[Congressional Record (Bound Edition), Volume 145 (1999), Part 6] [Extensions of Remarks] [Pages 7825-7826] [From the U.S. Government Publishing Office, www.gpo.gov]INTRODUCTION OF THE FORMER INSURANCE AGENTS TAX EQUITY ACT OF 1999 ______ HON. JERRY WELLER of illinois in the house of representatives Wednesday, April 28, 1999 Mr. WELLER. Mr. Speaker, I come to the floor today with my colleagues, Mr. Kleczka, Mr. McCrery, Mr. Neal, Mr. Ramstad and Ms. Baldwin, to introduce the Former Insurance Agents Tax Equity Act of 1999, a bill designed to expand a provision in the Taxpayer Relief Act of 1997 (TRA) that ensured that certain retired insurance agents are not unfairly subjected to self-employment tax. This bill will continue our efforts and will bring consistency and fairness to the tax treatment of similarly-situated former insurance agents. Congress, recognizing that valued, long-time insurance agents with certain termination contracts were being improperly subjected to self- employment tax, enacted a provision in the TRA designed to clarify that termination payments received by former agents are exempt from self- employment tax. In particular, the TRA amended Sec. 1402 of the Internal Revenue Code to provide that an agent's eligibility for termination payments could be tied to the agent's length of service. Unfortunately, the provision did not also allow for the actual amounts of the payments to depend on an agent's length of service. As a result, some termination payments are exempt from self-employment tax, but others are not since insurance companies structure their agreements with agents in slightly different ways. Some companies tie a former agent's eligibility for termination payments to his or her length of service with the company. While the agent's eligibility for payments is tied to length of service, the actual amount of the termination payment is not. Under current law, these former agents could receive termination payments indefinitely without incurring self-employment tax. (The payments, of course, continue to be subjected to income taxes.) Other companies structure their agreements slightly differently. These companies limit the period in which a former agent receives payments and they vary the amount of the payments according to each agent's length of service and performance during his or her last year of service. This payment structure is designed to encourage agent loyalty since agents are rewarded for long-term service with the company. However, since the amount of payment is tied to the agent's length of service, these payments would be subject to self-employment tax under current law. There is no policy justification for providing different tax treatment for these substantially similar arrangements. Both types of contracts seek to satisfy the same goal of rewarding loyal, long-time agents with more compensation. It should not matter for tax purposes whether this result is achieved by varying the actual amount of compensation rather than the term of compensation. The Former Insurance Agents Tax Equity Act of 1999 simply would strike language in the Internal Revenue Code that prevents companies from using a former agent's length of service in determining the amount of termination payment the agent will receive. In doing so, this bill provides equitable tax treatment for similarly-situated former agents. This provision is supported by thousands of insurance agents around the country, as well as the National Association of Life Underwriters, the Coalition of Exclusive Agents, and the National Association of Independent Insurers. This issue affects a small number of agents and any revenue implications of making this clarification should be negligible. In the interest of ensuring that termination payments to former insurance agents are [[Page 7826]] treated fairly and consistently under our tax laws, I hope that you will join me in supporting the Former Insurance Agents Tax Equity Act of 1999. ____________________