Tax Cuts and Jobs Act, Section 3703: Computation of life insurance tax reserves

[Actuary321]

Originally Posted by 1695814

Is DAC changing, too?


https://www2.deloitte.com/content/da...-companies.pdf





Where is that talked about in the actual law?

This is from the enrolled bill:

SEC. 13519. CAPITALIZATION OF CERTAIN POLICY ACQUISITION EXPENSES.
(a) IN GENERAL.—
(1) Section 848(a)(2) is amended by striking ‘‘120-month’’ and inserting ‘‘180-month’’.
(2) Section 848(c)(1) is amended by striking ‘‘1.75 percent’’ and inserting ‘‘2.09 percent’’.
(3) Section 848(c)(2) is amended by striking ‘‘2.05 percent’’ and inserting ‘‘2.45 percent’’.
(4) Section 848(c)(3) is amended by striking ‘‘7.7 percent’’ and inserting ‘‘9.2 percent’’.
(b) CONFORMING AMENDMENTS.—Section 848(b)(1) is amended by striking ‘‘120-month’’ and inserting ‘‘180-month’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to net premiums for taxable years beginning after
December 31, 2017.
(2) TRANSITION RULE.—Specified policy acquisition expenses
first required to be capitalized in a taxable year beginning
before January 1, 2018, will continue to be allowed as a deduc-
tion ratably over the 120-month period beginning with the
first month in the second half of such taxable year.

[Actuary321]

Originally Posted by 1695814

tbh, I don't understand what that means...is it just saying "consult the NAIC" and if I do so I'll see that nothing's changing?

I'm life only so I wasn't involved in discussing the Health stuff. And though I have seen some of the documentation, the stuff I am seeing is so whacked, I can barely understand what they are saying in regard to the life stuff. The health stuff is pretty much Greek to me. Sorry.

[Steve Grondin]

Originally Posted by 1695814

Is DAC changing, too?

Be careful with your terminology. The tax law isn't amending Deferred Acquisition Costs (DAC), the GAAP concept. The tax item frequently called the DAC tax, which is based on premiums, did change and A321 cited the portion of the code. The change impacts years 2018 and forward, the transition rule paragraph preserves the old schedule for years 2017 and prior.

[Steve Grondin]

Originally Posted by 1695814

A few more questions (thanks, all, for the previous discussion)...these changes apply only to Life insurance, right? Were there any changes to Health insurance tax reserves? Is there anywhere I can point to in order to prove that?

Sorry, missed this question. Some of this is from old memory, so verify before forming an opinion.
In terms of tax, the term "life insurance reserves" cover reserves for health contracts too (see IRC sec 816 I think).
My past experience was on individual limited ben health policies. There was a difference between non-can and gtd ren, as well as a LTC difference based on issue year. For tax method gtd ren got FPT2, LTC was split by issue year into FPT and FPT2. Non-Can might have been an echo of the stat method. Our non-can was so small i don't remember if AFR played a role, but it certainly did on gtd ren and LTC.

If I had a copy of US Tax Reserves for Life Insurers easily available, I could refresh my memory. That is an excellent source that would cover all the questions you have asked.