Interpretation of Retirement for 4228 and Employee Benefit Plans
The New York State Insurance Department recently interpreted “retirement” for insurance agents due to changes in the federal tax law applicable to nonqualified deferred compensation plans. The tax code now requires that one of six events occur in order for these plans to make a distribution.
The problem arises in that the working life of insurance agents tends to fade out, not end with a definitive bang. Even after they stop pursuing new business, agents often continue to get paid for policies written long ago, and they might write a new policy for old customer. This income stream makes it difficult to determine when one of the six events has occurred .
To clarify matters, New York now interprets “retirement” for insurance agents under section 4228 of the NYS Insurance Law as either the earliest date when the agent is 55 and his combined age and years of service is 70, or the earliest date when the agent is 60 and his combined age and years of service is 65.
The Circular Letter opines that other later dates should satisfy the retirement criteria. But if an insurer wishes to use earlier dates, it must demonstrate to the Department that the proposal is reasonable based on expected agent experience.
The complete interpretation of this issue, including state Insurance Law and federal Tax Law citations, can be found in Circular Letter 8 (2008), dated April 14.
The problem arises in that the working life of insurance agents tends to fade out, not end with a definitive bang. Even after they stop pursuing new business, agents often continue to get paid for policies written long ago, and they might write a new policy for old customer. This income stream makes it difficult to determine when one of the six events has occurred .
To clarify matters, New York now interprets “retirement” for insurance agents under section 4228 of the NYS Insurance Law as either the earliest date when the agent is 55 and his combined age and years of service is 70, or the earliest date when the agent is 60 and his combined age and years of service is 65.
The Circular Letter opines that other later dates should satisfy the retirement criteria. But if an insurer wishes to use earlier dates, it must demonstrate to the Department that the proposal is reasonable based on expected agent experience.
The complete interpretation of this issue, including state Insurance Law and federal Tax Law citations, can be found in Circular Letter 8 (2008), dated April 14.
