Current U.S. pension and retirement savings tax incentives provide far more help for high-income taxpayers than for lower-income workers, officials at the U.S. Government Accountability Office (GAO) contend.
Charles Jeszeck, an acting director at the GAO, has summarized GAO analysts’ findings in a letter addressed to senior Democrats on the House Ways and Means Committee.
The lawmakers asked the GAO to look into arguments that current U.S. retirement programs do little to help the workers who need the most help with preparing for retirement.
Some federal policy watchers have suggested that Congress ought to consider changing, or eliminating, retirement savings tax incentives because of the concerns about whether they help low-income workers.
“There are concerns about the distribution of pension tax benefits estimated to cost the federal government more than $100 billion per year,” Jeszeck says. “For [defined contribution] plans, a disproportionate share of these tax incentives accrues to higher income earners.”
Today, only about half of U.S. workers at private employers are in pension plans, and the total number of single-employer private pension plans increased just 1% between 2003 and 2007, to 705,000, Jeszeck writes in the retirement savings incentives report.
Employers created 180,000 pension plans during that period but closed almost as many, Jeszeck says.
Only about 8% of the new plans were defined benefit pension plans, and 92% were 401(k) plans or other types of defined contribution plans, Jeszeck says.
About 72% of the individuals who hit the defined contribution plan contribution limits earned more than