ERIC Urges Senate Finance Committee to Be Wary of Unintended Consequences

In a statement submitted today to the Senate Finance Committee on its hearing on retirement savings reform, the ERISA Industry Committee (ERIC) urged the committee to be wary of unintended outcomes in considering changes to the tax rules for retirement savings. 

“ERIC urges Congress to exercise significant caution when considering any changes to the tax incentives relating to the retirement system and avoid major unintended adverse consequences,” said Kathryn Ricard, ERIC Senior Vice President for Retirement Policy. 

To read more, click here.

Don't miss ERIC's Tax Reform FocusOn Call with Miller & Chevalier

The ERISA Industry Committee (ERIC) has scheduled a FocusOn call with Miller & Chevalier on Thursday, April 24 at 2 pm to discuss tax reform. ERIC indicates that:

"Join ERIC and the lawyers of the Miller & Chevalier Employee Benefits Group as they provide an inside-the-Beltway overview of the impact the recently proposed Tax Reform Act of 2014 would have on the tax rules governing employee benefits, executive compensation, payroll taxation, and information reporting.

While the recently proposed tax reform bill may not itself advance in Congress, its provisions could very well serve as a blueprint for future tax reform legislation. Because a number of the changes in the employee benefits area would be quite dramatic, we thought it would be useful for Miller & Chevalier to share its views with ERIC members on what the consequences of these changes might be.

This call is open to all ERIC members and trial members."

To learn more, click here.

ERIC Expresses Concern with Ways & Means Committee Chairman Camp’s Tax Reform Discussion Draft

ERIC President and CEO Scott Macey made the following statement in response to the release of a tax reform “discussion draft” by House Ways and Means Committee Chairman Dave Camp (R-MI):

“Chairman Camp should be applauded for his efforts on trying to simplify the tax code and lower the overall tax rates. We respect the time, effort, and thoughtfulness that Chairman Camp and Committee members invested in developing this plan, but nevertheless, we do have concerns with his proposed changes to the current tax incentives for retirement policy. "

To read ERIC's press release, click here.

The following documents were published regarding the Discussion Draft:

• Chairman Camp’s Press Release
• Executive Summary
• Section-by-Section Summary of the Draft
• Legislative Text
• JCT’s Estimates of the Draft

ERIC members and trial members can read more about the Discussion Draft here.

Washington Post Article Highlights Risks to Retirement Plans From Debt-Ceiling Delay

A recent article by the Washington Post, "Debt-ceiling follies put retirement funds at risk" states:

"Because the full faith and credit of the United States has never ever been in as much doubt as it is today, no one knows with certainty what will happen if (more like when at this point) the U.S. breaches the debt ceiling on Oct. 17, as Treasury Secretary Jack Lew predicts. That’s why debt-limit doomsday deniers are nuts to toy with our most valuable asset.

But the predictions are so dire — frozen capital markets, delayed payments and global financial meltdown — only crazy people (see previous sentence) would play with this kind of fire. And if they succeed, more than 60 million American workers with retirement accounts, 80 percent of whom earn less than $100,000 annually, stand to get burned."

To read the entire article, click here.

ERIC Joins Group Trade Association Letter on “Blank Slate” Approach to Tax Reform

ERIC recently joined a group of business trade associations on a letter to the Senate regarding the “blank slate” approach to tax reform, urging the lawmakers to preserve the current tax treatment related to retirement savings.

“While we work to enhance the current [employer-sponsored retirement] system and reduce the deficit, we must not eliminate one of the central foundations – the tax treatment of retirement savings – upon which today’s successful system is built,” the letter argues. It adds that, “The effects of such a change for individuals, employers and the system as a whole are simply too harmful and must be avoided.”

ERIC members and trial members can read more here.

The Group Trade Letter to Senate is available here.

The Baucus and Hatch Dear Colleague Letter 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.