The Foundations

From the beginning, AALU members consisted of leading producers who recognized that the federal tax law affecting life insurance planning was an essential element of their success as life insurance producers.  The AALU Washington Report emerged within a year of the association’s origin as a means of keeping members informed of key legislative and regulatory developments affecting advanced life insurance planning.  Similarly, it has been an enduring tradition for the AALU Annual Meeting to be convened in Washington, DC, so that members can use the forum to deliver their message to Capitol Hill—as well as networking and learning advanced planning techniques. 

However, AALU in its early years was hindered by its isolation and, to some extent, its maverick image.  John O. Todd, an early AALU President, played a key role in enhancing the image of AALU. Todd personally was widely respected within the life insurance industry, and he lent his own credibility to AALU.  He spoke to the Executive Committee of MDRT and other established groups about the key role played by AALU and advanced life insurance agents in the legislative and regulatory process. 

For many years, the practice of AALU members and the focus of its technical information and advocacy centered on opportunities that existed in the qualified plans arena, in addition to and sometimes in conjunction with, estate and business planning.  However, Congress, Treasury and the Internal Revenue Service limited the incentives and imposed greater restrictions for business owners in the qualified plans arena during the 1970s, 1980s and 1990s shifting the qualified plan focus to greater emphasis on the nonqualified plans arena.  This shift in focus coincided with legislative attacks on COLI.

Preparing for Bigger Industry Role

The late 1990s began major changes for AALU.  In order to play an increasingly role on critical tax issues, AALU began to build its independent financial strength and its lobbying clout.  AALU generated greater political strength through an increased emphasis on political involvement, an internal lobbying capacity, and retention of multiple outside counsel and lobbying firms. We now retain four top-notch outside counsel firms providing us with technical expertise and contacts and access to both sides of the aisle, both House of Congress and the Administration.   AALU likewise enhanced the impact of the Legislative Circle Program—growing the support that members provide to key legislators on the House and Senate tax-writing committees and Leadership from approximately $200,000 annually for endorsed candidates in the early 1990s to the current level of over $1.1 million per year.  Finally, protecting the “three thin threads”—a phrase coined by a past AALU President Mac Nease for the inside buildup, tax-free death benefits and ability to remove life insurance from a taxable estate—had taken firm root as the core focus of AALU.

AALU’s Emergence since 2000

In 2000, the issues that we faced also became more intense and directly threatening to the priorities and business practices of AALU members.  It was clear that estate tax legislation and split dollar regulation carried huge consequences for AALU members. 

Given the prominence of AALU members in the distribution system and AALU’s narrow focus and effective action on product tax issues and advanced life insurance planning, life insurance companies, producer groups and industry organizations to work more closely with AALU and help support AALU work on key issues.  This has led to the current AALU Issues Alliance, an effective partnership that focuses nearly three million dollars annually toward key issues.

Similarly AALU has made very concerted efforts with major industry trade associations to create a single strong voice on key issues—working very closely with ACLI, NAIFA and NAILBA. 

In 2004, AALU forged a Strategic Plan to contemplate the longer term direction of the organization, including how to increase the political activity and influence of the Association’s membership, and how to be the most effective advocates for advance life insurance planning. It has implemented multiple components of the plan, including bolstering the internal staff and realigning resources and strategies in order to be more proactive in our advocacy efforts. 

AALU/Industry Key Issues Since 2000

Split Dollar Grandfathering: AALU helped achieve a significant measure of success in protecting existing business through a recognition that new regulations have “no inference” on the status of split dollar arrangements entered into before the rules were finalized and the creation of safe harbor options. 

COLI:  AALU played a lead role in building industry unity to defeat a proposal in 2003 which would have dealt a devastating blow by taxing the death benefits of corporate owned life insurance and in the enactment of COLI Best Practices legislation.

Commission Disclosure:  AALU helped fashion the concept behind the unified life insurance industry response in to concern arising from so-called “bid-rigging” allegations within the property casualty arena, from which has emerged reasonable reforms.

Estate Tax:  AALU’s focus on this key issue and work with pro-reform groups such as the Coalition for America’s Priorities have resulted in significant progress toward permanent, sustainable reform that will enable clients to plan with certainty.

“Investor Owned Life Insurance” and “Stranger Originated Life Insurance”:  AALU took strong positions on both issues and have made progress working on a joint industry basis to try to protect life insurance against risk from practices that violate the purpose of state insurable interest laws.  Our current focus is on a state-level solution—proposed changes to the NAIC Viatical Settlements Model Act.

Tax Reform/Tax Expenditures:   AALU and the broader industry are vigorously making the case for the critically important protection, savings, jobs and economic growth resulting from permanent life insurance to combat challenges from multiple fronts—such as the proposal in the President’s Advisory Panel on Tax Reform to place new taxes on the inside build-up of permanent life insurance and annuities or a reexamination in the new Congress on so-called tax expenditures to pay for tax cuts or spending increases.

Deferred Compensation: Currently, AALU is working with a broad coalition to combat proposed legislation which would have very negative impact on nonqualified deferred compensation.

Today, with nearly 1,800 members and a staff of over twenty AALU is the premier advocacy organization for the sophisticated financial advisor and continues in the spirit of its founders fifty years before.