Employees who earn less than $150,000 benefit the most from taxincentives they receive by putting money away in theiremployer-sponsored retirement plans.

Plan sponsors also receive a small benefit from the taxincentives, so why eliminate tax incentives as part of taxreform?

Those were the two big points made by Brian Graff,executive director and CEO of the American Society of PensionProfessionals & Actuaries, in a letter to the House Waysand Means Committee's Pensions and Retirement Tax Reform WorkingGroup.

The Obama White House has proposed doing away with theseincentives after individuals are able to stash away several millionto help balance the federal government's budget. But as Graffpointed out, being able to make pre-tax contributions to aretirement account doesn't mean people won't pay taxes on thatmoney later.

Graff, eching a point he made at the time the proposal wasunveiled earlier this month, said eliminating tax incentives couldhave a major consequence for small-business owners who offerretirement plans. Many might stop offering such plans, he said,because there is no incentive for them to do it. As has beendocumented for years, because defined benefit pension plans aregoing away, more people are relying on workplace-sponsored plansfor their savings.

Any drop in tax incentives could have a ripple effect across theindustry, Graff and others have said.

In his letter, Graff said that access to a retirement plan atwork is the key to successfully preparing for retirement, so anymodifications to the current incentives should be evaluated basedon whether they will encourage more businesses to sponsorretirement plans for their employees.

“The current tax incentives for employer-based retirementprograms have been very efficient at promoting retirement securityfor millions of working Americans,” he wrote. “If increasingretirement and financial security is the goal, increasing theavailability of workplace savings is clearly the way to getthere.”

ASPPA has found that more than 70 percent of workers earningbetween $30,000 and $50,000 a year will participate in a workplaceplan, though fewer than 5 percent will save through an IRA on theirown.

For those families with a retirement savings account, the medianpercentage of the families' total financial assets held in theseaccounts is 65.7 percent, up from 59.6 percent in 2004.

Graff told the committee that the most effective way to expandretirement savings is to make payroll deduction savings availableto most workers.

ASPPA supports auto-IRA proposals that would require employersthat do not sponsor another type of workplace retirement plan tomake automatic payroll deduction IRAs available to theiremployees.

The organization opposes proposals to expand coverage thatincludes mandatory employer contributions.

Businesses already contribute to Social Security and smallbusinesses can't afford another required contribution, it says. Itsays part-time employees also should have the opportunity to setmoney aside in a workplace retirement plan. They simply don't haveto be eligible for matching company contributions, which wouldlimit the burden to employers offering the incentive for theseemployees, ASPPA says.

The group also supports a larger Saver's Credit because it willhelp lower-paid workers to afford to save. If the credit weredeposited to retirement savings accounts instead of refunded to thesaver, it should also help supplement savings, it says.

Under the president's proposal, retirement accounts would becapped at about $3.4 million in a move that would raise $9 billionfor the government over the next decade.

The cap would prohibit taxpayers from adding more tax-free moneyto their accounts once they've crossed that $3.4 millionthreshold.

This article was originally posted atBenefitsPro.com, a sister site of Credit Union Times.