Not only will proposals to cut savings incentives in retirement plans jeopardize low- and moderate-income workers' chances for secure retirements, but the anticipated budget savings are between 55% and 75% lower than expected, research released Tuesday by the American Society of Pension Professionals & Actuaries found.
According to ASPPA, the current cash-flow analysis used by the congressional Joint Committee on Taxation and the Treasury Department’s Office of Tax Analysis to evaluate the costs associated with tax deferrals in defined-contribution plans don’t include taxes paid by workers because they aren't paid until after the worker retires. That tax revenue is counted as lost rather than deferred.
Research by economist Judy Xanthopoulos and tax attorney Mary Schmitt for ASPPA found that by using present-value analysis, the estimated five-year cost of retirement plan tax expenditures is 55% lower than the Joint Committee's estimate and 75% lower than the Treasury Department's.
“ASPPA’s analysis, which takes the same long-term view that economists employ in evaluating other forms of investment, shows that the short-term window used in Washington budget-scoring overstates the cost of retirement savings incentives – and therefore the savings that would result from slashing these incentives,” Brian Graff (left), executive director and CEO for ASPPA, said in a press release.