i 16 8 V vii vi 14 ii 24 13 19 6 iv 3 20 18 SUMVARY 291S 9 ZII 12 27 28 1 Z5 7 S26 7 TABLEOF CO_ 23 i0 422 iii 21 EBRI TABLE3 the tax expenditure estimates are based on assumptions that behavior will not CONCLUSIONS TABTABLE LE 5 1 CONCLUSIONS le _nnell rate when vels benefits of was tax, whoavailable. wri orare tesa disbursed. deferral that But the by of'Revised the tax The i methodology time liability." estimates the 1984creates 2 .i/empl Budget W oy ithin am higher, wasupward this prepared context, and bias theref there because ore was it SUMMARY taken this perspective, portfolio but until relatively fro the m margin. is countr the as distribution. ........................................................... notregular The The yspecial inheavy sois 1984 the the Institute That deductible notincome, burden sophisticated estimates tax Reagan is, yetpro In each appreciates v mature. on isions the Budget additional if workers are is h itypothetical considered manner further is lists for For purchased the at tax TA retire example, separate lower that Bopportunity flawed LE obligations mexample to ent 2higher income be indi consider because categories van progra iduall presented income "exception to levels. ywould m . saddress of theis the individuals arise and case here Recentl precipitous totally to estimates the at of ythe the Committee athe $I, normal there new can. itime 0 changes o0 f0has tax the analyst proportions pensions them comp creatio un teno has tax the for data. been for expenditu pension some 6two / able years Using reasons. tax rto e now. arises expenditure partially 1977 The as The inthe first this application clarify was referen case. is something ce that the There of discrepancy. ye the arthe ,inFederal is concept excess because no contribution Budget ofhas The it 25 cdifference onot rresp percent.10_J continues orecognized nds to orin employer estimates initial post-tax contribution By of the the end tax $500 of expenditures were rates the invested 1982 and the taxthatparticular yin earare an inasset att mid- ributable taxing Athat pril did options of tonot 1983 IRAs. ,pay that sources aThare regular e IRA being (see being Social first collected year Security tax expenditure ulegislation nder the individual calculated passed byincome Congress by the tax, Treasury will allraise other for marginal athings $1,000 being pension tax rates change if current tax provisions are modified. For example, consider the case There is no doubt that federal tax policy has contributed to the edoes INTRODUCTION INTRODUCTION been the structure" vidence estimates not considerable aA consider vailable thorough of FEDI_,AL ...................................................... fo taxes, r the fiscal discussion suggesting REVENUE anal but EMPLOYER factysis 1982 isthat LCONTRIBUTIONS OSS calculated and of that is current ESTI changing $19.515 discussion 1982 blATES TOas IRA workers P, billion ITIP.BqENT the though FOR utilizati of tax "TAX the will PROC_ oall treatment (i.e., n numbers EXPENDITURES" .have other FOR in $45.280 higher resp that exceptions of ohealth nseare - real FOR $25.765). tpublished obenefits I earnings are ERTApart Of contribution unexplained m concerning in Iforethe therealistic, esti average One m"tax ates variations His concern YPOTHETICAL marginal made expenditures," marginal fromor that yin ear when tax tax AL estimates policymakers to Trate NtNATAIVE the rate yespecially earinvestment o£ assumpti that fro 25mINVESTMENTS should percent o are year ns.those return not to have ispertaining These eyear. xplained. AND applied is ispaid. that indicate RETURNS Each toto the As The of the employee FO tax aan these R amount substantially minimum A exexpenditure ample problems ofofof this $21 pension expenditures. to taxexpenditures pension with considered. interest dividend that be the the plagued plan Acontribution paid but ERISA implementation thorough inFor rather by to Each data, a are unprecedented example, a firm analysis trust is defined provided will the with attributable offund uni accumulate in ERISA's v middle and as erse aits since "exceptions deficits CBO discussion ret oage minimum fanalysis to ,none uto pri rn and avate athrough decision meaning exists. value younger of tofunding of defined-benefit the thevarious of the that by nor tax The workers. nearly standards mincreasing the al expenditure all benefits tax Congress structure" $2,600 taxcap For has programs incenti paid levels, value several over escalated numbers to ves of are provide of the grew raising all the years will that ten by equal.The related T co able ntribution 7) tax were 1984 expenditures mi sh Budget go ht win exceed g estimate total are theIRA embedded total of balances the added tax in a ofexpenditure acc broader $80 umulation billion. category arising overThat of tenbecause "retirement means years that of thatthe is for many elderly pension recipients. Because the adjusted gross income T-19 SELECTED PKTV_TE AND PUBLIC 5_IDYER PLANS, SELECTED VOLUNTARYEMPLOYEEBENEFIT PROGRAMS WORKER IN 50 PERCENT TAX BRACKET of an employer who is providing family health insurance coverage that costs is discussed in more detail below. benefits. WORKII_ PARTICIPANTSPER BENEFICIARY IN DEFINED BENEFIT CONCEPTUA jumped expansion in billion thisthe inconsistenc significantly Budget inLof BACKGROUND IRA the yeach contributions pension y Table ear ovON eris TAX s 4 pri yneeded. stem. shows orEXPENDITURES then years. the There theConsideration tax foregone Fis o......................... expenditure r no example, doubt federal ofthat EBRI the estitax mates in effect released would thedue short of bethe behavioral toaround 2term, the data tax $4.8 inthe particular the le indi estimates of the attributable 218 vels v,the idual 48 employer cap 7 when normal from plans are tax and they will $1,980 tobased structure in expenditure, corporate tax retire the make on defe to pre contributions, assumptions $2,160 v ror ral. ifor o tax usthe however, purposes (in rates. for twent fact millions yfamily that that is yof representing ears; not behavior deriving of the coverage simply dollars) 3pension 2.0 will the percent and current foregone system estimate. not from ochange. freductions $792 tax is thisnot collections This to groFor $864 wth yetignores ofexample, mature. for taxin are preferential years be private taxable larger programs. this, asset published subject $17.135 and itself. tax emplo since Mr. will to expenditu tax in Chairman, ybillio er's closer the provide In the treatment rnprogram ethis contribution Budget scruntiny. isit a fcase orattributable post-tax is is each to prithe a vnoncontributory. ate apleasure year specific post-tax rates The distribution plans." is second to in needed. to kind higher man disposable appear 8/isy ofinstances. The that of estimated activit Consideration before $1296.88. explanati the balance y. cost you on contributions The For from today. of This more of that voluntar these the the israpid higher I$482.45 yinitial tax appear and deductibility plans within thresholds for the self-employed at 198which of 2 tax mortSocial yg ear Regular age and new interest Security others." IRA contributions on Pension benefits owner-occupied Table 6become shows equaled Tax the taxable homes attaxleast durin expenditure are gnot $50fiscal billion. indexed 1983the Private Pension and Aggregate PENSION PLANSWITHMORETHAN100 ACTIVE PARTICIPANTS Profit Stmring State and Local Federal Civil Service Employer Savings DURING1977 BY Account PLANAGE Expenditure Capital Gains $200 per month Contributions for a married empl Contributions oyee. The estimates Retirement Contributions of the revenues Contributions to be Table 7 in a news release on November 19, 1982. This information was picked up MAGNITUDE revenues tax changes treatmpreferences ent that but In OF of the sho TAX might emplo u simple afforded EXPENDITURES ld yeraccompany recognize sponsored example retirement tax FOR that used plans law VOLUNTA ther programs above changes included e will it RY EMPLOYEE was do and be Fiscal incost f possible of uthe tuthe re Bthe E Years last NEFIT tax struct federal tofour collections show ure Fgovernment ederal how of other theat tax the tax the marginal consider billion occurred the calc extent ulation, for A As the From Probably between rates proble to you fiscal case awhich were mknow, purely but 19of the with 71982. 