WASHINGTON–A pension professional group is assailing a proposal from the cochairmen of the federal Deficit Reduction Commission to eliminate the tax incentives provided to employers to fund retirement plans.
Brian H. Graff, executive director and CEO the American Society of Pension Professionals & Actuaries (ASPPA), Arlington, Va., said eliminating the tax breaks would “directly impact a worker’s ability to save for retirement” and “ultimately hits low- and moderate-income workers the hardest.”
Graff cited data compiled by the Employee Benefit Research Institute, Washington, which showed only 5% of workers save for retirement on their own, without the benefit of an employer-sponsored plan.
By contrast, 70% of workers earning between $30,000 and $50,000 participate in employer-sponsored retirement plans when they are offered, Graff noted.
Retirement plans such as 401(k) are the primary savings vehicle for most Americans, he added. Eliminating the tax incentives would strip many of them of critically important benefits and protections provided by the Employee Retirement Income Security Act of 1975 (ERISA), Graff said.
“The retirement security of American workers will greatly suffer if the Deficit Reduction Commission’s recommendations are enacted,” he said.
The commission’s draft proposal also calls for fully or partially taxing employer-sponsored health insurance and taxing cafeteria plans. It also suggests uncapping the disability insurance portion of Federal Insurance Contributions Act (FICA) taxes–now 1.8% of FICA.