5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
A deficit reduction recommendation to cap the annual tax-preferred contributions for 401(k) plans to the lower of $20,000 or 20% of income would cause large reductions in retirement savings for both high- and low-income workers, according to a study by the Employee Benefit Research Institute (EBRI).
The recommendation, known as the "20/20 cap," put forward by the National Commission on Fiscal Responsibility and Reform, would most affect the highest-income workers, which, the EBRI noted, is not surprising, since those with high income tend to save the most in 401(k)-type plans. However, the EBRI also found that the cap would cause a big reduction in retirement savings by the lowest-income employees as well.
The study evaluated the impact of applying the 20/20 caps starting in 2012. The highest-income quartile within each age cohort experiences the largest average percentage reduction. However, for each age cohort other than the oldest one, the lowest-income quartile has the second-highest average percentage reductions. Primarily this is because their current or expected future contributions would exceed 20% of compensation when combined with employer contributions, the EBRI study found.
Source: EBRI press release #932, July 11, 2011.
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