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 The 1982 code decreed that any money withdrawn from an annuity would be considered income first and would therefore be taxable.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
Subtraction of a number of years from a standard table of life insurance rates under the assumption that a particular group-women-outlive men and presumably will be paying premiums for a ...
In ocean marine insurance, provision stipulating that upon the collision of two or more ships, when all ships are at fault, all owners and shippers having monetary interests in the voyage ...
Insurance company that does not utilize the rates and policies of a rating bureau. ...
Branch of knowledge dealing with the mathematics of insurance, including probabilities. It is used in ensuring that risks are carefully evaluated, that adequate premiums are charged for ...
Summary certificate of benefits issued to an employee in lieu of a policy. The master contract remains with the employer. For example, in group life insurance, an employee receives only a ...
Presence of other contract (s) covering the same conditions. When more than one policy covers the exposure, each policy will pay an equal share of the loss. ...
Recording and presentation of financial statements, such as the annual statement, by the insurance company. Financial reporting statements are used by the State Insurance Commissioner in ...
Payment of that portion of the annual premium by the employee necessary to cover the PS-58 cost for that given year. Any unpaid premium balance for that particular year is paid by the ...
Specific powers that a prospective insured believes the insurance company has granted to its agent. For example, if the insurance company has furnished the agent a rate book, application ...
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