As Congress grapples over ways to carry out a tax policy overhaul, one organization is determined to making sure retirement savings don’t fall within striking distance of a lawmaker’s pen.
The Save Our Savings Coalition, an organization comprised of businesses and industry advocates, has formed to protect Americans’ retirement savings.
“Tax reform is a worthy goal that, if done right, could present policymakers a unique opportunity to preserve and enhance the system that’s helped millions of hardworking Americans save for retirement,” says Jim McCrery, former ranking member of the Ways and Means Committee. “On the other hand, misguided proposals could unintentionally undermine the incentive for employers to offer retirement plans or for working people to save.”
Various studies indicate that most Americans want to preserve the tax incentives of retirement plans. The Coalition points to research showing that 80% of households who have a retirement account say its positive tax treatment is a significant incentive to contribute. According to a recent study by the Investment Company Institute (ICI), about 90% of households oppose both taking away the tax advantages of retirement accounts and reducing the amount individuals can contribute to retirement accounts. A recent report by the Transamerica Center for Retirement Studies found that 34% of Americans believe that extending the Saver’s Credit to all filers regardless of income should be a priority for President Donald Trump and the new Congress – that’s roughly the same percentage of respondents who even knew about this incentive.
However, The Center for Retirement Research at Boston College reports that the U.S. government subsidizes retirement savings through 401(k) plans with $82.7 billion in tax expenditures every year. Considering the current political climate and much needed tax reform, some industry analyst fear that taxation of retirement accounts is on the table.
Back in June, policymakers unveiled a “blueprint” for simplifying the tax code, and the Tax Policy Center noted that the House Ways and Means Committee would examine existing retirement tax incentives, and look toward “consolidation and reform of the multiple existing incentives.”
But rather than dial back these benefits, Rep. McCrery says, “Congress should be focused on policies that will expand and improve the private retirement system.”
NEXT: A boost to the economy
The Coalition also points out that the current tax structure behind retirement plans not only encourages employees to save, but it also delivers an overall benefit to the U.S. economy.
The organization states, “Savings are an important driver of economic growth. At the end of 2016, U.S. retirement assets totaled $25.3 trillion invested in the equity and fixed income markets, making American capital markets the largest and most liquid in the world. Those dollars power the economy by giving businesses the necessary funds to create more goods and services.”
The Coalition is also looking to encourage lawmakers to push for intiiaitves that will expand the workplace retirement savings system.
“We need to make sure people continue to have access to retirement plans,” says former Representative Charles Boustany, who served on the House Ways and Means Committee for eight years. “Everyone deserves the opportunity to retire with dignity and financial independence. The private retirement system is particularly important for middle class families, with 80% of participants in workplace defined contribution retirement plans earning less than $100,000 annually.”
Today, the Coalition reports 75% of private sector workers are offered workplace retirement plans and 82% of them choose to participate.
The membership of the SOS Coalition is comprised of the American Benefits Council, American Retirement Association, Committee on Investment of Employee Benefit Assets, Defined Contribution Institutional Investment Association, Financial Services Roundtable, Investment Company Institute, New Economics for Women, Northern Trust, Plan Sponsor Council of America, Principal, SPARK Institute, TIAA, and Women’s Institute for a Secure Retirement. The SOS Coalition will work to ensure Americans continue to have access to the private sector retirement system and to meaningful savings incentives.
For more information, visit saveoursavings.org.