Saving the 401(k)

Congress continues to actively debate a variety of tax reform proposals, all adversely impacting our existing retirement system. The American Society of Pension Professionals and Actuaries (ASPPA) is leading the way in providing counter arguments to these proposals.

Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) have proposed a “blank slate” approach to tax reform, meaning the tax deferral incentive for retirement plans would be discontinued along with every other tax incentive in the IRS code that represents “permanent” lost revenue. On June 27, ASPPA responded to Chairman Baucus and Senator Hatch, reminding them that the tax incentives of retirement plans are deferrals of tax liability, not permanent exclusions or exemptions. The existing budget rules score tax deferrals in retirement plans as current tax expenditures without proper recognition of the present value of the future tax revenue. This fundamental flaw in the budget scoring system is the reason that retirement plans are in the crosshairs of the tax reform movement.

On the House side of the debate, there is interest in tying tax reform to the looming debt ceiling deadline. ASPPA has released an excellent video summary of the debt ceiling impact here:

ASPPA has also sent a comment letter to the Pensions and Retirement Tax Reform Working Group of the House Ways and Means Committee. In the letter, they argue for the maintenance of the current tax incentives, reminding House members that the current budget scoring rules skew the actual impact to the budget by understating future tax revenue.

In addition to the Congressional debate, President Obama has submitted a proposed 2014 budget provision limiting how much money an individual can invest in retirement accounts on an annual basis. The limit would be linked to the cost to purchase an annuity that would generate a $250,000 annual income payment (which is the defined benefit plan limit). The limit would be aggregated across all tax deferred accounts held by that individual. While the number of individuals impacted by this limit might be small today, the increase in administrative burden to comply with the requirement would be significant. Young workers enrolling (and auto-enrolling) into plans will also be more likely to hit the limit as their benefits are projected out 45 or more years under this new compliance test. A great analysis of this proposal was published in the NY Times on May 15, 2013.

Last year, ASPPA launched “Save My 401k”, a grassroots campaign aimed at protecting the private retirement system. The campaign’s message is being deployed through social media, including Facebook, LinkedIn, Twitter, and You Tube. ASPPA has also established a website with content to educate lawmakers and the general public about the utilization rates of 401(k) and other employer sponsored savings plans.

The site provides links to allow you to directly email your elected representatives to urge continued support of the existing regulations. It takes only 20 seconds to process your request. Every email and letter counts as Congress gauges public interest in the debate. Over 150,000 letters have been generated from the site to date.

ASPPA has also created a LinkedIn group and Facebook page of the same name (see below) with daily posts and links to news articles, proposed legislation, statistics, and other important information.

ASPPA has made various marketing materials available with the Save My 401k campaign branding including email signature graphics and other templates at

Save My 401k website:

Save My 401k on Facebook:!/SaveMy401k?fref=ts

Save My 401k on YouTube: