When Congress passed the Pension Protection Act of 2006, pavingthe way for greater use of auto-enrollment in 401(k) plans, lawmakers rationalized thelandmark policy largely on the work of a few economists.

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One was Richard Thaler, the recent recipient for theNobel Prize in Economics based on his research on behavioraleconomics, who first began writing about automatic enrollment andescalation in 401(k)s in 1994.

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On Twitter this week, the Nobel laureate staked out an unpopularposition on the question of whether Congress should limit pre-taxcontributions to 401(k)s as a part of tax reform.

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“Unpopular observation,” wrote Thaler. “Reducing the limit on401(k) contributions is massively progressive.”

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Tax-preferences on traditional 401(k) contributions benefit the wealthy in twoways, Thaler wrote. “They save more and get a bigger tax subsidy.Very few max out.”

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The University of Chicago economist’s position in support oflowering the tax-preferences on 401(k) contributions set off hoursof feedback on the social media platform.

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Comments ranged from the boorish, to input from respectedindustry voices like Skip Schweiss, president of TD Ameritrade’strust company, Michael Kitces, CFP and author of the Nerd’s EyeView blog, Aron Szapiro of Morningstar, and Shai Akabas, aneconomist at the Bipartisan Policy Center.

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In one exchange, Dr. Thaler suggested there were alternatives totax incentives to motivate savings rates.

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“Just set the default at 10 percent for example,” wrote Thaler.“No reason to subsidize saving by the rich.”

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Details on exactly how traditional 401(k) contributions will beimplicated under tax reform have been kept under wraps bylawmakers.

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Last week, unnamed sources leaked that lawmakers wereconsidering capping pre-tax contributions to 401(k) plans at$2,400.

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Rep. Kevin Brady, R-TX, the chief tax writer on the House Waysand Means Committee, confirmed this week that treatment of 401(k)sremains under discussion, in spite of President Trump’s vow toprotect retirement savings contributions.

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Brady told BenefitsPRO that Universal Savings Accounts wereamong the policy options being considered. Those would allow allAmericans to invest a limited amount of after-tax dollars thatcould grow overtime tax-free and be withdrawn at will, for anypurpose, without the penalties associated with early withdrawalsfrom 401(k)s.

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In reporting in the Wall Street Journal, Brady suggested thathigher contribution limits to 401(k)s were also beingconsidered.

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A first view of the tax bill is slated for November 1. The Waysand Means Committee will begin considering the bill the week ofNovember 6.

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Dr. Thaler did not respond to a request for comment via email bypress time.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.