US - Recommendations issued yesterday by the president's advisory panel on federal tax reform would devastate the retirement security of millions of American workers, according to the American Society of Pension Professionals and Actuaries (ASPPA).
Under a proposal put forward by the advisory panel, all employer-sponsored defined contributions plans, including the 401(k), would be replaced with the “save at work” account.
A significant aspect of the proposal is the elimination of the tax deduction for contributions. Instead, contributions to the account would be made on an after-tax basis.
ASPPA is concerned the proposed measures would force workers to stop saving in their 401(k) plan.
The advisory panel admitted the plans would enable them to lower tax rates on highest ranking earners by eliminating the pre-tax deduction for retirement plan contributions.
Brian Gaff (pictured), CEO of ASPPA, said, “ASPPA believes this is totally unacceptable to lower tax rates for higher income workers by sacrificing savings tax incentives for American workers.”
Further, ASPPA believed the proposal would eliminate tax incentives for annuities, reducing the ability of individuals without a plan to effectively manage their retirement funds.
“It is frankly irresponsible to suggest eliminating this critical means of ensuring that retirees will have enough money to live on,” Graff concluded.
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