The Consolidated Appropriations Act, signed into law December 27, 2020, includes changes to the tax code that will reduce the minimum interest rate assumptions insurance companies may use. These changes will affect the definition of insurance including:
The Guideline Premium Test and the Cash Value Accumulation Test under Internal Revenue Code (IRC) Section 7702 and;
Modified Endowment Contracts under IRC Section 7702A
Once implemented, the reduced interest rate assumptions will allow for increased premiums for new permanent life insurance policies acquired utilizing these revised rates. TRC Financial is evaluating the impact of the updated rates with carrier partners and will be monitoring industry reactions to the rate changes as we move forward.
We will provide additional updates on section 7702 and impacts to our product portfolio as they become available.