3 used one no an "tax and primar conceptual benefits the employer "exception" to1977 Given yexpenditures" concept generate argument and higher will who basis 7of might 2.is the 7 betax used rates the providing percent paid, are 1982 be expenditures tax toda defined magnified of Budget and yexpenditure between IRA family for thus, utilization as estimates reducing because "revenue is 1968 there health that estimates and are of is the the insurance among losses 19 plausible. the no 7 tax tax 7. are upper existence code If also all structure emplo in incentives pension more $500 individual my yeethan investment capacity trust benefit of Since the for coverage, other post-tax earnin as some the after programs tax Executi gfunding s. categories Account an code ten accumulation increase v The e more years provisions pattern Director remaining than o£would Contributions of emplo of 90 under 9of that ythe perent, be percent ee $2.580 the $1,137.50 plan the affect benefits Employee billion regular would of doesn't in the the Given or have reduce Benefit total estimates in savings within fit Year been thethe the tax Research higher $60 significantly vehicles. mold potential expenditures should Vehicle of tax assumed the be In taxby funding estimates of Were forpension this the law obligations broader to be category changed in compliance a from nd pensio the nwith last confederal four tributions Federal law has and Budgets. contributed interest One T marginal is he$25.I Treasury billion tax Department rates dollars. o£ pension uses 4--/ an This recipients avera does ge not marginal should meanincrease the tax government rate gradually of approximately willinprovide the 30 198Z 1985 1984 PROGRAMS ........................................................ Plan A_e 3 (Percenf] (Percent) [Percent) Less Than 5-1_0 11-15" 16-20 21"25' Over 25 gained by a tax cap generally assume that such a cap of $170 per month, as an quickly does some of others. not tax Year ininclude revenues. b(billions)(of oth the a definition trade The total)conclusion press (billions) of and thethat (of the '_or total) m cthe oal nventi (billions) number structure" onal showing media. (of of total)the upThis in tax (billions) the incl syu stem. annual des such As can attributable expenditures code What flawed Budgets. income beprovisions is attributed because individuals interesting to arise the provisions that toand estimation this is health afhow fect that assumed o£ they benefit the there procedure the are estimates, marginal Federal is programs measured. absodoes lutely tax tax should or not rate laws If pension no even the be iswhich published undertaken. tax-expenditure likel attempt programs yallow to do to cumentati a besponsored special account Consideration quite concept on low, forb oyn is point offsetting increased Institute. preferences coverage revenue the comp ofufrom distribution tation that in taxWith for the the costs reven method emplo me 1984 cap ues$200 is yer-pro by and Budget Dr. then collected 22 per vthus, ided Schieber, percent. the married overat "tax that prior health least 5EBRI's couple. expenditure" / enter Budget in insurance part, Research theThe estimates. tax represents estimates is isDirector. expenditure ignored. that Virtually itof taxes would the In EBRI calculation. fact, deferred revenues reduce is no athethe not to undertaken. homeowners expe other 28,169 to post-tax the nditu words, tax growth re accrual with qualified Consideration estimate 5in 7.2$25.I under the percent from tax plans billion the expenditure of the of in pension the the this 1984 existence life pension Budget year, option. estimates. cycle ataccumulation but isthe structure attributable rather endByofenhancing that of 1955 in earnings, homeowners this to were chang example the assumed e"Retirement sbenefit would inresults to thehave be tax percent accr might future. ualshave toHigher to expected estimate become marginal Total taxable significant the pension tax all S rates Years pension increases tax Years among expenditures conpension Years tributions in the Years recipients tax and would expenditure sliYears ghtly not should lower Year £1ee estimates s reduce to rates Unknown accou tonts HEALTHBENEFITS TAXATION .......................................... 4 Pre Tax Income $i,000.00 $i,000.00 -- $I,000.00 1970 $ 13.0 66.3% $ 4,6 23.5% $ 2.0 10.2% $ 19.6 example, Total Plans w (number) ould not result 22,467 in different 4,092 5,418 health3,839benefits 3,008 pr2 o,visi 258 ons 3,62 u8 nder the 224 Federal Budget is a fair representation of the pension system to federal taxes newspapers to of understating have the 1971 foregone. life any The ascycle semblence foregone 1981 USA 15.0 Tstructure Budget oday 65.8 o tax f and validity esti revenues m The of ateearnings, 5.2 Washingt in ofinthe this on the 22.7 context benefit particular current Post. 2.7accruals of Table period. pensions, tax 7 expenditure 11.8 sh and o Few wsmarginal then individuals that the 22.9the fortax annual IRA fiscal are emplo Ifexclusion, the be the the Exclusion Civil because rate defined-benefit comprehensi the gained y actual 1983 significnat ers. assumptions. Service expenditure of v Budget For This eness of by exemption, the rates example, contributions aplan does tax favored points difference plans, used of was cap is not insurance or also consider to estimated out, generally which tax mean deduction generate treatment in to largely the that is the pre- the being ter certainly by assume if m tax either from case financed subtracting pension itself pro accorded collections vgross ided. that of the not aison contributions such 1981 66 income pensions the "unfortunate afuture y The pay-as-you-go ear-old on oa case, r cap literature current or 1982 discounted compared which of 62.7 single Budget and $170 in benefits percent provide interest that basis. isman per to estimates. taxes rich amonth, itwho of paid aseems with accruals If on special allthese and asto accruals nonprofit, explanation between and the The nonpartisan, marginal was 1982 sensitivity pro and vided tax 1983public rates for of Budgets the these policy tha ,estimates t precipitously in proresearch v particular ide to a,even radically organization higher relatively because different estimates. offounded small the passage distributi changes in 1978. onof in to future estimate pay $25.1 pension the billion IRA tax related expenditure more expenditures. in federal estimates income Assumin under taxes gthe aifcurrent ratetheir of mortgage estimation 28 percent interest would I_ncomeSecurity," provided by pensions, the primary goal of ERISA, plan providing their primary returns through capital gains (stocks), tax exempt 1972 17.8 66.2 S.8 21.6 3.3 12.3 26.9 RETIREMENTPROGRAM TAX EXPENDITURES ............................... 8 paid legal services plans $ 20 $ 25 $ 25 W Post orking Tax Participa Income nts 500.00 1,000.00 $ 500.00 500.00 1973 20.7 66.3 6.6 21.2 3.9 lZ.5 31.2 modified tax treatment. That is, that the employer would continue to provide c Health the ontribtime utioBenefits ns discounted during value fiscal of 1982 futurehad tax to ha collections ve been at based least on $21current billion. m CONCEPTOALBACK6ROUND taxpa rates year yet Per easurement Benef receiving y 1981 ers, that iciar,/was provide however, of $14.7 significant these ais billion. radically expenditures ON improper. TAX IPJ_based EXPENDITURE The diff should 1982 erent annuities Budget distribution estimate Percentage esti so mthe ated of thePlans tax differences of the the collections 1981 tax expenditures fiscal in the on y such ear value of pensions credit, ianalyses N conventional defined-benefit received m othe ply t only that taxaConsider from d$8,400 It that expenditures preferential oes Go appears vsavings ern foregone _nnell show m plans in en the tSocial that the program. case has w ign taxes rate than omore prima uld ore control Security ofof cross ha ron y this comprehensi vaetax, worker current reason been sectional o cv obenefits er mpletely orvless ewho a all for trust deferral is the resources. co than analyses during vthr erage in fund o significantly ugh ten the of ou contributions 1982 tyears leads SO istax Ifpercent essential. her and liability." re to old venues ban oo (some increased at kadditional marginal and o the nwhich would Finally, pri interest ev nate d tax are say of EBRI methodolog an security two became theexample, level retirement sponsors taxable is yof .wo now the research uld plans that being proposed notall had jeopardized result and pension met cap educational in their reflects different contributions because normal programs thehealth cost the relatively would resulting contribution inbenefits anflee effort narrow increase to provisions plus accounts to range pro the invof ide tax under providing 40employer ayear sound the ERTA yield which 19an 74 IRA roughly tax 24.2 expenditure doubled 65.8 IRA for 7.8 eligibility the 1982 21.2 tax for year 4.8 1982. of Yet at least 13.0 this $14 1982 36.8 billion. tax were interestnot deductible, (bonds), or and tax defer if they red did earnings not cha (life nge their insurance). behaviorBut in an significant y way 1975 27.6 63.6 9.1 21.0 6.7 15.4 43.4 Value of account Investment credit for ESOPs 1,390 1,250 1,375 Methodological Problems in Retirement Program Tax Expenditure Two or less 5.5 1.9 2.1 3.4 7.0 10.5 12.0 7.6 1976 33.0 64.0 10.7 20.7 7.9 15.3 51.6 family health insurance that would cost $200 per month, $30 of which would be it not modified than of annuities tax Estimates would a collected expenditure cross person's In make The tax cannot ....................................................... sectional the 1984 treatment. no due lifetime preparati for difference explain Budget to the anal 'special' ontax identical ranked yThat the sis obligations o iff discrepanc is, is the there tax the essential. that categor 1985 pro exclusion y were visions that the yBudget, between beneficiaries employer of arise Finall of represent plans the emplo the because y1981 would , at y$4.8 erinconsistencies $25.6 or G expenditure ohealth part vcontinue billion not. ernm billion ent of The insurance earnings estimated to maturity f 1o -- 3provide in r athe 60 can inconsistencies bracket _r_ Methodological $8,400 pensi ast utilization contributions annual ronomically) thaa ons Z,in amortization and "Tax uUnder but ppension tois ofshe Sexpenditures" under ten in Problems health the higher als the benefits. y ocurrent 19.8 ears these schedule actual fcare ails estimate in from plans. method services. can Retirement to calculation Assume stipulated retirement. 7.S explain arise of From of employer 10.Z there computing from It aProgram herin of more iswas Assume 17.2 both cERISA o these contributions argued nclusi practical no Tax the emplo 27.9 oas other nthis estimates, Expenditure that tax the yer that worker income expenditures 31.3 policy minimum lowering and an the dto employee has pensio received Estimates analysis higher say 36.9 funding the $I,000 nnothing used tax actions. tax trust 21.9 and in by rate no ofthe information relative expenditures 1977. contributions. their at endprimary The of As toy defined-benefit basis ear the the heightens returns Budget There tax forcode policy is through political of if little the pension this decisions. United tax-exempt variance provision pressure system StatesEBRI in interest in to were 6overnment the this reduce aseliminated. dollar an countr orinstitution contribution capital yamount is prepared todaygains. ofdoes islevels. employer each still not But year take quThe ite a portions expenditure The Treasury The of estimate these assignment shouldaccounts update onlyofincreased pension might its IRA fleecontributions estimates by to11other percent based actiacross v between ities upon currently individuals that the two are annual av fa ailable in vored the by 1977 38.4 63.9 12.4 20.6 9.3 15.5 60.1 UNITED STATES SENATE V_re than S, up to 10 20.1 10.7 17.4 23.5 25.9 24.9 23.1 21.9 Exclusion 1978 of employer 44.0 64.0 contributions 13.7 19.9 11.0 16.0 68.7 _re than I0, up to ZO 15.4 13.I 19.6 19.3 15.7 12.1 9.4 12.5 C0b_IITrEEON FINANCE taxable 1979 income. 48.9 Yet on 63.5 the cost 15.3 control 19.9 side, pr 12.8 oponents assume 16.6 the 77tax .0 cap be deferred Theasworld a pension is notcontribution. quite as neat as In the the aggregate simple ,example foregone discussed revenuesabove in pri contributions actual percent here vate andcalculations plans incr the ease. $2.8 was fourthestimated billion Ther of among ethese was estimated tax atestimates, absolutel $25.4 expenditures y in billithe oto no n say explanation 1984 during (seenothing Budget. Table fiscal of in 4)The 1985. the the on discrepanc csignificant Budget ontributi These o yns docu revenue m is ents of pre-tax For family earnings contributions assumpti 'expenditures,' requirement forthe medical ons health individual income is that used for insurance insurance across that why private in federal they can not the workers' premiums be arise consider plans that 1982 civinvest ilian would Budget from earnings established and e alld and such cost in estimate tax state one levels. things $200 rates before of and per are three below as local That month, "theref 1974, contributions ways: 100% means o pension rethe $30 'special,' (i) that total m of ore pla which ato modest nsemployer realistic." regular individual were would in whichbe the bof positions set young. perspective preferences Treasur lBudgets. significant information tax special are Unexp significant the than expenditure oflained 1pension 20 "tax y,As deductions Department, on Inthe expenditure" will and portions Variations public the fact methodological system system ,concept should estimates reduce considered 30.0 the policy the of would matures, present 1984 in 525.00 the is these estimates tax the issues. are now not comprehensiveness Budget revenues 5 deficiencies for 5.5 accounts Estimates alsoher being the abeseperate 1,100.00 calculating important isratio estimate 39.7applied developed foregone flawed mi ........................... gof tax ht in 26.7 w ofif oto flee the because rkers tax of expenditure because the the by state 16 co calculation .liability. 9to v 50.00 the 1982 erage, tax toother of and Treasury beneficiaries pension expenditures 14.4 fiscal thelocal line and activities totally procedure This year contributions thus, item Department 10.8 and 550.00 person federal for tax were 1will 7that 2must 6IRAs. .3would and are Treasury's the tax code ItTax is rather Model not the tha has npurpose not increasing been of publicl this Federal testimony y described, revenues. to focus making on the it difficult whole range to of 1980 54.7 62.3 17.5 19.9 15.6 17.8 87.8 L_kn_,aa medical a/ care 9.3 11.3 10.9 15,355 9.9 18,545 6.7 6.7 21,300 7.7 9.8 2 551.25 1,210.00 55.00 605.00 1981 60.2 61.2 20.0 20.3 18.2 18.S 9B.4 HEARINGS ON would result in less comprehensive coverage. Less comprehensive coverage $60.2 the Othercurrent billi Issues on time (see frame Table should 5) andbe inc adjusted ome on the to account trust funds. for the Acc present ording value to of case methodological and estimates, taxable T utilization even herethus, all harder is income. resources certainly the howe le tovactual els. vdeficiencies reconcile er,Yet are no areon estimation One aeffecti extremel the priori when rationale vely in cost ythe the reas ofcontrol o sensiti Budget's n Gcalculation tax is overn tv that o eexpenditures mbelieve side, entinclusion lower to controlled?" assumptions proponents procedure, that servfor ice of anyretirement Keogh utilization assume must set 3 about / o plans As be f emplo assumpti the aexplored. programs result is ytax levels eronscap theis is savings estimated retirement included have markedly and explaining interest adjaccount; uin decline, sted asacco the the in are gross u changed the nts tax (2) not much hypothetical (IRAs). expenditur income treated a esti as pension mthe ate of eFor asratio $8,400 plan; calc fro regular example, employers m ulations of under one orworkers income (3) budget but they current fo an it rare tarise o toinvestment is the beneficiaries estimated law. the criticall first through nexHe t. time. vehicle would yeach contributions The important inyear. be onl Itthe where yis eligible Social The given allto bepublished adjustments unexplained contribution civilian favored Inconsistencies explored. 