Brian H. Graff, executive director and CEO of ASPPA, calls President Obama's proposed 2013 budget "a bad proposal based on bad math," especially when it comes to encouraging participation in small businesses' 401(k) plans. Graff issued the following statement in response to Obama's budget announcements, which were made Monday.
“President Obama’s proposals to limit the tax benefit for retirement savings for families earning over $250,000 is a bad proposal based on bad math. Unlike other targeted tax incentives, the tax break for retirement savings is a deferral, not a permanent write off. Under the President’s budget, these taxpayers wouldn’t just lose a current tax break, they would actually be penalized for saving—paying taxes now and taxes later.
"This will discourage small business owners from setting up or maintaining retirement savings plans for their employees. Workers that lose workplace retirement savings plans will be the ones that really pay for this misguided proposal.
"Under current law, there is already a $250,000 cap on compensation that can be used to calculate contributions to 401(k) plans. The President’s proposal effectively doubles down on this limit for 401(k) plans, and takes an axe to the tax incentives that encourage small business owners to offer these types of plans at work.
"More Americans save at work than any other place. Calculations from the Employee Benefit Research Institute (EBRI) confirm that more than 70 percent of moderate-income earners with access to employer-sponsored plans participate in those plans, while less than 5 percent without employer-sponsored accounts contribute on their own to an IRA. Penalizing small business owners that make over $250,000 who contribute to 401(k) plans won’t balance the budget, but it should and will make them think twice about putting in a plan to begin with.
"We urge the Obama administration and members of Congress not to jeopardize the retirement security of working Americans by penalizing retirement savings.”