The tax treatment of life insurance and annuities has encouraged generations of Americans to protect their financial futures. As society and work change, life insurers are committed to solutions that protect all Americans, regardless of where and how they work, their life stage, or the economic status of their household. Americans are living longer, and financial security into retirement is a big challenge facing our country.

American families count on life insurers' products for peace of mind, long-term savings, retirement planning, and a guarantee of lifetime income when it's time to retire. 90 million American families depend on our members for life insurance, annuities, retirement plans, long-term care insurance, disability income insurance, reinsurance, dental and vision and other supplemental benefits.

When Congress and state legislatures consider approaches to tax reform, policymakers must carefully consider the negative effects on families if changes to public policy make it more expensive to obtain financial and retirement security.

ACLI has partnered with the American Fraternal Alliance, Association of Advanced Life Underwriting, GAMA International, Insured Retirement Institute, National African-American Insurance Association, National Association of Fixed Annuities, National Association of Independent Life Brokerage Agencies, National Association of Insurance and Financial Advisors, and Women in Insurance & Financial Services to educate policymakers about the critical role life insurers’ products play in the lives of American families, businesses, and communities.

ACLI Position

On behalf of the U.S. life insurance industry, ACLI shares the goal of encouraging economic growth through a competitive tax system.

The nature of the life insurance business is very different from that of a manufacturer or retailer in that it involves the satisfaction of long-duration promises. Life insurers receive premiums in exchange for a contractual promise to pay insurance or annuity benefits. Life insurers utilize those premiums as well as investment returns on the premiums to pay policyholder benefits as they arise, often many decades in the future. The protections and guarantees our products provide are not available from any other type of financial services company.

The life insurance industry serves a critical role by providing a private sector safety net for millions of American families and businesses. The more families rely on our products and services, the stronger the private safety net becomes, and the less they need to rely solely on government entitlement programs. Tax increases on life insurers have an impact on their regulatory capital, lessening the availability and affordability of products that can be provided.

Current tax rules are aligned with the benefits life insurers’ products provide and advance public policy goals of helping safeguard families and individuals during times of financial stress by providing a private sector safety net for millions of Americans. The rules reflect and reinforce these public policy goals and should be preserved in this time of unprecedented financial and retirement security challenges.

Life insurance and retirement savings products are taxed appropriately under current law. The savings that build up in life insurance, and annuities contracts do not escape taxation. They are taxed at ordinary income tax rates when people make withdrawals from their retirement savings or annuity, or cash in their life insurance policies if protection is no longer needed. Additionally, life insurance and annuity owners pay premiums with after-tax dollars.

The life insurance industry’s current tax burden is substantial, and the current tax code arrives at a measure of taxable income for the industry that is proper and consistent with the way other businesses are taxed under the code, taking into account our unique business model. Changes to the tax treatment of either life insurer products or life insurance companies would affect the availability and affordability of our products at the very time that private sector protections and guarantees are needed most to supplement strained public safety nets.

Statement to House Ways and Means Committee

ACLI Statement for the Record - House Ways and Means Hearing - May 2017

Comment Letters To Senate Finance Committee

ACLI submission letters to Senate Finance Committee Working Groups—April 2015 (PDF format)

Congressional Financial Security Caucus

Co-chaired by Democrats John Larson (CT), Al Lawson (FL) and Donald Norcross (NJ) and Republicans George Holding (NC), Bill Huizenga (MI) and Tim Walberg (MI), the bipartisan caucus will work to educate lawmakers about the ongoing need for public policy that encourages Americans to save more, plan ahead, and protect their financial and retirement security. Learn more about the caucus here.


Quick Links