3 by We plans asthe are 13 variations to part to / the as tax pleased these inof well. health code. IRA thetwo in and to 578.81 Budget. The plans estimates benefits' For address Pension militar higher would The 1,331.00 the Tax from ytax income "tax have retirement Committee Expenditure cap year expenditure" been can individuals, to $89.2 affect concerning year. program 60.50 Estimates billion aconcept large is in "tax still particular, ...... during proportion was expenditures," 665.50 not first 22 fiscal included this laid of tax expenditure expendit There u was res isonly listed no do 23ubt in percent the that Budget g federal reater but tax than rather policy the to 1982 has evaluate estimate contributed those in the that to the 198pertain 2 understand the reasons for or mechanics of adjusting tax rates for purposes of J S_Exclusion IRCE: EBRI tabulati of pension ons of 1977 contrib plan discl utions osure data submitted to IRS in 4 607.75 1,464.10 66.55 732.05 SI3_RCES: Private Plan contributions from U.S. Department of Commerce, The future considered. cacollections mpliance with E:_,I_. that will result because the pensions funded today will shthe othe uld actual workers be lessmethod who expensive, receive of calcsuch u reducing lation. benefits. the premium rate below $200, possibly even tv contribution m Other bnnell ore realistic Issues theTheav...................................................... rates current erage than and marginal anbudget other the particular situation with tax out rate anocertainly taxing fanalytical workers options warrants cobasis vered that oby nthe are which a concerns pensi beingo to n evaluate 2used 5of the to ret practical out quite employee would explanation will Security Inconsistencies interesting for stream 1981. and urn in aearnings dampen complicated. double 12 result on of 1967 The /benefit program th definitions tax This e current by that that the in exemption :investment expenditure Stanley less in well-known is programs. we declined adding IRA 48.5 budget First, hacomprehensive v that eS. and since the percent is found Surrey, estimates durin ha situation Pension Treasur inflationary ultim tax vehe g for arisen was more expenditures athe tel the yTax coverage. the estimates for over y certainly 1950s than Deputy realized in Expenditure 1980 problem the age the the and and hypothetical Assistant attributable 65 measurement Less the total warrants 196 as and in 1981 0foregone a s. Estimates comprehensive health employer so capital Budget 7Secretary /his concern. case of to The care taxes taxable differences gain. annual public contribution considered ratio prices. for from coverage There income Assume tax will plans Tax exemption is is Policy here would that that no by especially in couldthe5 be1984 expected those Budget _atiQnal pertaining because estimates Income 638.15 andthe Pto rodof uc size employee ttax Accounts, 1,610.51 ofexpenditures their benefits. 1948-1974 savings andEor During Revi 73.21 over employer sed time the last sponsored makes 805.26 two it years to expansio Budget emplo nand yee oof12.5 benefit Tthe he percent abstract pensio programs n greater concept system. established than of There tax the is expenditures by 1981 noemplo doubt estimate yers that has on ina been inthe voluntary theapplied 1981 short Budget. basis. term, to the these calculations, however. The analyst who generated the pension tax TAX EXPENDITURES _sti_wates o[ the Na{ional Inco_4 Prc_uct Accounts (J_2); State 6 private pensions 670.05 for some 1,771.56 years now. T80.53 he application 885.78 of the a/ Includesplans with no beneficiariesreports. and-Local Government plan con_ributio_[r6_al U.S. Bureau of the to $170, thus eliminating the estimated revenue gain. Even if the employer ultimately Congress. of considered. employerbe There pension For taxed. example, is contributions, noInsegment the in a current CBO of the anal personal Treasury ybudget sis of IRA or estimates various tax contrib code tax utions ofthat cap tax should and levels, expenditures thebeinterest raising beyond for the expenditures covering went them. should decline be are worthwhile Rel$6,400. Emplo ationship annual shown tobe Such yall nTable Emplo The about er o By Opponents tless in rate toprivate because plans analysis Schedule the are Special Table y to seek S, er e 15 of x end other not pensive, based contributions percent return 2. of those oplans of always Analysis was fXthis Tax of fewer the In on n opportunities in of oreducing 1982 the in tabulation Expenditure tlogic 1982 consistent each the covered available 1981 G first Federal to in tax U.S. argue of shown tax-favored the the year ythese ear workers, of workfo Categories within premium Federal 45,280 t that Income that oin information in in coptions oTable rmpare ce mid-April which will it or but Tax benefits Budget rate isca .................. across 49,700 5 minimize nthe because Tables the overly would earlier. below increas that does of deposit 1981 categories, that be 1985, e simplistic. indicates plan $200, o their not f56,560 and l0are m the In is opercent sponsors re 1982 include the possibly other tax not made taxa same or Budgets. liabilities 2taxed They tax 7words, to per from separate filed sources even the argue as segment there atretirement Treasury ha 7ofveBecause the been programs. from budget significant 1961 employer orto The tax 703.55 1969. contrib estimate code changes He that u1,948.72 tions does stated: inshould federal are include relativel be tax beyond some laws 88.58 yamount scrutiny, constant, affecting attributed and 974.36 irrespective employer thatto The expenditure tax major prefereEven ncategories ce concept estimates the affor 1983 ded has offor Budget programs retirement notthe recogni estimates 1984 and zedBudget programs the that might estimated did does thenot be implementation cost understood know taxthe how expenditures federal such since ofcontrib go ERISA's that vrelated ernment Budget utions to Census, Finances of B_loyee Retirement Systems of State and Local TABLE 7 minimum Governments, fundin 1970-1971; g standards 1972-_973; has 1973-1974; escalated 1975-1976;priv 1976-1977; ate employer's 8 738.73 2,143.59 97.44 1,071.79 CONCLUSION earned on ........................................................ these T_,1978-1979; funds. From 1979-1 this June 980; foregone 28 TABLE 1980-1981. =29, 41983 collections Table 2; Federestimate al Civil Service Treasur Plan 29y coy st scrutiny, retirement There ear. on investment did isnot alsand o programs decline, that aincome. lackincludes the there of In analysis foregone this isemplo thesense y explaining revenues pee ossibility benefits. the estimated areeven that estimated But, greater the taxpolicymakers pexpenditures oon rti discrepancies onthe o basis f must the accruing of premium between one set to with year cthe to only estimates of which military beneficiaries. liability that urrent income $170, Plans cap the to one-fifth giprovided ven year. income from IRS fthus disability of or of or the(Form $1,980 earnings self-employed $592. the eliminating to the ($18.2 inflation The tax the 5500) information to benefits relatively expenditures employee billion) level, $2,160 in rate the and compliance employer -- estimated for incan small of for but this family that the be the the number divided contrib federal segment with are compilation yrevenue coverage make attributable ERISA ofuinto up contribution tions of bene gain. onl the for and ficiaries two ofyfor economy the from Ta about groups: Even bhealth to le1977 $792 IRAs. that if 9 7today, itwere percent plan the insurance to benefits would is The $864 emplo unlikely reporting year, however, of be IRA for yon er the includes sponsored pension expenditure employee account benefit estimate the benefits. programs tax by more expenditure and But, than indi policy two vidually isthirds. calculated makersestablished must Thisto understand element equal retirement $500, of that thethus programs. revised employee actually tax were each some was prepared are assigned tax shown revenues. co well ntribution in inthe Table before The model conclusion I. rates anywhen More substantive inwethan many called that90 instances. the percent information tonumber ascertain ofshowing The the onmore such total 1982 upinformation. rapid IRA tax in utilization the expenditures funding annualNor of 9 775.66 2,357.95 107.18 1,178.97 Contributions from United States Office of Personnel _kanageLnent, others Through deliberate departures from 2,835 accepted3,755 concepts 4,230 of pension obligations in compliance with federal law has contributed i0 814.45 2,593.76 117.90 1,296.88 Federal FrinBe Benefit Facts 1980, _980, Table 5-1, p. 15; and FEDERAL REVENUE LOSS ESTIMATES FOR "TAX EXPENDITURES" DUE TO thatTHE of subtracts individuals wMoA uld GNIT bec UDE the omeOF estimated and taxable TAX theEXPENDITURES tax tax would collections collections be shifted FORTABLE VOLUNTARY onontpension o Spension another EMPLOYEE benefits benefits employBENEFIT eeare paid benefit estimated PROGILa in the stillbkS current on a which understand total taxes IRAIf Assume balances that the are$1,000 deferred emplo as an ofyee alternative, $80 inbenefit and pre-tax billion. benefits incentives income that That that this is means are to are man be tax-exempt. that crucial had invested within nottoenjoyed in the the The a long 1982 regular National the-term tax double savings year Income indicates benefits related exceeding results indi cost the manyv 1985 idual did will tax in net not and represent areduce in co significant clear expenditures vdecline one income 1984 erage, year the relationship Budgets. aand an there larger comprehensi the overestimates through increase are total is percentage Tembedded he vthe eness between various added estimated ofpossibility 9ofpercent, in acc plan addition of special retirement aufiscal mulation their broader agethat would and exemptions to co 1982 verage over family the program category beneficiaries reduce tax portion ,the inincome expenditure tax the of ten response "retirement of expenditures. potential year at in thelower defined- period topremium due tax to benefit expenditure militar required high income incentives y o£ retirement estimate private indi unpublished viduals areplans program. can dat crucial a through be from under better the toThe Office ERISA their themilitary understood of long-term pension is Personnel considered retirement by participation M,ana welfare looking gement.inprogram ofthe at broad tax recent arepaid expenditure cross greatl _13.7 annual y sections The for Federal Economic voluntar Budgy et toReco emplo is thevery ay gee fair rowth Tax benefit rAct ein presentation the (F_TA) programs tax of expenditure 1981 can of the be expanded attributed pensio estimates. n the system ato vailability either By to enhancin federal pension of g the was he able to provide such documentation in time for development of this NET EXCLUSION OF PENSIONSTAIq34ENTOF CONTRIBUTIONS AND EARNINGS PRESENTED IN Premiums deductions on group term and life credits, our TA tax BLE system 6 does operate to Cash distribution 'Retirement 814.45 Income Securit 2,593.76 y," provided by -- pensions, 1,296.88 the primary consistent to be coincidental. At the other end of the participant/beneficiary SELECTED FEDERAL BUDGETS welfare of broad cross sections of society. The Institute offers its receiving account yand totally that new re that ear. venue Product IRA would isThe then from different contributions attributable preferred Thebecome net Accounts taxes the 1984 difference cap Budget taxable set have taxprovide by to o equaled treatment. fto 22 the of individuals. would is be percent the tax what statistics paid atUnited be deferral least they on In (see shifted the this States This currently $50 page onon initial latter both: to billion. procedure the 7Ganother oofvpension ernment call income, case, full The upwardly employee the statement). the accrual. submitted Treasur meaning estimated tax ybenefit biases capthat Department This to might taxthe the only still points have of Tab benefit discussion. contributions billion net plans estimates exemptions changing insurance society. le exclusi 1forplans. in o affect This tax nwhen self-employed benefits for The Federa preferences. bias o tobeing fthe Defined-benefit Institute the pension empl l in Treasur pri during o Revenue over yver the ateand toffers rpensi age tax y usts fiscal This economy others." Department Loss oexpenditure 65 nplans in is its or Estimates c1981 o the especiall ntributi in the assistance cover One ways vand estimates arious nontaxability 2o ,y 035 ns might estimates thus for two-thirds thatthe sectors. Tax in have and is are these 2 case evaluating ,the 100 Expenditures will tr usually expected ust of of for second fordecline, Social private fund federal hospital 2,259 the significant largest earnings Security plan toplans. cosome vpension erage, was Ifa Indi taxpayers, income exaggerated. vidual levels Retirement howethan ver, for isAccounts workers improper. (IRAs) who aretobetter include off. workers Limiting already or eliminating covered by athe programs or health goal ofbenefit ERISA, programs plan securit sponsored y is now bybein employers. g jeopardized because the ASSETS IN INDIVIIX/ALRETI_ ACAXXJNTS, 1981-1982 virtually all of this adjustmentDallas can L. be Salisbury laid directly to the inclusion of the FEDERAL for REVENUE Selected LOSS Voluntary ESTIMATES EmplFOR oyee"TAX Benefit EXPENDITURES" Programs .....DUE TO 5 Tax liability accomplished on by expenditures -- in effect to produce an resulting increase in tax expenditures heightens political pressure no effect on either revenues orExecuti behavi Fiscal ov r.e Director Year range, Premiums estimatedthe onpatter taxaccident expenditure n is and comparably dis- for two consistent. reasons. More than 55 percent of plans $S00 HEALTH Congress assistance expenditure benefits. increaes uses will anBENEFITS average The by Table in acThese in tthe resulting the to uall sensiti evaluating reduce 5Reagan TAXATION marginal tax ytwo includes bev expenditure provisions ity deposited from contribution Administration of the tax recent the the ramifications ratetax in estimates estimates of annual of the treatment le the vels. approximatel listed account. tax contributions to between for law ninety-fi even of yfuture are retirement Inrelatively theconsidered each 50 vgenerations to 1982 percent e yseparate pear, riprograms. and vately small to to as 1983 be estimate the categories of changes sponsored Budgets "exceptions program account , the inin ramifications receiving extent, 7the to 5.7one estimates percent potential asMiddle-income preferred pr NET ofor grams higher o£EXCLUSION future problem taxmature tax expenditures in generations indi the treatment. OF in viduals but CONTRIBUTIONS the 1984 can calculation Budget are never who ofInto program this ha than v be be eTOof latter tconsistent, significantl oin RETI_NT tall participants tax ythe case, expenditures y res 1985 olved PLANS then the Budget. lower and because tax the FOR tax that tax cap federal THE The payers rates might ois fprojected plans' of have participants pension plan tax F prime inancincentives iain lengine Instituti plan. the expenditure United and in onThe for medical anTax employer States, even Yesystem ar-e Equity nd cost larger 1981 behind described health inflation. andsegment AprFiscal il the benefits, 30in tCivil 19 of Responsibility tax 82 Onthe Service the June language. therefore, public other 30t 198 Retirement 2plan hand, Act will Septmembers. em(TEFRA) ph ber place ysician System. 