X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

WASHINGTON – Recommendations issued on Nov. 1 by the President’s Advisory Panel on Federal Tax Reform would be “devastating” to the retirement security of millions of American workers, one trade group contends. The American Society of Pension Professionals & Actuaries (ASPPA) said Bush’s proposal would eliminate all employer-sponsored defined contribution plans and replace them with the “Save at Work” account. The new proposal would also eliminate the tax deduction for contributions, which would be made on an after-tax basis, although distributions would be tax-free. “Without the upfront tax deduction, we believe many workers currently saving in their 401(k) will choose not to save,” said Brian Graff, ASPPA executive director/CEO. “ASPPA believes that it is totally unacceptable to lower tax rates for higher income individuals by sacrificing the savings tax incentives for American workers.” According to Graff, the Advisory Panel indicated that it was able to finance lower tax rates on taxpayers with the highest incomes by eliminating the pre-tax deduction for retirement plan contributions. The Advisory Panel would also propose eliminating IRAs and other savings vehicles such as education IRAs and section 529 plans and replace them with “Save for Retirement” and “Save for Family” accounts that would allow for annual contributions up to $10,000 each. Combined, these accounts would allow a couple owning a small business to save $40,000 for retirement on a tax preferred basis compared to $10,000 under current law. “Many small business owners will forego adopting a workplace retirement plan if they can save that much on their own on a tax-preferred basis,” Graff said. Further, the proposal would eliminate the tax incentives for annuities, a move Graff said “is frankly irresponsible to suggest eliminating this critical means of ensuring that retirees will have enough money to live on.” Of equal concern to ASPPA, is the Advisory Panel recommending that 100% of the dividends paid by U.S. corporations and 75% of investments, including mutual funds in U.S. corporations, be exempt from tax. Graff said this essentially means that investments made outside of a qualified plan could have an effective tax rate of less than 4%. Unlike retirement plan savings, these investments will not be subject to the distribution restrictions that help ensure that the funds are available for retirement, he added. As Congress evaluates the Advisory Panel’s savings proposals, ASPPA has asked that any reform to the federal tax system accommodate “sound retirement policy.” “The 401(k) has been a great success story introducing tens of millions of Americans to the benefit of saving. It is critical that we “don’t take away America’s 401(k),” Graff said. ASPPA is a national organization made up of more than 5,500 retirement plan professionals, whose mission is to preserve and enhance the country’s employer-sponsored retirement plan system. [email protected]

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

Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical CUTimes.com 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 Law.com and GlobeSt.com.

Already have an account?

 

Credit Union Times

Join Credit Union Times

Don’t miss crucial strategic and tactical information necessary to run your institution and better serve your members. Join Credit Union Times now!

  • Free unlimited access to Credit Union Times' trusted and independent team of experts for extensive industry news, conference coverage, people features, statistical analysis, and regulation and technology updates.
  • Exclusive discounts on ALM and Credit Union Times events.
  • Access to other award-winning ALM websites including TreasuryandRisk.com and Law.com.

Already have an account? Sign In Now
Join Credit Union Times
Live Chat

Copyright © 2022 ALM Media Properties, LLC. All Rights Reserved.