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Former Obama Official Expects Biden Will Protect 401(k)s, IRAs

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J. Mark Iwry “Don’t assume the private pension tax expenditure would necessarily be a deficit reduction target in a Biden-Harris administration,” J. Mark Iwry says.

Retirement plans will not likely suffer if Democratic presidential candidate Joe Biden wins the White House, the head of national retirement policy during the Obama-Biden administration tells ThinkAdvisor.

“Don’t assume the private pension tax expenditure would necessarily be a deficit reduction target in a Biden-Harris administration,” J. Mark Iwry, now a nonresident senior fellow at the Brookings Institution, told ThinkAdvisor on Monday in an email. “The private pension system plays a unique role in our economy.”

According to the Tax Policy Center, Biden’s plan replaces the deduction for worker contributions to traditional IRAs and defined contribution retirement plans with a refundable tax credit that would be roughly revenue neutral over the long run.

As the Tax Foundation explains, the proposal would provide retirement savers with “a 26% refundable tax credit for each $1 contributed. The tax credit would be deposited into the taxpayer’s retirement account as a matching contribution. Existing contribution limits would remain, and Roth-style tax treatment would be unaffected.”

The plan would “shift some of the benefits of tax deferral in traditional retirement accounts toward lower- and middle-income earners with the goal of encouraging additional saving by those taxpayers,” the blog states.

The tax credit would replace deductions for contributions to “401(k)s, individual retirement accounts (IRAs), and other types of traditional retirement vehicles, such as SIMPLE accounts,” according to the Tax Foundation.


Biden’s plan would also provide automatic enrollment in IRAs for workers who do not have a pension or 401(k)-type plan.

“The pension tax expenditure will be even easier to defend when auto-IRA makes the system far more inclusive and progressive,” Iwry said.

Iwry, co-creator of the automatic IRA concept in 2006 who helped lawmakers draft a bipartisan bill that was introduced in 2007, said the auto-IRA “has always been, by its nature, a bipartisan concept.”

The “Obama-Biden administration made auto-IRA the centerpiece of their retirement proposals, but then Obamacare was enacted,” Iwry continued. “The ensuing divisive politics and toxic partisanship meant it was no longer the right moment” to push ahead on the auto-IRA.

The auto-IRA, however, “has been steadily acquiring proof of concept as seven states have enacted it; others are considering it, and three of those seven states have begun implementation, which is going smoothly,” Iwry said.

Under the leadership of House Ways and Means Chairman Richard Neal, D-Mass., a longtime champion of auto-IRAs, “Congress can achieve nationwide uniformity with a federal auto-IRA that builds on, preserves and integrates the state auto-IRAs,” Iwry added.

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