30t 198 aof Among 2relatively co 1982 vIn erage, final distribution -- 1,296.88 -- 159.38 1/ Methodological One possible Problemsreason in Retirement for using Program higher Tax tax rate Expenditure assumptions Estimates in the 1984 Imblic plans for the first time. (dollar amounts in billions] o Tax-deferred benefits include, primarily, employer contributions to ability SELF-EMPLOYED insurance AND OTHERS PRESENTED 120IN SELECTED 115 FEDERAL 120BUDGETS Table 2 Hypothetical Alternative Investments and Returns Rless EFIR_[ENT than fi The PROGR ve first years AMTAX isold EXPt_ that had Cl)ITURES current twenty workers or more will active have workers higher perreal beneficia earnings ry, no effectThis on either calculation revenues procedure or behavior. would result in a $500 tax expenditure in accumulates and participants the to evaluated the esti levnormal el mates of ininterest retirement more and the for of structure" proposed tax the adetail Worker taxes related paincome yers because later. cap will inof tax and 50 reflects both also Percent expenditures Before tax capital current have expenditures the turning Tax to accumulation relati tax be Bracket arising paid incentives to vely are that ............... onfro narrow calculated plans. the discussion, m and special annual range These reform for returns. pro ofhowever, 1them 0vemployer isions as it both other particular the growth pension combination curren wage things, , in ttax growth this tax because expenditures the Form categ incenti phenomen federal o5S00 ry of ves the requires o ocivilian n fand and tax cited passage slightl reform expenditure reporting and earlier. y of militar proposals. ERTA lower the which during y rates retirement "effective roughly fiscal to estimate doubles programs 1985 plan was the date" IRA cover IRA 254.8 orrelated date about percent 5 heavy retirement Comm pre tax during venti ercexpenditure ialvburden e retirement Ban When ksprograms, ser 1on 7vCongressional iceworkers estimates than cov state erage during at $7.0should lower and talk andtheir local dental and income be $generated working 13.0 plans public and levels. and vision opinion careers on the $14.9 At a care basis federal turn the receico vsame eto vconsistent erage, Civil much time, $16.2 Service where greater it with is prices highly those reduced Disposabletax-exempt o balance Each ofcontribution the 848.45 tax expenditures limits 1,296.88 for ismany calculated private --on plans. an item 1,137.50 by item basis Budget calculations There The world are basicall isthan not used qy uitethree a year as reasons neat earlier andwh simple y is employers the as inclusion theare example willing of public provto idedsponsor in 1980 1981 1982 1983 1984 Income I_atual Savof ings trusts Ban-ks i/to finance3.4 and 4.5 5.8 5.9 constituted about 3.4 percent o£ total compensation in 1981. reduction and control of Fiscal Federal Year expenditures, these tax The remaining $2.4 billion discrepancy in the 1983 and 1984 Budget at the margin. That is, each is considered to be an "exception to Savings and Loans 1/ -- 9.2 2/ 16.3 n.a. n.a. while levels less overthan their11 percent lifetime of than the current oldest beneficiaries. plans reporting had It isas this manypheno as twenty menon RETIREMENT contributions. the first time PROGRA period There b_S in is the little example variance citedinabove. the dollar The amount computation of employer methodology The in expenditures. the valuUnited The e oflargest Taxation the States Assuming account single Tax of these aat Code. rate category thebenefits of end Each 28of ofof percent each tax isthe deferred expenditure yspecial ear wouldover until yield pro the in visions the an ten the IRA employee years 1984 in taxthe Budget is expenditure withdraws tax shown is code in the proposals. Unexplained higher eligibility well. is ha used s v uppl einstructive plan to been ement The inestimate was the relativel ary Treasury The Variations for set 1984 unemployment to yInstitute 1982. up. the consider Budget analysts private stable, inYethas the than the this use plan ma Estimates abase in ymajor be the 1982 number. theagainst particularl actual tax pri stud or y expenditure Because yin budget's _592 which progress vulnerable inthe oftaxes estimate. estimate tax the that paid expenditures significant toisonly on changes Again, looking current increased nare in oat nethe many of Tab Retirement questionable percent advlantage e 3 of expenditures from System. the Working whether total the tax While Participants the U.S. are treatment revised ne work the ver latter force mentioned. tax of per pensions, policy does and Beneficiary paid not Yet would include retirement onit the inresult is Defined other clear all in benefits federal hand. less that comprehensive ifci in For vilian 1979 example, workers health o P, tatuaI ur full F ,uninsurance dsThese especiall statement. the yand normal programs. earlier those First, structure" 2.6- employed pro The Treasury visions first of by estimates taxes, 4of .reason, the 0 the Federal but U.S. and the isTax 4.3 go this foregone calculated vernment. Code ranking ha taxes ve asdoes "The Sbeen .Othough from not mean theinfer all annual benefits these amounts were(dollar treated amounts as line in 10 items millions on the )5 S estimates Credit Unions of funds retirement Benefit fromPension pro the 0.2 gram plan. Pltax ans expenditures With 0.S More Than forn.1a. 00 198Active 2 was attributed n.a. to SOURCE: EBRI other calculations. exceptions Assumes are part 10 ofpercent the normal annualstructure rate of for purposes of Life Insurance Co. 3.5 n.a. n.a. n.a. that raises the real level of Social Security and pension benefits alike for participants does of thenotissues consider perraised benthat eficiary. inifthis taxes testimon were ynow , the collected result on of which pension will contributions be shared with and the that contributions estimated. the forregular the Budget gives 1982 materials rise savings tax across toyear aaccount workers' tax orofoexpenditure ther atcolumn least earnings public$14 inrepresents dTable obillion. cuments levels. 2. explain At aThat Moving decision themeans end from the of by that rea vised ten the tax modest ye Congress year estimates. ars period thisto that 15hospital benefits by / tax 11 attributed See propercent visions. EBRI It care One The toalso estimate ISSUE largest ofcoverage, between to the requires the 19 BRIEF 8 problems 0pension single deferral theSyl the #17 that two 1v9ester area 8category 1 "Retirement with tax annual of theof expenditures. tax J. the number greatest Schieber, Budgets. of 19 on estimates 82tax employer Program ofexpendit active health Ph.D. 1983 In of However, Tax pension fact tax participants care u,Expenditures" reexpenditures the in cost if 19 plan the 84 1984 these inflation. contributions 1984 in Budget other the Budget arisingplan twoInis subject pexceeding differences in ension the hypothetical of costs expenditure the much deri in Participants benefits it vplans ing discussion doescase side the across capt paid estimate. u considered re of During and the by the atdebate all various Budget least 19private 77 This earlier, ,in by 90sectors recent i they Age gpercent nores pension P if would lan years. and the the ................. ofprograms, automatically marginal the extent these The role costs dialogue toll of tax which /government and rate 16 has one isis often 20 that earnings exemption it is from return ofthe employer the primary andtotal 50 pension motivation, percent civilian contributions, marginal population is that tax abracket employed healthy personal inworkforce full IRA eachcontributions, time year.will in 1977 be more wasand Research Director 1981 Budge ot Tax-exempt $ 12,925 benefits $ 14,7 include 40 employer contributions to group health changes in come the tax underrate close assumptions. scruntiny of At the firstCongress blush one and might the Budget think that the -(Washington, D.C.: "exception" F.BRI, mi April ght be 1985) magnified and EBRI because statement of the to existence the Senate ofFinance others. trust fund Undo interest ubtedly accruals many of the that older thisplans would innecessaril Table S y with result high in a reduction succeeding cohorts of retirees. As a result, the marginal tax rates that will account that the Tot 1982 to alaCongress. AsBattributed fiscal su etsdget would Bureau. Neither and year accumulate life to 1period of / the 19,785 these insurance, _deferal would toarguments a value allow of 25,605 long-termand tax of $some T is r76on $814.4S -3well $/employer slight 27,905 founded short-term under variation _71--5 pension / the in the posited disability plan from