A diverse group of advocates and financial services firms launched Tuesday the Save Our Savings (SOS) Coalition, an alliance dedicated to ensuring that Americans’ retirement savings aren’t compromised as Congress delves into a comprehensive tax overhaul.
Members of the SOS Coalition include: American Benefits Council, American Retirement Association, Committee on Investment of Employee Benefit Assets, Inc., Defined Contribution Institutional Investment Association, Financial Services Roundtable, Investment Company Institute, New Economics for Women, Northern Trust, Plan Sponsor Council of America, Principal, SPARK Institute, TIAA and Women’s Institute for a Secure Retirement.
The groups along with former congressmen worry over proposals to reduce the tax incentive for retirement plans. For instance, in the sweeping tax reform changes of 1986, Congress reduced the contribution limits for 401(k) plans.
Similarly, former House Ways and Means Committee Chairman Rep. Dave Camp, R-Mich., proposed freezing the indexing of the limits, which has the practical effect of significantly reducing them over time. Such changes, the coalition argues, would severely reduce the incentive for employers and employees to save.
Camp joined PwC US in 2015 as a senior policy advisor based in its Washington National Tax Services practice.
“Tax reform is a worthy goal that, if done right, could present policymakers a unique opportunity to preserve and enhance the system that’s helped millions of hardworking Americans save for retirement,” said Jim McCrery, former ranking member of the Ways and Means Committee, in a statement announcing the coalition. “On the other hand, misguided proposals could unintentionally undermine the incentive for employers to offer retirement plans or for working people to save.”
Congress, McCrery continued, should be focused on policies that will “expand and improve the private retirement system.” He cited research showing that Americans overwhelmingly support tax incentives for retirement savings: 80% of households who have a retirement account say its positive tax treatment is a big incentive to contribute, and about 90% of households oppose both taking away the tax advantages of retirement accounts and reducing the amount individuals can contribute to retirement accounts.
Rep. Charles Boustany, who served on the House Ways and Means Committee for eight years, added in the statement that “We need to make sure people continue to have access to retirement plans because everyone deserves the opportunity to retire with dignity and financial independence.”
The private retirement system is particularly important for middle-class families, Boustany added, “with 80% of participants in workplace defined contribution retirement plans earning less than $100,000 annually.”
The coalition stated that nationwide, “75% of private sector workers are offered a workplace retirement plan and 82% of workers who are offered a workplace retirement plan choose to participate.”
Michael Kreps, a representative of the coalition and a principal with Groom Law Group, added that “the data makes clear that the retirement system has helped millions of people save for retirement. As Congress considers tax reform, it is critical lawmakers don’t unintentionally undermine the incentives for working people to save.”
Savings are an important driver of economic growth, the coalition maintained.
As of year-end 2016, U.S. retirement assets totaled $25.3 trillion invested in the equity and fixed income markets, making American capital markets the largest and most liquid in the world. “Those dollars power the economy by giving businesses the necessary funds to create more goods and services,” the coalition said.
— Check out 2 Tax Credits Retirement Savers Probably Don’t Know About on ThinkAdvisor.