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 sold utilizing these revised rates. This will allow more cash value to accumulate with less death benefit. As the first bit of good news for our industry in over some time, everybody is talking about it!
- Bobby Samuelson is calling it a "Christmas Miracle." Full Commentary
- John Hancock's Carly Brooks did a short video outlining the basics of 7702 and how the changes will affect our industry. Watch Video Now