President Obama’s FY 2015 Budget Once Again Includes Troubling Retirement Proposals

President Obama on March 4 released a $3.9 trillion budget proposal for fiscal year 2015 that includes several retirement-related proposals that raise concerns.

The retirement “themes” are consistent with prior year budget proposals including, requiring a payroll deduction IRA for businesses that do not offer a retirement plan to their workers, allowing the PBGC to set variable rate premiums, and capping the total accumulation in individual tax-savings accounts ($3.2 million).

ERIC members and trial members can read more here.
For the President's Budget Overview, click here.
For the Treasury Department's Greenbook, click here.
For FY 2015 Budget Overview Related Documents, click here.

Bloomberg Reports that Employers Oppose Increases in PBGC Premiums

Bloomberg Businessweek reports in “Employer groups oppose pension fees in budget deal” that:

“Employers that still offer workers traditional pension plans are in line for hefty insurance premium increases under the budget agreement struck in Congress, the second time in two years that lawmakers have turned to them to help finance spending deals.

The basic annual government-charged premium for pension insurance already was scheduled to rise from $42 for each covered worker in the private sector to $49 in 2014. The new budget agreement would raise that premium to $57 in 2015 and again to $64 the following year…

'It only provides another reason for sponsors to exit the system, thus further harming retirement security and the participants the system is intended to help,' said Scott Macey, president of the ERISA Industry Committee, a group that represents large employers on benefits issues.”

To read more, click here.
ERIC members and trial members can read more here.

ERIC Adamantly Opposed to PBGC Premium Increase in Budget Agreement

The ERISA Industry Committee (ERIC) explains in a recent press release that:

“The ERISA Industry Committee (ERIC) is deeply troubled by the Congressional budget agreement that includes an increase in premiums paid to the Pension Benefit Guaranty Corporation (PBGC) by companies that sponsor defined benefit pension plans.

“ERIC is adamantly opposed to the PBGC premium increase included in this budget agreement, particularly considering the latest round of increases enacted by Congress only two years ago has not even been fully implemented. There is no policy or financial justification whatsoever for this latest increase, and it quite clearly is just a means so that policymakers can say they offset their spending increases elsewhere,” said ERIC President Scott Macey.

To read more, click here.
ERIC members and trial members can read more about the Budget Agreement here.
For the press release by the House Committee on the Budget, click here.
For the Wall Street Journal article on this issue, click here.
For the Pensions & Investments article on this issue, click here.

New Study Evaluates Impact of a Retirement Savings Account Cap

The Employee Benefit Research Institute (EBRI) reports:

"The Obama administration’s FY 2014 budget proposal included a cap on tax-deferred retirement savings  that would limit the amounts accumulated in specified retirement accounts to that necessary to provide the  maximum annuity permitted for a tax-qualified defined benefit plan under current law...

EBRI’s analysis finds that although a very small percentage of current 401(k) participants with IRA accounts have combined balances sufficient to be affected by the proposed limit immediately, over time—and depending on the applicable discount rates, whether a defined benefit pension is involved, and the size of the 401(k) plan—the impact could be much greater."

A full copy of the report is available here.

Obama Administration FY 2014 Budget Would Limit Total Accrual of Tax-Favored Retirement Benefits and Make Other Changes

The White House has officially released the Fiscal Year 2014 Budget. Details have been leaking about the provisions contained in the budget since last Friday, when representatives of the White House began making statements about certain items in the budget.

The budget contains a number of very troublesome provisions related to retirement policy including prohibiting individuals from accumulating more than $3.4 million within the tax-favored retirement system (including defined benefit plans, defined contribution plans and IRAs), capping highest income earners’ itemized deductions to 28% (this provision specifically includes retirement contributions) and proposing that the PBGC set variable rate premiums.

ERIC Members and guests can read more here.

Links to the budget documents are as follows:

• Fiscal Year 2014 Budget Overview
• Analytical Perspectives
• The FY 2014 Budget
• Treasury Department “Green Book” (Description of Revenue Proposals)
• Treasury Department Revenue Estimates

President starts down slippery slope of taxing health benefits

President Obama formally released his budget for Fiscal Year 2014 (which starts October 1, 2013 and runs through September 30, 2014).

Singularly important: One of the president’s suggestions is quite significant: he proposes to limit the value of tax deductions and certain exclusions for the top 3% of families to 28%. This means, for example, that if an individual were in the 33%, 35%, or 39.6% individual income tax bracket, the value of his or her deductions on the Schedule A of the Form 1040 - PLUS certain other exemptions INCLUDING THE EXEMPTION FOR EMPLOYER-PROVIDED HEALTH COVERAGE - could not exceed 28%. This would be a signal event as it likely would start us down the long, dark road of whittling away at the health exclusion for everyone. (Note that the employee exemption for employer-provided health coverage is currently the largest single tax break for individuals on their federal individual income tax returns, eclipsing even the home mortgage deduction. Talk about a large target for revenue seekers!!!)

The President’s Budget Proposal for FY 2014: The emphasis in the president’s health care budget seemed to be on saving money rather than making large programmatic changes. For instance, you will be surprised to hear that the president does not appear to be in favor of repealing the Affordable Care Act (ACA). Certainly he does not propose to end Medicare as we know it, and he makes few changes to Medicaid.

The document is also noteworthy in that the president does not propose an increase in the Medicare eligibility age, although on previous occasions he has seemed willing to contemplate a two-year increase, gradually raising Medicare’s eligibility age to 67 from 65. In addition, although it was expected to be part of this proposal, the president does not suggest unifying the deductibles in Medicare Parts A and B.

ERIC Members and Guests can read more here.

President’s budget proposal:
Fiscal Year 2014 Budget Overview
Analytical Perspectives
The Budget
General Explanations of the Administration’s Revenue Proposals (Green book)

House Budget proposal: http://budget.house.gov/

Senate Budget proposal: http://www.budget.senate.gov/democratic/index.cfm/senatebudget

ERIC responds to President's Budget Proposal -- Don't Harm Retirement Plans

In a press release issued today, ERIC President & CEO Scott Macey urged the government not to harm employer-sponsored retirement plans. In response to President Obama’s fiscal year 2014 budget proposal to impose a $3 million cap on accumulated retirement savings and further increase PBGC premiums, Macey said:

"The President’s FY 2014 budget proposal to limit the deduction or exclusion for contributions to defined contribution plans, defined benefit plans or IRAs for an individual with accumulated retirement savings of approximately $3 million appears to be short-sighted, confusing, and does not consider the unintended consequences of imposing such a cap."

"Individuals and families already are struggling to save enough for retirement, and they do not need another disincentive from saving. Moreover, the burden of calculating whether a participant exceeds the $3 million cap would only add an additional layer of complexity in retirement planning and would unfairly burden participants, as well as plan sponsors."

Click here to read more.