News & Information

 

FEATURED PRODUCT

Pension and Employee Benefits: Code, ERISA, & Regulations
This series provides an authoritative and comprehensive reference to the full text of benefits-related provisions of the Internal Revenue Code, the full text of ERISA, and related proposed and final regulations, as well as the official IRS and DOL preambles, and Committee Reports.

Learn More »

CCH® PENSION AND BENEFITS — 12/09/05

Tax reform proposals draw fire from ASPPA

Recommendations issued by the President's Advisory Panel on Federal Tax Reform (see CCH Pension Plan Guide ¶27,051) would have "devastating" consequences for the employer-sponsored retirement system, according to Brian Graff, executive director of the American Society of Pension Professionals and Actuaries (ASPPA). Speaking at a November 8, 2005 press conference, Graff said that if the advisory panel's recommendations become law "most employers, particularly small businesses, would no longer have an incentive to offer a retirement plan to their employees."

Loss of tax deduction seen as crucial

One of the advisory panel's recommendations is to eliminate all employer-sponsored defined contribution plans, including 401(k), 403(b), 457, and SIMPLE plans, and replace them with a single type of account, called the Save at Work account. Contributions to the account would be made on an after-tax basis, although distributions would be tax-free. "Without the upfront tax deduction," said Graff, "we believe many workers currently saving in their 401(k) will choose not to save."

Impact on small business plans feared

The panel also proposes replacing IRAs and other savings vehicles, such as education IRAs and Code Sec. 529 plans with Save for Retirement and Save for Family accounts that would allow contributions up to $10,000 each. Combined, these accounts would allow a couple owning a small business to save $40,000 for CBAs, new employees were eligible for employer retirement on a tax preferred basis (compared contributions to the fund on their behalf after they to $10,000 under current law). If these recommendations are enacted, Graff contends, "many small business owners will forego adopting a workplace retirement plan if they can save that much on their own on a tax preferred basis."

For more information on this and related topics, consult the CCH Pension Plan Guide.

Visit our News Library to read more news stories.