Retirement officials are worried that Congress, in its efforts to reduce the federal deficit, will look to pilfer the tax expenditures for employer-provided retirement plans—which totaled $112 billion in fiscal year 2011, James Klein, president of the American Benefits Council, said in testimony before the House Subcommittee on Health, Employment, Labor and Pensions on Tuesday.
In its scramble to find ways to reduce the deficit, "some in Congress may overlook how these plans provide retirement savings incentives to workers at a significantly lower cost than the additional dollars needed to expand corresponding public programs," Klein said. "Because members of the Education and Workforce Committee inherently understand the value of the employer-sponsored retirement system, you are especially well positioned to be a voice within the budget debate on the need for tax policy to support, not erode, employer plans and retirement savings."
William Sweetnam, co-chair of Washington-based Groom Law Group's Policy and Legislation Group, who was previously the benefits tax counsel in the Office of Tax Policy at the Treasury Department, told AdvisorOne in an email message that in deciding how to close the budget deficit, "Congress will be looking at cutting all government spending–including reducing tax expenditures." One of the biggest tax expenditures, he said, "is the current exclusion from taxable income of contributions and earnings on employer-based defined benefit pension plans and defined contribution plans"–like 401(k) plans.
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