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.
Banks have been big sellers of annuities, posting $14.5 billion in sales last year, the association added.
The President dropped the annuity proposal last week, but industry watchers say the measure is likely to be included in other revenue-raising measures.
Banc One's Milwaukee-based insurance unit is lobbying law-makers to protect the tax-exempt status of annuities. It is also working through the insurance companies whose annuities it sells to urge customers to write to Congress.
The Association for Banks in Insurance, which represents banks that sell annuities, is taking a similar approach.
Another trade group, the Financial Institutions Insurance Association, is rallying its member firms that sell investment products through banks.
Raising the Opposition
The association is urging members to get their bank clients involved and will also meet in Washington later this month to plan more formal actions, said its chairman, Richard Starr. "We don't want to see this product destroyed," Mr. Starr said.
Investment product marketing firms, meanwhile, are taking steps of their own.
Marketing One last month hosted a conference call for bank clients to describe the measure's potential impact on banks' investment products businesses.
Kemper Corp., the giant financial services company, is also lobbying hard and urging its units, including Invest Financial Corp., to join the opposition.
