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  #61  
Old 05-16-2018, 11:05 PM
Steve Grondin Steve Grondin is offline
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Quote:
Originally Posted by sKansKi View Post
This one has me confused.

Using number guy's link...

...near the bottom in the section titled "Effective Date of 2017 Amendment" it talks about the transition rule & relief.

I'll just post it here with my comments in blue:

Let's say that at 12/31/2018 the Tax reserve on my 2017 & prior issues will be 1,000,000 under the old method, and assume it's going to be 920,000 under the new method.

Is my deduction for the next eight years a flat 80k/8 = 10,000? Is it really that simple or am I reading that section incorrectly?

What happens if a large chunk of those policies lapse/die? Do I still get to keep taking that 10,000 deduction?
Yes, flat 10k per year but it is a reduction in reserve, so a increase in taxable income. Regardless of what happens to contracts, even if all lapse in jan 2018.

Think about why. December 31 you had 1m reserve. From issue, you have taken a $1m deduction to income. Jan 1 2018, your reserve is 920k. Say all lapse in this tax period. Reduction in reserve is 920k, so you have 920k in taxable income. Where did the 80k go? Answer you.spread it over 8 years.
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  #62  
Old 05-17-2018, 08:37 PM
Actuary321 Actuary321 is offline
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Are Bruce and Steve saying opposite things?
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  #63  
Old 05-18-2018, 08:15 AM
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No. I agree that the difference is income, spread over 8 years for any contract remaining in force over that period. But if the policy does not remain in force, then the entire reserve disappears, and spreading makes no sense any more.

Bruce
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  #64  
Old 05-18-2018, 09:50 AM
Actuary321 Actuary321 is offline
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Well that was the part that I thought you guys were disagreeing on.

In what I have heard in the various places I have been learning about it, everyone has seemed to be saying what Steve said.

That you calculate the tax reserve under the old method as of 12/31/2017 and the tax reserve under the new method as of 12/31/2017 and then the differences is then spread equally 1/8th each year for 8 years.

So in the example above, at the end of each year starting in 2018, you simply calculate your tax reserves under the new method and then add to that n/8ths of the 12/31/17 difference to that each year where n = 7 at 12/31/18 and decreases by 1 each year until it goes to 0 at the end of 8 years.

That way you don't have to keep track of the difference on each policy that would seem to be required under Bruce's method.
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  #65  
Old 05-21-2018, 02:15 PM
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Quote:
Originally Posted by Actuary321 View Post
That you calculate the tax reserve under the old method as of 12/31/2017 and the tax reserve under the new method as of 12/31/2017 and then the differences is then spread equally 1/8th each year for 8 years.

So in the example above, at the end of each year starting in 2018, you simply calculate your tax reserves under the new method and then add to that n/8ths of the 12/31/17 difference to that each year where n = 7 at 12/31/18 and decreases by 1 each year until it goes to 0 at the end of 8 years.
I'm confused by the dates.

Is this new law effective for the 12/31/2017 tax reserves? ...or is that simply the date one uses to calculate the difference that is written down over 8 years and the new reserves are calculated starting at 12/31/2018?
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  #66  
Old 05-21-2018, 02:38 PM
Sleeping Dragon Sleeping Dragon is offline
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The new law is effective for 1/1/2018. So, the opening tax reserve balance for 2018 is recalculated under the new law. The difference between tax reserve reported at 12/31/2017 and the new starting tax reserve balance gets spread over the 8 years.
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  #67  
Old 05-22-2018, 12:35 PM
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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?
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  #68  
Old 05-22-2018, 05:22 PM
Actuary321 Actuary321 is offline
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807(d)(3)(A)(iii) -"In the case of any noncancellable accident and health insurance contract, the reserve method prescribed by the National Association of Insurance Commissioners which covers such contract as of the date the reserve is determined."
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  #69  
Old 06-17-2018, 09:16 PM
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Is DAC changing, too?


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


Quote:
Deferred Acquisition Costs
(projected to raise $7.2 billion from 2018 through 2027):
Similar to pre-Act law, the Act requires life
insurance companies to capitalize and amortize
a percentage of premiums collected as a proxy
for deferred acquisition costs. The section 848
capitalization rates for each of the three
categories of insurance contracts will be
increased by approximately 20 percent, and the
amortization period will be extended to 15
years. All amounts capitalized as of December
31, 2017, would continue to be amortized over
a 10-year period.

Where is that talked about in the actual law?
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Old 06-17-2018, 09:25 PM
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Quote:
Originally Posted by Actuary321 View Post
807(d)(3)(A)(iii) -"In the case of any noncancellable accident and health insurance contract, the reserve method prescribed by the National Association of Insurance Commissioners which covers such contract as of the date the reserve is determined."
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?
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