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Obama Administration (Still) Eyeing Retirement Reforms

President Obama's term in office may be coming to an end, but his administration still has an “upside-down” eye on retirement reforms — and not just the fiduciary reproposal.

Speaking on Capitol Hill at an event sponsored by the Bipartisan Policy Commission, Jason Furman, chairman of President Obama’s Council of Economic Advisers, said that while the private retirement system has been successful for many, “not everything we are doing is working,” as he reiterated President Obama’s commitment to “get at the upside-down preferences” in the current system.

'Modest’ Means

Furman noted that, from an economic perspective, the goal of tax subsidies for retirement accounts is to encourage additional savings, but said that “the public interest in subsidizing additional retirement savings is modest at best” for those who have “accumulated large balances,” noting that since “many of these individuals are over the caps on contributions” anyway, the current tax incentives have “no marginal impact.”

As for the reforms still on the Obama administration’s radar, Furman specifically cited:

  • The administration’s budget proposal to limit the tax value of specified deductions or exclusions from adjusted gross income (AGI) and all itemized deductions — including employee contributions to defined contribution plans and IRAs — to 28%.
  • The administration’s budget proposal to cap retirement savings cap of roughly $3.4 million (depending on interest rates).
  • Various savings incentives in the budget proposal, including auto IRAs, MyRAs, etc.
    In fact, Furman suggested that those proposals would serve to fund the administration’s other savings incentives.

  • On the distribution side, Furman noted the administration’s work on QLACs, lifetime income disclosures and a proposal to permanently exempt from the age 70½ required minimum distribution rules individuals with aggregate IRA and tax-favored retirement plan accumulations of less than $100,000 at age 70½.

    ‘Conflict’-ed

    Furman said that the recently released fiduciary regulation was also part of the president’s policy — one focused on the investing/savings stage of retirement preparation. He reiterated the administration’s claim that these so-called conflicts of interest cost investors $17 billion in losses per year.

    In a brief Q&A following his remarks, in response to a comment that the fiduciary proposal in its current form is “unworkable,” Furman acknowledged that the proposal was currently out for comment, and that it’s important to "not hide behind every argument we can drum up to not act” in making the proposed changes, noting that ERISA “hasn’t been changed in 40 years, and it’s high time to do so.”

    For a different perspective on the “upside down” tax preferences, click here.

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