The American Council of Life Insurers is taking issue with a proposal by the White House to tax the “non-earned” income — for advisors, this includes annuity income — of people making $200,000 or more per year at 2.9% to help pay for Medicare.

Frank Keating, the group's chief executive officer, sent a letter Feb. 24 to Secretary of the Treasury Timothy Geithner about it: “Currently, Americans face unprecedented difficulties securing their retirement income in an environment that has shifted longevity, savings and other retirement risks onto the individual. In such a landscape, policy-makers should not create a disincentive for annuity products that help Americans address these risks.”

The letter invokes the Employee Benefits Research Institute 2009 Retirement Confidence Survey, which says most people expect to struggle to meet the cost of retirement. It found that only 20% of Americans are confident they have assets to outlast their lifetimes.

Surely these aren’t the same people making at least $200,000 per year in income? That’s not really the issue, said ACLI spokesman Jack Dolan. He said that the ACLI's basic point is that annuities are for retirement income, another focus of President Obama’s recent speeches. Annuities should just be for that purpose and shouldn't be tapped to pay for something else as well, he said.

To be clear, here's what the White House said: “The President’s Proposal adopts the Senate bill approach and adds a 2.9% assessment (equal to the combined employer and employee share of the existing [Medicare Hospital Insurance] HI tax) on income from interest, dividends, annuities, royalties and rents, other than such income which is derived in the ordinary course of a trade or business which is not a passive activity (e.g., income from active participation in S corporations) on taxpayers with respect to income above $200,000 for singles and $250,000 for married couples filing jointly. The additional revenues from the tax on earned income would be credited to the HI trust fund and the revenues from the tax on unearned income would be credited to the Supplemental Medical Insurance trust fund.”

In Keaning’s opinion, including annuities as a source of taxable assets could well dissuade people from buying them, thus only adding to the masses of retirees facing an uninsured and thus uncertain future.

“In the current environment, it is clear that Americans face daunting financial security challenges as they age," Keating said. "Considering that and the existing difficulties individuals have faced navigating a retirement landscape that shifts retirement’s risks onto the individual, policy-makers should not create a disincentive for a product that helps Americans secure their retirement,” he says.

The White House didn’t return a request for comment by press time.