President Obama’s own pension, based on reasonable actuarial assumptions, is worth at least $5 million — 40% more than the small business retirement savings cap proposed in his fiscal year 2014 budget, according to the American Society of Pension Professionals & Actuaries. A statement issued by ASPPA today raises the question: Is the president saying his own pension is a loophole?
The statement, from Brian H. Graff, Executive Director/CEO of ASPPA and NAPA, offers ASPPA’s response to the president’s proposed fiscal year 2014 budget released today.
“We were very concerned when last year’s budget included a double tax on contributions to 401(k) plans. Small business owners earning over $250,000 would have to pay tax on contributions in the year the contributions are made then pay tax at the full rate when contributions are distributed at retirement,” Graff notes. “We were hoping this misguided proposal would be eliminated in this year’s budget, but instead the Administration has kept the double tax proposal, and added another penalty for retirement savings.
“Now, if a small business owner has saved $3 million in his or her 401(k) account, they won’t be allowed to save any more. Without any further incentive to keep the plan, many small business owners will now either shut down the plan or reduce contributions for workers. This means that small business employees will now lose out not only on the opportunity to save at work, but also on contributions the owner would have made on the employee’s behalf to pass nondiscrimination rules.
“The proposed retirement savings cap in the president’s budget is not closing a loophole and is not correcting some perceived abuse of the rules. Rather, small business owners have been playing by the rules all along. They saved each year within federally dictated contribution limits and they provided matching and other contributions to their employees to comply with federally mandated nondiscrimination rules. Now these small business owners are being punished for doing right by their workers and saving and investing successfully.
“We think it is grossly unfair that a small business owner will be limited to retirement benefits that are nowhere near as valuable as executives’ at large corporations. Small businesses can’t use the nonqualified deferred compensation arrangements that provide millions, even billions of dollars in retirement benefits to big corporate executives. Every time retirement plan limits are cut, the corporate CEOs get more nonqualified retirement benefits. It’s the small business owners and their employees who lose out. It just isn’t fair.
“Even President Obama’s own pension, based on reasonable actuarial assumptions, is worth at least $5 million. That’s 40% more than the small business retirement savings cap permitted under the president’s budget. Is the president saying his own pension is a loophole too? It’s simply wrong to attack small business owners who have responsibly maintained retirement plans for themselves and their workers.”