HB 102-RETIREMENT PLANS; ROTH IRAS; PROBATE  3:38:34 PM CHAIR OLSON announced that the final order of business would be HOUSE BILL NO. 102, "An Act relating to property exemptions for retirement plans, individual retirement accounts, and Roth IRAs; relating to transfers of individual retirement plans; relating to the rights of judgment creditors of members of limited liability companies and partners of limited liability partnerships; relating to the Uniform Probate Code, including pleadings, orders, liability, and notices under the Uniform Probate Code and the Alaska Principal and Income Act, the appointment of trust property, the Alaska Uniform Prudent Investor Act, co-trustees, trust protectors, and trust advisors; relating to the Alaska Principal and Income Act; relating to the Alaska Uniform Transfers to Minors Act; relating to the disposition of human remains; relating to the tax on insurers for life insurance policies; relating to insurable interests for certain insurance policies; relating to restrictions on transfers of trust interests; relating to discretionary interests in irrevocable trusts; relating to the community property of married persons; and amending Rule 64, Alaska Rules of Civil Procedure, and Rule 301(a), Alaska Rules of Evidence." CHAIR OLSON recapped that the committee previously has a presentation, adopted the proposed committee substitute (CS), Version U, and took public testimony. 3:39:00 PM ERNEST PRAX, Staff, Representative Wes Keller, Alaska State Legislature, on behalf of Representative Wes Keller, sponsor, referred to the committee substitute (CS) Version U, [labeled 28-LS0335\U, Bannister, 2/26/13]. He briefly explained the differences from the original version to Version U, which corrects a drafting error on page 3, line 3. The committee substitute also deleted Section 38 of the original bill, since some question arose as to the necessity of the language. Thus the sponsor deleted the language. [Section 38 would expand the allowable time an insurance contract may be procured on the life of body of a person with whom there is a significant financial interest in the continued life of that person being insured]. 3:39:59 PM REPRESENTATIVE SADDLER asked for clarification on whether these remarks reflected the changes in Version U. REPRESENTATIVE CHENAULT asked for clarification on Section 38. CHAIR OLSON noted that a draft amendment in members' packets labeled U.1 conceptual will not be offered. 3:41:37 PM REPRESENTATIVE REINBOLD made a motion to adopt Amendment 1, labeled [28-LS0335\U.3, Bannister, 3/20/13], which read, as follows: Page 35, line 22: Delete "a single" [AN INDIVIDUAL]" Insert "an individual" Page 35, lines 23 - 24: Delete "or for a group or other type of policy  that insures the life of one or more individuals" Insert ", or for a life insurance policy issued  for delivery to a trust that was formed under the laws  of this state or contains a provision that laws of  this state govern the validity, construction, and  administration of the trust," Page 44, following line 1: Insert a new subsection to read: "(d) AS 21.09.210(m), as amended by sec. 37 of this Act, applies to a life insurance policy issued for delivery to a trust if the life insurance policy is issued for delivery to a trust on or after the effective date of AS 21.09.210(m), as amended by sec. 37 of this Act." Reletter the following subsection accordingly. CHAIR OLSON objected for the purpose of discussion. 3:41:58 PM BRET KOLB, Director, Division of Insurance (DOI); Anchorage Office, Department of Commerce, Community & Economic Development (DCCED), stated that Amendment 1 would delete the language "or for a group or other type of policy that insures the life of one or more individuals" which the division thought was broad and [adds language that] ties it to trusts. The intent of HB 102 is to address trusts and the way the bill was originally drafted it broadened out the premium tax handling for every type of insurance instead of limiting it to insurance related to trusts. He clarified that the language in Amendment 1, lines 8-10 defines it to limit the bill to a life insurance policy delivered for a trust that would receive the favorable treatment, which is 2.7 percent premium tax for the first $100,000 in premium and one-tenth of one percent for the premium above the first $100,000. 