Bipartisan Legislation Reintroduced to Modernize Tax Treatment for Life Insurers
The Secure Family Futures Act has been reintroduced in both the House and Senate, aiming to modernize the taxation of debt investments held by life insurance companies. The bill, strongly supported by the life insurance industry, seeks to repeal the current capital tax treatment of debt investments such as bonds and subject them to regular tax treatment instead.
This legislative move would bring the tax treatment of life insurers’ debt holdings in line with that of other financial institutions. The bill was initially introduced in the House in September 2023 by Rep. Randy Feenstra (R-Iowa) and in the Senate the following July by Sens. Thom Tillis (R-N.C.) and Bob Casey (D-Pa.). Although it didn’t pass during the 118th Congress, it has now been reintroduced with new bipartisan support.
Rep. Feenstra emphasized the need to correct the current tax misalignment, stating, “Current tax law doesn’t recognize how insurance companies are able to meet their obligations to their policy holders, putting unnecessary costs on life insurance and the financial security it brings to families across America.” Sen. Tillis, now partnered with Sen. Raphael Warnock (D-Ga.) following Casey’s 2024 re-election loss, noted that the bill ensures “debt investments made by insurance companies are treated equally under our tax code.”
Industry Support and Potential Impact
The life insurance industry strongly supports this legislation, arguing that it could lead to lower operational costs for insurers and potentially more affordable insurance products for consumers. Life insurance companies traditionally invest in safe instruments like bonds, but have sought alternative investments and private equity partners in recent years due to historically low interest rates following the 2008 financial crisis.
David Chavern, president and CEO of the American Council of Life Insurers, highlighted the industry’s significant role in the economy, stating, “Life insurers protect families and help power the American economy. The $8 trillion they invest in businesses, infrastructure, and job creation adds life to communities across the United States.”
The proposed tax change is seen as a step towards rectifying the existing tax mismatch within the code. Chris Payne, senior vice president of government relations for Principal Financial Group, noted that this change “will pave the way for insurers like us to excel in our primary mission: creating opportunities for families and small businesses to achieve financial security.”
The legislation has significant backing from states with substantial life insurance employment, such as Iowa and North Carolina. Iowa’s life insurance industry supports nearly 54,000 jobs and $66 billion in investment, while Principal Financial Group employs almost 1,000 people across North Carolina.
By modernizing the tax treatment of life insurers’ debt investments, the Secure Family Futures Act aims to promote economic growth, investment, and financial security for families and businesses across the United States.
