Statutory Valuation of Individual Life and Annuity Contracts - fifth edition

In preparation for the Life and Health Qualifications Seminar, I’m reading “Statutory Valuation of Individual Life and Annuity Contracts - fifth edition” (Claire, Lombardi, Summers).

“The Tax Cuts and Jobs Act (TCJA) introduced changes to the tax treatment of insurance company reserves. It modified the formula used to calculate tax reserves by specifying that they should be determined as a percentage of the greater of the life insurance reserves determined under statutory accounting principles (SAP) or tax reserves determined under the new formula.” (chatgpt)

From Federal Register :: Computation and Reporting of Reserves for Life Insurance Companies, I’m summarizing that Tax Reserves = max(surrender value, .9281*stat reserve).

Chapter 1.7.3 mentions nothing of the TCJA, just to use CRVM, i = max(afir, stat_i), & stat_mort.

The copyright of this book is “2018, 2021”, so they would’ve known about it at least in 2021.

Is the book out of date OR do I not understand something? (logical-OR)

Your understanding is fine, the book is out of date. Section 807(d) of the US income tax code is clear that in most cases tax reserves are max(CSV, 92.81% of stat), capped at the statutory reserve.

1 Like