Sunday’s vote passed the health-care reform bill, upsetting an insurance coalition made up of five organizations. Insurance News Net posted the letter sent to federal legislators by the insurance associations. They are not protesting the actual bill, but an annuity tax included in it that consists of a 3.8% Medicare contribution collected from individual annuity income. Americans use annuities to secure their retirement, which the coalition argues is even more important since we have just suffered the largest economic crisis after the Great Depression. We no longer have access to the pension plans of past generations that provided a lifetime of retirement income. Because of this fact and the consequences of people living longer lives, many Americans use annuities to guarantee a lifetime income from their retirement savings.
While President Obama’s Middle Class Task Force chose to compare annuities to other retirement options as one of the best out there, the insurance coalition wonders why this health-care bill’s annuity tax seems to contradict that. An added tax on annuity income will surely discourage Americans from using this retirement tool to secure lifetime income. The coalition asks legislators to create more incentives for retirement vehicles like annuities, similar to the recent Retirement Security Needs Lifetime Pay Act & the Lifetime Income Disclosure Act. They may not rest until the tax on annuity income is removed from the bill and another solution is found to fund the health-care reform bill.