1. The way 401(k) contributions are taxed could change. Biden’s tax plan replaces the deduction for worker contributions to traditional IRAs and defined contribution retirement plans with a refundable tax credit. The change is intended to encourage middle- and lower-income workers to save more, but it would be roughly revenue neutral over the long run, according to the Tax Policy Center.
2. Workers without retirement plans would get auto-IRAs. Biden’s plan would also provide automatic enrollment in IRAs for workers who do not have a pension or 401(k)-type plan.
3. Labor's fiduciary rule would be on the chopping block. A Biden administration will likely seek to overturn the Labor Department’s fiduciary prohibited transaction exemption as well as the Securities and Exchange Commission’s Regulation Best Interest. Biden’s pick to be vice president, Sen. Kamala Harris, D-Calif., also opposes Labor’s fiduciary rule.
Aron Szapiro, policy research head at Morningstar, predicted that SEC Chairman Jay Clayton would leave “in early 2021,” and if Biden won the White House, the new SEC chair would likely withdraw Reg BI.
(Photo: Mike Scarcella/ALM)
4. The payroll tax "donut hole." Biden’s tax plan imposes a 12.4% payroll tax on income earned above $400,000, evenly split between employers and employees.
“This would create a ‘donut hole’ in the current Social Security payroll tax, where wages between $137,700, the current wage cap, and $400,000 are not taxed,” the Tax Foundation states.
Max Richtman, president and CEO, National Committee to Preserve Social Security and Medicare, said the ”‘donut hole’ is actually a temporary gap resulting from a much-needed adjustment of the current Social Security payroll tax wage cap.”
5. No Social Security cuts. Biden says his payroll tax expansion would “fund more generous Social Security benefits.” He would adopt the Consumer Price Index for the Elderly for Social Security indexing, which would provide more generous cost-of-living adjustments than the current formula. His plan pledges “no Social Security benefit cuts of any kind including raising retirement age, means-testing of benefits, adverse adjustments to benefit calculator, or through COLA.”
Democratic presidential candidate Joe Biden has said that requiring the wealthiest Americans to shoulder more of the tax burden and restoring the estate tax to “historical norms” top his list of economic priorities. But retirement policy also plays a prominent role.
“Protecting Social Security and Medicare and lowering prescription drug prices transcend partisan politics, and candidates need to pay attention to these issues if they want to win,” Nancy LeaMond, AARP chief advocacy and engagement officer, said in releasing a recent survey.
The AARP survey of voters in presidential and Senate battleground states show that voters 65 and older could decide this year’s election.
“Concerns about the coronavirus and their health overall are driving 65-plus voters away from their natural base,” LeaMond said.
According to the survey, former Vice President Biden leads President Donald Trump among voters 65 and older in eight states.
Read the gallery above to see how retirement plans could change under Biden’s proposals. A future article will look at Trump’s retirement pledges.
— Related on ThinkAdvisor: