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The comments from industry professionals about tax treatment of benefits and suggestions for improving benefit plan outcomes included: Retirement benefits are a tax deferral rather than an exclusion from income—meaning the federal government will eventually recoup the forgone revenue. This distinguishes retirement plan deferrals from other tax exclusions. A big difference between tax-expenditure estimates and revenue estimates for scoring tax reform is that the latter incorporates taxpayer behavior whereas tax expenditure estimates do not. Ten percent or fewer of those ages 55 to 60 are making withdrawals from their IRA, compared with 80% of those 71 and older. On a historical basis, depending on the period measured, pre-retiree balances in defined contribution retirement plans double about every eight to nine years. Employer match levels seemed to have a bigger impact on older workers, but automatic enrollment seems much more significant in terms of getting younger employees to participate in retirement plans. Common challenges for underfunded retirement systems worldwide include the need to increase the state pension age and/or “normal” retirement age for full benefits; to promote higher labor-force participation at older ages; to encourage or require higher levels of private saving; to increase retirement coverage of employees and/or the self-employed; and to reduce savings “leakage” prior to retirement. The full report is published in the August 2012 EBRI Issue Brief, “’After’ Math: The Impact and Influence of Incentives on Benefit Policy.” online at www.ebri.org. Speaker presentations, a webcast recording of the event, and other information are online at EBRI’s website at http://bit.ly/EBRIpolicyforum0512.
The comments from industry professionals about tax treatment of benefits and suggestions for improving benefit plan outcomes included: