January 2021

LEGISLATIVE DEVELOPMENTS

Amendment to IRC §  7702 – Minimum Rate of Interest

On December 27, President Trump signed the Consolidated Appropriations Act (“CAA”) into law. The CAA combined COVID-19 stimulus measures and various other budget appropriations.

Section 205 of the CAA updates the minimum rate of interest for IRC § 7702 testing for life insurance contracts issued after December 31, 2020. The previously stated minimum rates were 4% (for the Cash Value Accumulation Test, “CVAT”) and 6% (for the Guideline Premium Test, “GPT”). The new law establishes a new minimum rate of 2% for the CVAT and 4% for the GPT in 2021.

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