ASPPA’s Hoffman to Obama: Preserve Retirement Plan Tax Benefits

“There are already prohibited transactions under IRS rules,” he explained. “The problem is there is no enforcement mechanism. If this falls under the same rules, what you will have is good guys trying to comply, and bad guys trying to flaut the rule. It will be easier for them to get away with it because of that lack of enforcement.”

The last items addressed by Hoffman was the broader issues of debt reduction and tax reform. He said ASPPA is worried about savings incentives that might be weakened by the president’s budget, in an attempt at deficit reduction.

“The most recent budget [Obama] submitted included a return to a Reagan-era marginal tax deduction capped at 28%. For high income earners, that means their money will be taxed on the way in and on the way out [of a savings plan]. For small businesses in particular, the tax benefits are a strong motivating factor for offering a plan.”

Hoffman quoted an ASPPA info graph that found 74% of workers participate in a savings and investment plan offered by their employer. When a plan is not offered by an employer, less than 5% of workers save for retirement.

“The point we’re making here is that it is extremely important to preserve the tax deduction benefits for the decision maker, meaning the employer, who offers the plan.