New Retirement Security Bill Proposes to Make Portion of Guaranteed Lifetime Income Payments Tax-Exempt

July 20, 2009

SOURCE: InsuranceNewsNet, Inc.

Reps. Earl Pomeroy (D-N.D.) and Ginny Brown-Waite (R-Fla.) has recently introduced The Retirement Security Needs Lifetime Pay Act (H.R. 2748). The bill seeks to amend the Internal Revenue Code of 1986 to exclude a portion guaranteed lifetime income payments from the taxable income.

H.R. 2748 would provide a 50 percent tax exclusion lifetime annuity payments received under one or more annuity contracts (up to $10,000 annually). 

The bill would also exclude 25 percent (up to $5,000 for single and $10,000 for a joint return) of lifetime income payments received under any qualified retirement plan from Individual Retirement Accounts (IRAs), qualified plans and similar employer-sponsored retirement savings plans other than defined benefit plans. 

Additionally, the proposed legislation seeks to exclude the value of longevity insurance from amounts subject to required minimum distributions and clarify the taxation of partial annuity payments.

“The Retirement Security Needs Lifetime Pay Act will provide families with incentives to plan for a secure lifelong retirement,” Pomeroy said in a statement. Brown-Waite believes the bill would serve as an incentive for workers to invest in a retirement annuity.

The Insured Retirement Institute, formerly known as NAVA, commended Pomeroy and Brown-Waite and called the proposal “a huge step in the right direction” in helping Americans boost their financial security in retirement, particularly with the growing concern over the future of the Social Security. 

Americans for Secure Retirement (ASR), a broad-based coalition of more than 40 organizations, also welcomed H.R. 2748 as one of the solutions to the retirement challenge facing many Americans.

Meanwhile Sens. Kent Conrad (D-ND) and Pat Roberts (R-KS) are planning to reintroduce the Retirement Security for Life Act, according to ASR. The Retirement Security for Life Act, originally introduced in May 2007, proposes to amend the IRC of 1986 to create federal tax incentives designed to encourage individuals to invest their retirement assets in an individual life annuity.