New research by ASPPA shows that middle- and lower-income Americans benefit more from retirement tax incentives, mostly due to the non-discrimination rules in DC plans. Putting aside the fact that unlike other tax incentives, savings that taxpayers get by taking advantage of the retirement tax rules are deferrals, not permanent exclusions, the research shows that 71% of the tax benefit from DC plans goes to people with an AGI of less than $150,000. Compare that to only 8% of the benefit from the capital gains tax that goes to this group.
"The employer-based retirement savings tax incentive is the efficient and effective way to help Main Street save for retirement," said Brian Graff, CEO/Executive Director of ASPPA and NAPA. "Proposals that would discourage employers from continuing to sponsor these plans are misdirected. We urge Congress to be very cautious when considering tinkering with a system that is helping so many American workers save for their financial future.”
As noted by the Washington Post, the ASPPA research is a compelling argument to maintain the current retirement system in an era when more people have to rely on their DC plans to retire, and many are not prepared. Limiting the tax incentive would seem to hurt everyone — especially those who can least afford it.
