Amendments to Proposed Health Bill Lower Deductibility of Insurance Executive Pay
Tuesday, October 13th, 2009 | Executive Compensation, Federal Legislation
On October 1, 2009, the Senate Finance Committee, by a vote of 14-8, approved an amendment proposed by Sen. Blanche Lincoln (D., Ark.) which would lower the current executive pay tax deduction from $1 million to $500,000. The amendment was made to the proposed America’s Healthy Future Act of 2009 and includes deferred remuneration and previous existing contracts.
Sen. Lincoln reasons that the proposed legislation will serve as a windfall to the insurance industry and therefore the deduction for executive compensation should be reduced to ensure that revenue stays within the company to lower premiums. For the reduction to apply to an insurer, the company must receive 25% of its gross premium income from plans that meet the minimum creditable coverage requirements in the proposed Act.
However, there is still ambiguity because the definition of minimum creditable coverage as defined by the Act does not apply to individual, small group and other group private health insurance. That is left to each state’s insurance commission.
This amendment is consistent with last year’s amendments to IRC § 162(m)(5) which lowered the tax deduction of executives of companies receiving T.A.R.P. monies from $1 million to $500,000. Perhaps we are seeing the start of a new trend.
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