ASPPA Says Deficit Reduction Proposal Would Eliminate 401(k)s

November 10, 2010 ( – A retirement industry trade group says that a proposal in the Deficit Reduction Commission Proposals could eliminate 401(k) plans.


Brian H. Graff, executive director and CEO of The American Society of Pension Professionals & Actuaries (ASPPA) in response to the draft report released today by the chairs of the bipartisan National Commission on Fiscal Responsibility and Reform said, “We are deeply concerned that recommendations from the draft report issued today from the chairs of the Deficit Reduction Commission would eliminate tax incentives for retirement savings and negatively impact the ability of working Americans to effectively prepare for retirement.

According to ASPPA, as drafted, one of the options listed in the proposal would eliminate the tax incentive for employers to offer retirement plans to their employees—which ultimately hits low and moderate income workers the hardest.  ASPPA says that the proposed “Zero Option Plan” (page 24 of the Co-Chair draft at would “decimate the savings rate by eliminating tax incentives for contributing to employer-sponsored retirement plans, such as 401(k) plans, likely triggering mass terminations of company retirement plans—directly impacting a worker’s ability to save for retirement”. 

ASPPA cited data prepared by the non-partisan Employee Benefit Research Institute (EBRI), which suggests that only 5% of workers save for retirement on their own, without the benefit of an employer sponsored plan. By contrast, 70% of moderate to low income workers earning between $30,000 and $50,000 participate in employer sponsored retirement plans when they are offered.

“The 401(k) acts as the primary savings vehicle for most Americans and eliminating these tax incentives would strip them of critically important benefits and protections provided by the Employee Retirement Income Security Act of 1975 (ERISA). Simply put, the retirement security of American workers will greatly suffer if the Deficit Reduction Commission’s recommendations are enacted,” according to the press release.

Graff added, “We urge Congress to consider carefully the impact of the commission’s draft recommendations on tax incentives for employer-sponsored retirement plans. Don’t rob America’s future retirees to fund the deficit gaps of today.”