Benefits

Tax Incentives Benefit Most Retirement Plan Participants

By Rebecca Moore editors@plansponsor.com | April 19, 2013

April 19, 2013 (PLANSPONSOR.com) – An analysis from the American Society of Pension Professionals & Actuaries (ASPPA) shows retirement savings tax incentives benefit a majority of workers.

Using a distribution analysis for the tax incentive for employer-based defined contribution (DC) retirement savings, the ASPPA found 71% of the benefits from retirement savings tax incentives goes to workers earning less than $150,000.  

Analysis of the distribution of the individual income tax burden shows this group pays only 44% of income taxes. By contrast, families with average gross income of less than $150,000 received only 8% of the tax savings from the capital gains tax incentive in 2010 (89% of the capital gains tax break went to families earning more than $200,000).  

“The employer-based retirement savings tax incentive is the efficient and effective way to help Main Street save for retirement. Proposals that would discourage employers from continuing to sponsor these plans are misdirected. We urge Congress to be very cautious when considering tinkering with a system that is helping so many American workers save for their financial future,” said Brian H. Graff, executive director and CEO of the ASPPA.  

Since the release of the proposed fiscal year 2014 budget by President Barack Obama, there have been differing opinions about how retirement-related provisions will potentially affect retirement savings (see “Budget Proposals for Retirement Savings—A Deterrent or Not?”). 

ASPPA's research report is here.