In reaction to the U.S. Senate Committee on Finance's tax reform hearing concerning retirement security, the American Benefits Council and the American Council of Life Insurers say employer-sponsored defined contribution and defined benefit retirement plans are essential elements to the U.S.'s retirement system.
In fact, ABC and ACLI have successfully helped millions of families acquire retirement savings that will provide trillions of dollars in retirement income using these plans. Employer-sponsored retirement plans play a large role in personal financial security as well as creating savings to encourage the type of capital investment the economy needs for long-term growth.
"Today's retirement laws and policies are working well and are aiding individuals to accumulate savings and generate retirement income," ABC and ACLI say in a written statement. "For that reason, the first, and most important, principle we urge this Committee to consider in the context of tax reform is to do no harm to the existing retirement system. We urge policymakers to avoid any actions that would make it more difficult for individuals to save for retirement or that would discourage employers from starting or continuing to maintain retirement plans. Thus, the wisest course in most instances will be to not enact new laws and regulations that would interrupt the successes of the current system."
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If the government is to get involved, the dramatic rule and incentive changes could lead to unintended consequences, which is a risk not worth taking, ABC and ACLI say.
Changes in the tax incentives would require each plan sponsor to reevaluate and completely redesign its retirement plan offerings and could force them to consider eliminating their plans entirely," ABC and ACLI state. "Even seemingly small changes in laws and regulations often generate confusion and enormous costs for individuals and employers."
Instead, ABC and ACLI believe the focus should be on how policies can help individuals and employers save enough retirement income to maintain their standard of living. Typically, retirement policy is led the need for federal revenue, and when that is the driving force, the plans become more complex and costly. Still, savings should be encouraged.
"Even under the current savings levels, many Americans are at risk of a financially insecure retirement," ABC and ACLI state. "Policies that further bolster retirement security for future generations should be carefully considered – but those policies must build upon the existing successful structure to generate greater retirement savings."
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