New Laws for New PoliciesNew Laws for New Policies
Changes to IRC Section 7702 encourage stability and reduce risk for permanent life insurance
Deep inside the Consolidated Appropriations Act, 2021 (CAA), among changes to Montana water rights and public health laws, are changes to outdated interest rates impacting buyers of newly issued permanent cash value life insurance policies. The changes apply to life insurance policies (general account and variable) issued after Jan. 1, 2021.1
The CAA updates fixed interest rates in Internal Revenue Code Section 7702 with capped indexed floating rates used to calculate tests determining whether a contract qualifies as a life insurance policy for income tax purposes. The fixed rates used for life insurance tax testing were set when interest rates and policy crediting rates were much higher than they are today. As commercial interest rates ...
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