research }_-6Tg-_$ contributions this assumptions / income estimate and and an pro sufficient adjustment estimate "exceptions y earnings. vthe ide event, number preferential Wh of TIt hrough ythe for toto the isthen, the of marginal the clear this 1982 an beneficiaries health normal if comparative ardu tax fiscal from including ous effect treat benefits' the structure" pr year omexample cess ent of be analysis. the tax the reported. for tax federal of expenditaure oftax described acap teleph taxes specific cap can What one civilian The legislation did affect above isdiscussi age kind was not immediately retirement of only aexist that oof nslarge the acti on 23 the then plan b with proportion vu percent dget ity. apparent tax program the can vari sdeficits y oFor stem man's us be greater is so of staff that 1982 the of Committee Tcentered sponsorship able 4 on on the "The or Federa regulation, impact Tax l Revenue Treatment that(dollar the fa Loss vorable oftax Estimates Employee amounts expenditure tax pro in Benefits," for v billions isions estimates "Tax ) Expenditures" for Juneemployee should 22, 1983. bebenefits presented have SOURCE: the percentage interest Special points The earned utility Analysis lower on these of inBudget the retirement funds. pension of the Treas than tax United ury expenditurees during then Statesthe substracts Government working estimate the career Fiscal estimated is extremely then the tax productive approximately than $13an ,849.unhealthy The mean one.annual The second salary is level thatofthe Federal employer employees can purchase effects 1985 Budget of theinsurance, Due Economic to Net Recover and Exclusion a yvariety 25, Tax5 of90 Act of Pension of smaller 25,765 1981 Contributions would benefits $ 27,500 be that to and reduce include the dental tax 6/ TheseYear data limited , 1984 are spelled unless (Washington considered out , in D.C. detail : in Office in the Sylvester broader of Management context J. Schieber, and of other Budget, Social tax 1/ This is the capital gains tax not regular income tax. worker/beneficiary ratios are in firms that are expanding. High workers who receive such benefits. and $170 in be 1984 for than literature. the paid would fiscal to Budget thetaxes $180 on 1982 bepension 1983. insurance, pa billion to Thus estimate yabl beHowever, another ebenefits paid to would child of the inthe rationale be the the hold earned care, minimal. 1982 future etax r without merchandise year Budget today may when ultimatel versus will 4 and an benefits 5,280 y be 12.5 yadditional discounts fiscal higher percent beare 49,700 year crucial disbursed. than and tax greater discrepancy employer-provided obligations. the $ in56,560 m determining arginal than should thetax calculated example, and at clearl taxthe earnings. liabilit yT Inencourages reasury 1983) The the the from ytax Congressional would case p.the Department deductibility G-32. of retirement effective bepri $2,546. vateBudget a general plan accumulations retirement of home Act date. explanati o£mortgage 1974 As program onin expected, (P.L. pensions interest otax f 93-344) the expenditures most versus reexpenses vised of formally the regular fiscal represents y the ounginterest 1985 plans and a on adding separately 1981 significantl federal Budget in the tax for pro y Earnings p vaffects collections. u isions. federal, blic $ 2,125 employe the Presented state $tax 2,520 rMany plan and expenditure inbelie local, contrib Selected veuand tions that estimates Federa private these increases l isn't pro Bud plans. v gets isions the the .......military previo helpusly insure 18 the health collections co S--ecurity: disposable vered insurance byPers CSRS retirement onpectives pension inonApril a group benefits benefits onwas Preservin basis $16,000." pro paid vand ided K the inrealize 9/the by System Inclusion the cursignificant repension n(Washington, t year. of increase federal economies TheD.C.: net workers by difference more of Thescale with than S(XIRCI_: _ tabulations of data provided by Federal Reserve Board, National Association of Mutual rates consideredmeals. for estimating These benefits theseconstituted tax expenditures. 3.5 percent Alsoofthetotal reductions in Employee 1982 BudgetBenefit Research 1,925 Institute, 2,I05 $ 1982) 2,305 p. 52. Savings Banks, National Credit Union Administration, Federal Home Loan Bank Board, U.S.League of worker/beneficiary ratios will continue as some plan sponsors continue to rates on benefits that are paid today. Underestimating the marginal tax rates decision have 1981 1984 the outcome very estimate estimates From bylittle the ofa ofin this Congress purel effect the the issue. y 1981 1984 conceptual on to Budget. the Budget pro Thevfiscal ide consideration basis hasa tax 1984 been theincenti pieced ortaxsubsequent thatexpenditure ve tomight gether. for indi fiscal ultimatel vestimates idual One yyear reas home obe nestimates. in of fothis r the have considered institutionalized bearing moreaccounts, The Because It In workers employer compensation the is next clear case employer column per "tax all contribution of that beneficiar other expenditures" private of inother contributions Table 1981. things yretirement "exceptions i2than n being shows 1981 asolder part are by equal. the program relatively to 63.5 plans of accumulation the the percent However, do. normal tax regular expenditures constant Less (i.e., structure" it of budget ,than is theunrealistic irrespective $1,000 l0 document. the percent givepre rise to of Treas Table 7retirement 1985 $500 /uryFor Budget to 5 estimates example, $1815.63. Oneprogram Employee concern the theincluded? Inthat percentage federal Contributions this policymakers 2 case ,170 taOne x of the rereason workers vto enue preferential 2,560 Retirement should is losses participating that $have 5,760 that the Programs taxifmilitary treatment arise theyin for view because Social retirement of changes the Security pension pension to the general for their Relationship the higher public's group o Tthan he to that TOther welfare reasury average theyTax could during combines earnings Expenditure nottheir private realize mayworking Categories account as andindividuals. li public for vesthe and employer rehelp visedAspro a pension tax vresult, ide rateincome the is Savings whatAsso they ciation cur s, reIn nv tly estmentcall Companthe y Institute estimated and American tax expe Counncil diture of Life rInsura esulting nce. from the the contribution limits and other provisions in the Tax Equity and Fiscal _uring 1984 Bud1940 get was Selected Theabout views twenty-five Priexpressed vate and times Public in 2this ,835the Employer statement percentage 3,755Plans are of $........... 4,elderly 230 receiving 21 contributions even though the rules that govern them are I/ IRA and Keogb deposits. Other Issues instance are flawed because the estimation procedure does not even attempt to expand SOURCES: difference that will in Failure By the Special apply inthe fu the ture, time to toAnalysis twcurrently distinguish o the but Budgets 1984 such G earned of Budget is sponsors among the thatBudget benefits was the the will prepared growth analyst of still will theo£ wh United o there have vlegally oerestimat did increasing was States therequired evidence e1985 the Govern numbers Budget magnitude employer available ment offorof tax ownership. of $58.26 Treasur to assume greatest the income large dollars plans /$60.26). ythat estimates Each portions significance orthat invested This if earnings o£the had provision As the ofthe pension been stated in tax tax level isfederal acreated expenditures expenditures ,tax thein abo preferences employer need qualified vthe etax in the tax for revenue the 1983 code contributions attributed is added in pension previous calculated Budget the does losses federal tax plan. not five estimate to that code actually for pensions on tax The years were arise an health revenues. differenc of item reported eliminated because represent because retirement insurance by eitem The is fewer pension they abasis all 1984 plan direct than at ansecurity dbenefits tax The program would IRA treatment act contrib account defined is during inutotall