Changes to Section 7702

Changes to Section 7702 in COVID relief legislation

Changes drive by low interest rate environment

As part of The Consolidated Appropriations Act of 2021, signed into law on December 27, 2020, a change was made to Section 7702 of the Internal Revenue Code. This change outlined several requirements permanent life insurance policies must meet in order to qualify as a life insurance contract for tax purposes.

Given the ultra-low interest rate environment, the change assists the life insurance industry by replacing the statutory interest rate assumptions (from 1984) from a previously hard coded 4% rate to a floating rate. These changes will impact the limits associated with both the definition of life insurance and modified endowment contracts.

Securian Financial is working to update our systems and illustrations to implement the changes. We will provide additional updates as we progress.

Please note — These changes will not impact in-force contracts and will only apply to new policies issued after the changes are implemented.


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Changes to Section 7702
 

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