Tax Equity And Financial Responsibility Acts Of 1982 And 1983 (TEFRA)
Legislation that redefined life insurance and raised taxes on life insurance companies. Among the provisions were new rules for some life insurance products, including a definition of flexible premium life insurance, and an increase in life insurance company taxes. Congress was concerned that a policyholder could take a substantial amount, say $1 million, and, after putting a few dollars toward a life insurance premium, put the remainder into a tax-free investment vehicle. One of two tests had to be satisfied for a policy to qualify as life insurance: the cash surrender value policy could not exceed a net single premium, and the death benefit had to represent a certain percentage of the cash value, which declined as the policy-holder got older. For example, at age 40, the death benefit must be 140% of cash value. The second rule closed a loophole on tax-free withdrawals from annuities. Prior to 1982 annuity holders could withdraw their initial premium tax free at any time. The 1982 code decreed that any money withdrawn from an annuity would be considered income first and would therefore be taxable. The older 1959 tax code devised a shorthand formula for determining taxes paid by insurers. The formula worked when interest rates were low, but as they soared, insurers found ways to reduce the increased tax bite. The 1982 code introduced a stopgap measure designed to raise taxes on life insurers by $3 billion.
Popular Insurance Terms
Policy that pays a dividend to its owner. ...
Date when an insurance company issues a policy. This date may be different from the date the insurance becomes effective. ...
Single life insurance policy combining term life insurance and ordinary life insurance. If the insured dies during the term period, a multiple of the face amount is paid to the beneficiary. ...
Specific time at which the insurance policy coverage begins and ends. ...
Total value of all goods and services produced by companies located in the United States as well as that produced by United States companies whose production facilities are outside the ...
Policy owner rights under a life insurance policy, including the right to name a new beneficiary at any time and to surrender the policy for its cash value. ...
Taking over of an insurance company's assets by the State Insurance Commissioner when examination of the annual report reveals that the company is in substantial financial difficulty. The ...
Consideration should be given to a company's capacity to underwrite a particular risk, as indicated by its financial standing, claims philosophy, price structure, agent representation, loss ...
Private, not-for-profit-group that develops and publishes safety codes and standards relating to protection of people and property against fire. The NFPA is financed by fees for technical ...
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