Magazine article American Banker

Fight Brews on Clinton Plan to Cap Annuity Tax Shelter

Magazine article American Banker

Fight Brews on Clinton Plan to Cap Annuity Tax Shelter

Article excerpt

Banking and insurance groups are mobilizing in opposition to a Clinton administration proposal to cap the amount of money that can be sheltered from taxes by investing in annuities.

Trade groups, investment product marketing firms, and individual banks are rallying against the measure, which is expected to be attached to one of several revenue-raising bills pending in Congress.

The measure would make annuities less attractive to many investors, and thus would have a "dramatic impact on banks and their customers," said Glen Milesko, president of Bank One Insurance Services, Milwaukee, a unit of Banc One Corp., Columbus, Ohio.

Currently, there is no limit on the amount that can accumulate tax-free in an annuity. Taxes on the earnings are not due until investors tap the funds, typically upon retirement.

$50,000 Annual Ceiling

The proposal, which has been circulating since early April, would have capped annual tax-exempt contributions at $50,000.

The current structure has allowed millions of consumers to build retirement income and has made the products hot sellers in banks, industry executives say.

Annuities have attracted attention from lawmakers seeking ways to boost revenues because they represent a sizable and growing pool of untaxed money.

Although firm figures could not be obtained, annuity investments are believed to total several hundred billion dollars. Sales of the investments were $72 billion last year, up from $53.6 billion in 1990, according to the Association of Banks in Insurance, Washington. …

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