comments/Questions Contact Info: Ryan Work 800/