Proposals to scale back or eliminate retirement savings incentives in 401(k) plans not only endanger the ability of low- and moderate-income workers to enjoy secure retirements but are based on faulty math, according to new research from the American Society of Pension Professionals & Actuaries (ASPPA).

ASPPA analysis shows the real cost of retirement savings incentives to be 55 percent to 75 percent lower than claimed by budget hawks, meaning that proposed cuts will not save nearly as much as advertised even as they jeopardize the future of 401(k)s and other retirement plans.

When evaluating the cost of the tax deferrals associated with defined-contribution plans such as 401(k) and Keogh plans, the Congressional Joint Committee on Taxation (JCT) and the Treasury Department's Office of Tax Analysis (OTA) both use current cash-flow analysis. Since workers withdraw money from these plans only in retirement, the taxes paid show up outside the 10-year timeframe used in cash-flow analysis, and therefore are "scored" as lost revenue, rather than deferred revenue. These tax deferrals differ from tax credits or deductions, such as those for medical expenses or mortgage interest, since the taxes deferred ultimately are paid.