3:43:44 PM REPRESENTATIVE JOSEPHSON asked where the state would stand vis- à-vis other states in terms of rate charges over $100,000 and whether Alaska would be the most generous rate. MR. KOLB answered no; that other states, perhaps South Dakota, offer eight-tenths of one percent for insurance above the first $100,000 of premium as opposed to one-tenth of one percent, although he admitted he was unsure of the rate for the first $100,000. 3:44:36 PM REPRESENTATIVE JOSEPHSON asked whether the insured person for the trust needs to have some connection to Alaska, such as property or other nexus. MR. KOLB answered that that the question pertains to trust law and not insurance so unfortunately he doesn't know the answer. REPRESENTATIVE JOSEPHSON asked whether an amendment in members' packets labeled U.2 would be offered. CHAIR OLSON answered yes. CHAIR OLSON removed his objection. There being no further objection, Amendment 1 was adopted. 3:45:52 PM REPRESENTATIVE REINBOLD made a motion to adopt Amendment 2, labeled U.2 [labeled 28-LS0335\U.2, Bannister, 3/15/13], which read as follows: Page 1, line 12: Delete "and" Page 2, line 2: Delete "Evidence" Insert "Evidence; and providing for an effective  date" Page 35, following line 27: Insert a new bill section to read: "* Sec. 38. AS 21.09.210(m), as amended by sec. 37 of this Act, is amended to read: (m) The tax imposed under this section for an  individual [A SINGLE] life insurance policy [OR FOR A GROUP OR OTHER TYPE OF POLICY THAT INSURES THE LIFE OF ONE OR MORE INDIVIDUALS] shall be computed at the rate of (1) 2.7 percent of policy year premium up to $100,000; and (2) one-tenth of one percent of policy year premium exceeding $100,000." Renumber the following bill sections accordingly. Page 43, line 9: Delete "sec. 42" Insert "sec. 43" Page 43, line 13: Delete "sec. 45" Insert "sec. 46" Page 43, line 15: Delete "sec. 45" Insert "sec. 46" Page 44, line 2: Delete "42" Insert "43" Page 44, following line 5: Insert a new bill section to read:  "* Sec. 52. The uncodified law of the State of Alaska is amended by adding a new section to read: APPLICABILITY. AS 21.09.210(m), as amended by sec. 38 of this Act, applies to a policy offered, issued for delivery, or delivered on or after the effective date of AS 21.09.210(m), as amended by sec. 38 of this Act. In this section, "policy" has the meaning given in AS 21.97.900." Renumber the following bill section accordingly. Page 44, line 8: Delete "sec. 42" Insert "sec. 43" Page 44, line 9: Delete "sec. 49(a)" Insert "sec. 50(a)" Page 44, line 11: Delete "sec. 45" Insert "sec. 46" Delete "sec. 49(b)" Insert "sec. 50(b)" Page 44, following line 13: Insert a new bill section to read: "* Sec. 54. AS 21.09.210(m), as amended by sec. 38 of this Act, and sec. 52 of this Act take effect five years after the effective date of sec. 37 of this Act." 3:46:06 PM MR. KOLB explained that Amendment 2 would provide a sunset provision after five years, so the statutes would revert to exactly to how insurance is handled today. It would remove the favorable trust treatment just to ensure that the process is working adequately, he said. 3:46:56 PM CHAIR OLSON commented that at this point it does not appear the state has missed any premium sales. In fact, it appears the state has been competitive on the few number of policies issued; however, if it turns out that hundreds or thousands of policies are over the limit of the premium, the state could lose a significant amount of premium tax. He related his understanding [Amendment 2] would not interfere with existing contracts, but would apply to new contracts after the sunset date. The proposed language change [in Amendment 2] would give the director a means to determine whether an adjustment is required. Additionally, this amendment would provide a means to measure the effect of the change after a reasonable amount of time. CHAIR OLSON removed his objection. There being no further objection, Amendment 2 was adopted. 3:48:21 PM REPRESENTATIVE REINBOLD moved to report the proposed committee substitute (CS) for HB 102, Version U, [labeled 28-LS0335\U, Bannister, 2/26/13] as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 102 (L&C) was reported from the House Labor and Commerce Standing Committee.