ARLINGTON, Va. – As the credit union industry continues to lobby for inclusion in any Social Security reform legislation, one major trade group is concerned that certain tax reform proposals could further erode incentives to save for retirement. On June 30, the American Society of Pension Professionals & Actuaries (ASPPA) testified before the Senate Finance Subcommittee on Taxation and at the Internal Revenue Service Oversight hearing that proposed tax changes could actually reduce retirement savings by discouraging many employers from offering such plans. ASPPA Executive Director/CEO Brian Graff told the panel that some popular tax reform proposals – such as those to reduce or eliminate taxation of capital gains and dividends – could have an unexpected and negative impact on the retirement security of millions of Americans. He referenced a report sponsored by the ASPPA Pension Education and Research Foundation authored by two former analysts of the Joint Committee on Taxation and titled, "Savings Under Tax Reform: What Is the Cost to Retirement Savings?" The report is posted at The report concludes that such tax changes would achieve their goal of increasing savings by high-income individuals, but would simultaneously result in the elimination of many employer-sponsored plans as employers – particularly small business owners – would be able to accomplish their savings objectives outside of a qualified retirement plan. This would lead to lower savings among low- to moderate-income workers, many of who already face the threat of savings shortfalls in retirement. Graff said studies have concluded that employer-sponsored retirement plans have been the only effective means to get low- to moderate- workers to save. According to the Employee Benefit Research Institute, low- to moderate-income workers are 20 times more likely to save when covered by a workplace retirement plan, he told the panel. Of workers who earned $30,000 to $50,000 and were covered by an employer-sponsored 401(k)-type plan, 77.7% actually saved in the plan, while only 4% of workers at the same level of income, but not covered by a 401(k)-type plan, saved in an Individual Retirement Account. "When deprived of the discipline and structure of a workplace plan, the vast majority of American workers simply do not save," Graff said. Graff also explained why any permanent reduction or elimination of the current reduced rates for capital gains and dividends would do very little to promote savings by low-to moderate-income individuals. According IRS data, only 4% of the US population filed tax returns that reported capital gains in 2002. Like CUNA, ASPPA supports the expansion of the current Saver's Credit. First introduced in 2001 on a temporary basis, the credit allows persons to be eligible to take a tax credit of up to $1,000 or $2,000 if married filing jointly, for making eligible contributions to an employer-sponsored retirement plan or individual retirement account. Earlier this year CUNA President/CEO Dan Mica urged legislators to also consider expanding the credit equally, concerned that the national savings rate would be negatively impacted if it were not. Meanwhile, Graff said "steps must be taken to expand workplace retirement coverage as opposed to proposals to improve the tax incentives for nonqualified investments as they would likely lead to reduced workplace retirement coverage." [email protected]

Complete your profile to continue reading and get FREE access to, part of your ALM digital membership.

  • Critical information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
  • Exclusive discounts on ALM and CU Times events.
  • Access to other award-winning ALM websites including and

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.