No 'crew cut' to 401(k) tax breaks, ASPPA chief vows

NOV 04, 2012
The American Society of Pension Professionals and Actuaries said last week that it is launching a lobbying initiative designed to protect tax deferrals for worker contributions to employer-sponsored retirement plans. ASPPA executive director Brian Graff said the organization will begin the campaign Nov. 12. At its heart is a social-media component that includes a website, savemy401k.com, that promotes the benefits of workplace savings, as well as the tax breaks that encourage employees to invest in the programs. One goal is for the ASPPA's nearly 10,000 members as well as 401(k) participants to send more than 250,000 e-mails to federal lawmakers. Congress is likely to begin grappling with comprehensive tax reform next year after dealing with the fiscal cliff following the election. The pension group is concerned that an effort to expand the tax base and lower individual rates — an objective of tax overhaul for many Democrats and Republicans on Capitol Hill — will result in a substantial reduction in favorable tax treatment for retirement savings. “If we do everything I'm talking about, we'll come out of this OK,” Mr. Graff told the opening session of the ASPPA annual conference, held in National Harbor, Md. “I promise you, we're going to get a trim, but it's not going to be a crew cut.”

HUNGRY PIGGY BANK

In addition to the website, the campaign will feature a Facebook page and a video game that involves a piggy bank attempting to devour coins while avoiding legislators who are trying to catch it. The symbolism reflects the ASPPA's view that retirement plans unfairly bore the cost of tax reform the last time the code was overhauled in 1986. The group is vowing not to let that happen again. “We're being used as a piggy bank to pay for other stupid stuff,” Mr. Graff said. “We're bigger [than in 1986],” he said. “We're stronger, and we're not going to take it anymore.” The retirement savings tax deferrals are among the three biggest so-called annual tax expenditures. It is exceeded only by the tax exclusion for employer-provided health care and the mortgage tax deduction. Unlike those two benefits, ASPPA emphasizes that the retirement tax breaks are actually deferrals. The government will collect taxes on the money when retirees withdraw the funds. The problem for the ASPPA is that federal budget laws are based on 10-year windows that don't capture 401(k) and individual retirement account withdrawals made decades down the road.

POTENTIAL CHANGES AHEAD

The presidential debt commission, led by Erskine Bowles and Alan Simpson, recommended limiting the retirement plan tax deferrals to $20,000 or 20% of income annually, whichever is lower. Many lawmakers have pointed to the Bowles-Simpson work as a guide for tax reform. Mr. Graff maintains that the Bowles-Simpson approach is too harsh and could force small-business owners to end the retirement plans they have established for their workers. He has similar qualms about President Barack Obama's proposal to limit tax deductions to 28% and Republican presidential nominee and former Massachusetts Gov. Mitt Romney's idea of curbing total annual deductions by allowing taxpayers to choose the ones they want to put into a small “bucket.” “The threat is nonpartisan,” Mr. Graff said of the widespread inclination to limit tax breaks. “We need every member of Congress to feel the heat as this process unfolds next year.” [email protected] Twitter: @markschoeff

Latest News

Integrated Partners, Kestra welcome multigenerational advisor teams
Integrated Partners, Kestra welcome multigenerational advisor teams

Integrated Partners is adding a mother-son tandem to its network in Missouri as Kestra onboards a father-son advisor duo from UBS.

Trump not planning to fire Powell, market tension eases
Trump not planning to fire Powell, market tension eases

Futures indicate stocks will build on Tuesday's rally.

From stocks and economy to their own finances, consumers are getting gloomier
From stocks and economy to their own finances, consumers are getting gloomier

Cost of living still tops concerns about negative impacts on personal finances

Women share investing strengths, asset preferences in new study
Women share investing strengths, asset preferences in new study

Financial advisors remain vital allies even as DIY investing grows

Trump vows to 'be nice' to China, slash tariffs
Trump vows to 'be nice' to China, slash tariffs

A trade deal would mean significant cut in tariffs but 'it wont be zero'.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.