tions that of forretirement. tax emplo year. y55unf expenditures and percent yuee nded As thehealth the with fund Others ofprogram the benefits as outstanding earnings think "revenue retirement matured, they as areaunfunded losses not are potential benefit this excessi taxed attributable difference liabilities relati currentl revenue ve veor y totally declined tosource toat ev the provisions enthe though isend tothat of tax treatment of those retirement of the witnesses programs. and do not necessarily aggregate assumptions cost fundamentally usedoftoinsurance calculate different. isthe reduced pension The forTreasury tax a given expenditures level should of present incoverage. the separate 1984 The Budget. _/ Estimated. Fiscal Years 1981-1984 (Washington, D.C.: Office of Management and Responsibility Act of 1982 should reduce the pension contributions and accruals Table _less / Basethan lin 6e efour stimatFederal es times using Re in late v senue t1950 availa Loss and ble then d Estimates ate forgradually each for instituti wmoved rax onal Expenditures" toward category.and reached The estimates reflect the views of the Employee Benefit numbers for private, federal, and state and local programs, and beneficiaries over the years. This relationship of plan age and beneficiary _rovide a minimum total asset amount, which may under report the actual amount of total assets unwarranted. and account tax IRA expenditures. contributions for the Duesignificant to Netand Exclusion thedifference fund of earnings Contributions in thearetax notcollections totaxed Retirement currently, on current even significant. five pa expenditure benefits drastically estimates suggesting yments, workers The represent Bfull ru etired that by dget). lower per abstract First, ythe taxable 1982 retired marginal and Federal a the larger IRA concept a employee new full beneficiary. utilization Go tax percentage analyst v$1,000 ernment, of rates benefits, taxprepared can for expenditures inFor but addition response be the plans does tax-deferred invested elderly. the result tooperating 1984 tohas family ERTA and been Budget in The benefits the jumped lower income twenty-five applied utility taxes estimate. total significantly and atpayable to o£ lower tax-exempt private taxes the years Theonnew or equality of expected Budget related fiscal accumulation the Federal 1981 ranked tax in pension the expenditures of under the tax $476.9 mid-1970s. contributions exclusion laws a regular billion. which in It 1982 ofsa allow vtook would employer ings Under wasaSocial $25.8 end account. special the health upcomp Security billion. in exclusion, uconventional tation The insurance elimination about The method exemption contributions 1984 thirty-five savings used Budget of , to preferential or vehicles. estimate tax years fourth taxes third willreason The be should paid is computation Research that when generate the benefits Institute, methodolo purchase numbers are gyprice its ultimatel based does Trustees, ofynot upon theconsider paid. health uniform its members, The insurance assumptions thattheoretical if taxes is tax in were basis ordernow to Inconsistencies in IRA and Pension Tax Expenditure Estimates outstanding. for some individuals in the high marginal tax brackets. until beneficiaries or other madestaff. up a segment of the retired population that was 5/ Computed from estimates presented in: Congress of the United States, SOURCES: Special allow Plans comparisons. Analysis for the G Self-Employed of the Budget and of others the United Presented States inGovernment for The second reason that current estimation techniques result in biased rates income becomes levels partic than ularly for workers significant who are in better comparison off. Limiting with defined-benefit or eliminating plan the benefits paid and the time discounted value of future tax collectins based on the longer, benefits pension though overinitial prior taxes nearly tax has years. amount expenditures greatly will 49 percent be can Contributions magnified paid be estimate deferred had whenfewer benefits the forthen, until perception than 1982are is the five exceeded extremely ultimately benefits active of the total participants tax-base limited are paid. accumulations actually unless erosion perconsidered that for can the collected deduction Congressinal comparable expenditu For among tax example, provisions potential re onpensio from to estimate Bthe Selected uthe dget gross for sources nright-hand segment pensions Office, contributions was income Federal of $17.1 of new "Containing or column will the Budgets which billion federal workforce leave ain nd provide ............................. Table tr higher middle reMedical uv st enues tht 2 a fushows (or n income was special dCare during interest 66.3 contributing the Costs workers credit percent) fiscal potential ,Through accruals with 1985. ato because preferrential post-tax less Market the that 23 These program. adequate of this for these estimates The Fiscal discussion Years is that 1981-1984 of ifthese employer issues (Washington contributions is ,now D.C.: takingto Office onpension a sense of Management trusts of heightened or and deductible if purchased through an employer's health benefit plan The Special Analysis G in the Federal Budget does not include separate 8I0 / / Alicia Alicia Finally, H.H.Munnell, Munnell, the recommendation The TheEcEconomics onomics of ofof thePrivate Private NationalPensions Pensions Commission (Washingt (Washington, on on, Social D.C. D.C.: : Forces" 12 ll// This EBRI(May is ISSUE 1982), based BRIEF on p.#10 actuarial 35."Federal repPensions." orts on the Civil (Washington, ServiceD.C.: Retirement EBRI,System July 2/ Special Budget). Analysis Budget of the United States Government Fiscal Year, 1983 Table be T-_e added current tax estimates attributed Brookings incentives 7trust contributions Our offund Assets testimony retirement to Institution, fortax-favored contributions employer in under Individual contains program 1982 health these and) and an tax tax-exempt p. Retirement plans. benefits example interest 44. expenditures ,MFrom unnell (pages benefits. income Accounts therefore, a more explains is 9considered. to that 1981-1982 practical II) will the that indicating place pension .... the polic It a appears 23 24 ysystem percent that analthe that ysis in distributed. beneficiary. -[accrual and 1974 T--he in re W venue ashington the Bro militar toobroader kings the 1981 estimates, , yhD.C. period. yAlso retirement The pothetical Instituti context :changes the howe o Office n, interest vof er, program worker in other of 1982} are this Management paid described tax f extremel p. iled relationship provisions. 44. towith y the and above sensiti the acco Budget with vUnited eucould nt Yet , each increasing to 1982) virtually acquire States assumptions year p. Congress is 3.if plan nonot the analysis about age taxable inareo£ too '1"982) retirement p. 5. benefits because they will not be able to adjust their investment individual contributions to IRAs, or investment earnings on the assets were would necessarily result in a reduction in the taxes to be paid in the future Security rate wasReform used to toprepare tax Social the es Security timate for benefits the 1981 that Budge was t implemented but that higher in the compliance with Public Law 95-595 for fiscal year 1981. 3_ 1/ / Special Stanley Analyses S. Surrey Budget in a speech of the to United Money States Marketeers Government , New York FiscalCity,YearNo1983 vember 4_ 9_// Special Final report Analysis of the Budget Universal of theSocial UnitedSecurity States Government Coverage Study Fiscal Group Year, , The 1984 this kind is now available. marginal (Washington,rates D.C. were : Office used inofpreparing Managementtheand estBudget imate, for 1982) subsequent p. 5. budgets. (Washington, 15, 1967. D.C.: Office of Mangement and Budget, 1983) p. G-32. Desirability and Feasibility of Social Security Coverage for Employees of Federal, State and Local Government and Private, Nonprofit Organizations EMPLOYEE BENEFIT RESEARCH INSTITUTE (Washington, D.C., 1980), p. 31. 1920N Street, N\V,Suite 520 \Vashington. DC 200_6lelcphone (202) 659-0670