Aegon Annual Report 2012

Annual Report 201241products sold to defined contribution plans, as well as otherinsurance products, would be adversely affected if it was decidedthat these products should be regulated as derivatives.There have also been occasional legislative proposals in theUS Congress that target foreign owned companies, such asa proposal containing a corporate residency provision thatthreatens to redefine some historically foreign-based companiesas US corporations for US tax purposes.The economic crisis of 2008 has resulted in proposals forregulatory reform of the financial services industry, both inthe United States and around the world. The Dodd-Frank Actgenerally leaves the state insurance regulatory system in place,but creates a Federal Insurance Office in part to represent theUS insurance industry in international matters. Many details ofthe Dodd-Frank Act are left to study or regulation, and therefore,the impact of the Dodd-Frank Act on Aegon USA or the lifeinsurance market in general, cannot be fully determined until theregulations implementing the Dodd-Frank Act are promulagatedand the studies completed. This includes any determination ofthe likelihood that Aegon USA will be considered systemicallysignificant and subject to heightened prudential standards.Aegon USA companies administer and provide both assetmanagement services and products used to fund definedcontribution plans, individual retirement accounts, 529 plansand other savings vehicles. Changes to defined benefit plansby sponsors in reaction to the financial economic environmentand the enactment of funding relief provisions may impactthe services Aegon USA companies provide to these plans. Inaddition, legislative and regulatory proposals are consideredfrom time to time which relate to the disclosure and natureof fees paid by defined contribution plan sponsors and theirparticipants. Other proposals that may be considered relate tothe nature of education, advice or other services Aegon USAcompanies provide to defined contribution plan sponsors andtheir participants. Finally, as noted above, proposals to changethe structure, remove or decrease the US federal tax preferencesof pension and annuity products, either as part of tax reform orpursuant to deficit reduction, would directly impact the cost andcompetitiveness of pension and annuity products and pensionservices sold to ensure Americans’ financial retirement security.Aegon USA companies also provide plans used to administerbenefits distributed upon termination of defined benefit plans.Any proposals that seek to either restrict fees and services to,or investment advice in, employer plans or change the mannerin which Aegon USA companies may charge for such servicesinconsistent with business practices, will adversely impactthe Aegon USA companies that provide administration andinvestment services and products to employment based plans.The Patient Protection and Affordable Care Act does not directlyimpact the business of life insurance. It is uncertain whetherany of the new regulations, anticipated over the next severalyears, that will implement this law, will impact the nature ordistribution of any of Aegon USA’s supplemental products.The American Taxpayer Relief Act (“ATRA”), enacted in January2013, made permanent, with some modifications, manyof the tax cuts enacted in 2001 and 2003 during the BushAdministration. The ATRA provisions that are most significantfor the Aegon USA companies’ business include those (a) on theestate tax (keeping the unified estate and gift tax exemptionthreshold of USD 5 million (adjusted for inflation after 2011)and raising the maximum tax rate from 35% to 40%; (b) onRoth conversions (permitting participants in qualified retirementsavings plans to convert otherwise non-distributable 401(k)plan balances to a Roth account if the plan so provides; and(c) increasing the top individual income tax rates to 39.6% andcapital gains rates to 20%. Other provisions of ATRA, such as thephase-out of personal exemptions and limitations on itemizeddeductions, as well as the new 3.8% tax on net investmentincome (enacted by the Patient Protection and Affordable CareAct and first effective in 2013), will further increase the marginalincome tax rate of certain high income households. Makingthe estate tax permanent will facilitate estate planning forAmericans. The extent to which the other tax law changes impactthe purchase of life insurance and annuity products, as well asthe participation of individuals in qualified retirement savingsplans, is as yet uncertain. Further tax proposals are likely to dealwith the debt situation in the U.S. The impact of such proposals,if they were passed, cannot be predicted at this time.Aegon CanadaTransamerica Life Canada (TLC) is organized and regulatedpursuant to the federal Insurance Companies Act (Canada). Theprimary regulator is the Office of the Superintendent of FinancialInstitutions. In addition, TLC is subject to the laws, regulationsand insurance commissions of each of Canada’s ten provincesand three territories in which it carries on business. The laws ofthese jurisdictions generally establish supervisory agencies withbroad administrative powers that include the following: grantingand revoking licenses to conduct business, regulating tradepractices, licensing agents, establishing reserve requirements,determining permitted investments and establishing minimumlevels of capital. TLC’s ability to continue to conduct its insurancebusiness depends upon the maintenance of its licenses at boththe federal and provincial/territorial levels. It is also governedby policy statements and guidelines established by the CanadianLife & Health Insurance Association.The mutual fund and investment management operations ofTransamerica Life Canada are governed by the Securities Acts ofeach province and territory.