March 5, 2013 (PLANSPONSOR.com) - As the government looks for budget solutions, defined contribution (DC) plan tax breaks fall in the crosshairs.
The tax advantages of DC plans, estimated to defer tax revenues by $50 billion to $60 billion a year, will be one of Congress’ sticking points in the coming year. That was the prognostication of the keynote address “From the Hill to the Summit” session of the National Association of Plan Advisors/American Association of Pension Providers and Actuaries (NAPA/ASPPA) 401(k) Summit.
“Facing difficult tradeoffs—between cutting food stamps or Medicaid, versus cutting 401(k) tax advantages—will come up over and over and over,” said Brian H. Graff, chief executive of ASPPA. “There just isn’t enough money there [in the U.S. budget]. For the White House and Congress, it is not about policy. They are looking for money, and we have been the unfortunate piggy bank of many initiatives. We have to keep the drumbeat for the ‘Save My 401(k)’ campaign going.” (See "ASPPA Launches 'Save My 401(k)' Campaign"
That is why Congress needs to hear about the importance of tax break incentives on the nation’s retirement savings pool from retirement plan advisers, said a high-level Congressional staffer who appeared on the panel, but who asked not to be named. “Congress needs to hear from people on the ground on how policy affects everyday people,” the staffer said.
The issue will come to a head by April 15, when Congress must pass a new budget or face the penalty of withheld pay for members of Congress, the staffer said. The House of Representatives, controlled by a Republican majority, is looking to create $1 trillion in new revenue through budget cuts and the elimination of tax cuts, he said. The Senate, with a majority of Democrats, is seeking only budget cuts, he said.