GENERAL BULLETIN

IRS Announces Inflation Adjusted Tables for 2007

Friday, November 10, 2006

In Revenue Procedure 2006-53, the Internal Revenue Service released inflation adjusted tax tables for 2007. These tables cover a wide range of items. Of particular relevance to life insurance products are adjustments made to (1) eligible long-term care premiums under section 213(d)(10) of the Internal Revenue Code, (2) medical savings account limitations under section 220, (3) generation-skipping transfer tax exemption under section 2631, and (4) taxation exemptions of periodic payments received under qualified long-term care insurance contracts or certain life insurance contracts under section 7702B(d).

Eligible Long-Term Care Premiums:
The limitations under section 231(d)(10), regarding eligible long-term care premiums includible in the term "medical care" are:

Medical Savings Account Limitations:
The term "high deductible health plan" as defined in section 220(c)(2)(A) means, in the case of self-only coverage, a health plan that has an annual deductible that is not less than $1,900 and not more than $2,850, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits does not exceed $3,750. For family coverage, the term "high deductible health plan" means a health plan that has an annual deductible that is not less than $3,750 and not more than $5,650, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits does not exceed $6,900.

Generation-Skipping Transfer Tax Exemption:
For 2004 through 2009 the GST Exemption is equal to the estate tax unified credit equivalent (applicable exclusion amount) rather than to $1,000,000 as indexed. In 2007 this amount is $2,000,000.

Periodic Payments Received under Qualified Long-Term Care Insurance Contracts or Certain Life Insurance Contracts:
For calendar year 2007, the stated dollar amount of the per diem limitation under section 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $260.

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