Lawmakers on the House Ways and Means Committee were advised on April 17 not to make changes to current retirement programs that might discourage employers from sponsoring plans for their workers. Judy Miller, chief of actuarial issues and director of retirement policy for the American Society of Pension Professionals and Actuaries, testified that current federal tax incentives can transform taxable bonuses for business owners into retirement savings contributions that benefit both owners and employees. “This incentive for the business owner to contribute for other employees results in a distribution of tax benefit that is more progressive than the current income tax structure,” Miller said.
Meanwhile, Randy Hardock, speaking on behalf of the American Benefits Council, said the wisest course for lawmakers is to not enact new laws that would disrupt the success of the current system. Hardock said short-term retirement legislation designed to boost tax revenues generally do so by eliminating the existing savings incentives and eroding the amount that workers actually save. “Making matters worse, any short-term revenue gain that might be derived from changes in the retirement savings incentives is largely illusory because when a worker saves less money today, it will mean smaller distributions (and less tax revenue) when the individual retires,” Miller said.”That is a lose-lose situation for the retiree and the government.”
However, Committee Chairman Dave Camp, R-Mich., questioned whether the large number of plans with different rules and eligibility criteria leads to confusion, reducing the effectiveness of the incentives in increasing retirement savings. Ranking member Sander Levin, D-Mich., questioned the value of making tax reform-inspired changes to retirement plans. “Tax reform should approach retirement savings incentives with an eye toward strengthening our current system and expanding participation, not as an opportunity to find revenue,” Levin said.
Small Business Tax Bill
The Ways and Means hearing on retirement security was called to highlight the need for tax reform on a day that millions of Americans filed their 2011 federal income tax returns and just days before the House is set to vote on legislation offered by House Majority Leader Eric Cantor, R-Va., to cut small business taxes by 20 percent. The Small Business Tax Cut Bill (HR 9) has drawn criticism from White House and House and Senate Democrats. In an April 17 Statement of Administration Policy, the White House charged that the Cantor bill would provide tax benefits to millionaires without requiring them to create jobs.
By Stephen K. Cooper, CCH News Staff
Chairman Dave Camp (R-MI), Hearing on Tax Reform and Tax-Favored Retirement Accounts
Opening Statement of Ranking Member Sander Levin, Hearing on Tax Reform and Tax-Favored Retirement Accounts
Testimony by Jack VanDerhei, Ph.D., Research Director, Employee Benefit Research Institute (EBRI)
Testimony Submitted by Judy A. Miller on behalf of the American Society of Pension Professionals and Actuaries
Statement of William F. Sweetnam, Principal, Groom Law Group, Chartered
Pursuing Universal Retirement Security Through Automatic IRAs and Account Simplification, Testimony of David C. John, Senior Research Fellow, The Heritage Foundation
Testimony of Randolf H. Hardock on Behalf of American Benefits Council
SAP on HR 9, the Small Business Tax Cut Act