A ‘Blank Slate’ for Tax Reform Puts Workers’ Retirement at Risk

| June 27, 2013 | 1 Comment

Retirement Tax Incentive is a Deferral Not Deduction

ARLINGTON, VA, (June 27, 2013) – The following is a statement from Brian H. Graff, Executive Director & CEO of The American Society of Pension Professionals & Actuaries (ASPPA) in response to a “Dear Colleague“ letter  sent by Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch of the Senate Finance Committee.

“Today, Chairman Baucus and Ranking Member Hatch of the Senate Finance Committee proposed a ‘blank slate’ approach to tax reform.

In other words, to begin the tax reform process the tax deferral incentive for retirement savings is to be thrown out along with every other tax incentive in the Internal Revenue Code that represents permanent lost revenue.

We appreciate the Senators’ acknowledgement that some tax incentives should be preserved – and we believe the incentive for retirement savings is clearly one of them. However, we are disappointed that there is no recognition that the tax incentive for retirement savings is a deferral, not a true ‘tax expenditure’. Tens of millions of American workers count on their employer-based retirement plans, and it is the tax incentive that powers these programs. In fact, the primary factor in determining whether or not a worker is saving for retirement is whether or not they have a retirement plan at work.

Data prepared by the Employee Benefit Research Institute (EBRI) shows that over 70% of workers earning from $30,000 to $50,000 participated in employer-sponsored plans when a plan was available, whereas less than 5% of those without an employer plan contributed to an IRA. Reducing the incentive would hurt these plans. Eliminating it would destroy retirement security for working Americans.

The benefits of this deferral incentive are very real, and the revenue that would be gained by eliminating it is not. Every dollar of retirement savings excluded from income today will be included as income when it is paid out in retirement. Treating the retirement savings income deferral like a permanent exclusion is terribly misleading, and could lead to bad policy decisions.”

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The American Society of Pension Professionals & Actuaries (ASPPA) is a national organization of more than 15,000 retirement plan and benefits professionals that serves as the educator, voice, and advocate for the employer-based retirement system. ASPPA members are administrators, actuaries, advisors, attorneys, accountants, and other financial services professionals who provide consulting and administrative services for qualified retirement plans. www.asppa.org 


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