EBRI May 2012 Policy Forum #70

"After" Math: The Impact and Influence of Incentives on Benefit Policy


Speaker biographies

Agenda and Presentations

Welcome and Introduction - Dallas Salisbury, EBRI

Session One: Setting the Stage: The potential impact of changes to current tax incentives for employee benefits (health care and retirement)

  • Dallas Salisbury (President and CEO, EBRI) 
  • Paul Fronstin (Senior Research Associate, EBRI)
  • Joe Antos (Wilson Taylor Scholar in Healthcare and Retirement Policy, American Enterprise Institute)
  • Gretchen Young (Senior Vice President, ERISA Industry Committee)

Session Two: What is the "true cost" of tax deferrals?

  • Karen Smith (Senior Research Associate, Urban Institute)
  • Eric Toder (Codirector, The Urban-Brookings Tax Policy Center)
  • Judy Xanthopoulos (Principal, Quantria Strategies, LLC)
  • Ithai Lurie (Financial Economist, Treasury)
  • Shanthi Ramnath (Financial Economist, Treasury)
  • Jack VanDerhei (Director of Research and Co-Director, Center for Research on Retirement Income, EBRI)
  • Michael Barry (President, Plan Advisory Services Group)

Session Three: What do people actually do after retirement with respect to their retirement savings?

Session Four: International comparisons -- are there lessons to be learned in pension plan design?

  • Dan DeKeizer (Vice-President and Sr. Actuary - Global Employee Benefits, Center of Expertise, MetLife)
  • Robyn Cameron (Global Leader, International Benefits Practice, Mercer)

Session Five: What are 401k/DC plans delivering? What levers can be applied to encourage/motivate worker-savers? Will the next generation of savers be better off?

  • Steve Utkus (Director, Vanguard Center for Retirement Research)
  • Laurie Nordquist (Director, Institutional Retirement & Trust, Wells Fargo)
  • Ed Murphy (Managing Director, Head of Defined Contribution, Putnam)

Session Six: How can efficient portfolio approach for retirement income optimization be integrated with plan sponsor options during the accumulation phase?

  • Chris Raham (Senior Advisor, Ernst & Young)
  • Bob Shaw (Executive Vice President, Individual Markets, Great-West Retirement Services)

Closing remarks: Nevin Adams, EBRI.

Relevant Recent EBRI Research:

  • March 2012 Notes article, “Modifying the Federal Tax Treatment of 401(k) Plan Contributions: Projected Impact on Participant Account Balances”—Integrating new data from plan sponsors, this paper provides a perspective on the impact of a scenario where the current tax treatment of employer and worker pre-tax contributions was modified such that workers would have to pay federal taxes on these amounts currently, rather than on a deferred basis, as under current law, and participants would receive an 18 percent government match (as contemplated in the Gale proposal, 2011, a plan that would modify the existing tax treatment of both worker and employer 401(k) contributions and introduce a flat-rate refundable credit that serves as a federal matching contribution into a retirement savings account). EBRI baseline analysis indicates that plan-sponsor modifications, combined with individual participant reactions, would result in an average percentage reduction in 401(k) balances of between 6-22 percent at Social Security normal retirement age for workers currently ages 26-35. These responses are strongly tied to plan size; EBRI baseline simulations show that 401(k) plans with less than $10 million in assets would experience average reductions in participant balances at retirement age of between 23-40 percent (depending on plan size and income quartile) for workers currently ages 26-35.
  • November 2011 Issue Brief, “Tax Reform Options: Promoting Retirement Security”—This paper analyzes two recent proposals to change the existing tax treatment of 401(k) retirement plans and is based on EBRI’s proprietary Retirement Security Projection Model. Currently, the combination of worker and employer contributions in a defined contribution plan is capped by the federal tax code at the lesser of $49,000 per year or 100 percent of a worker’s compensation (participants over age 50 can make additional “catch-up” contributions). As part of the effort to lower the federal deficit and reduce federal “tax expenditures,” two major reform proposals have surfaced that would change current tax policy toward retirement savings: (1) a plan that would end the existing tax deductions for 401(k) contributions and replace them with a flat-rate refundable credit that serves as a matching contribution into a retirement savings account; (2) the so-called “20/20 cap,” included by the National Commission on Fiscal Responsibility and Reform in their December 2010 report, “The Moment of Truth,” which would limit the sum of employer and worker annual contributions to the lower of $20,000 or 20 percent of income, the so-called “20/20 cap.”
  • July 2011 Issue Brief, “Employment-Based Health Benefits and Taxation: Implications of Efforts to Reduce the Deficit and National Debt”—President Obama's bipartisan National Commission on Fiscal Responsibility and Reform proposed changes that would achieve $4 trillion in deficit reduction by 2020 and reduce the debt to 30 percent of GDP by 2040. As part of the proposal, the commission would reduce the preferential tax treatment of employment-based health benefits as it applies to workers, first by capping, then freezing, phasing down, and ultimately eliminating them. The Commission does not recommend any changes to the employer deduction as a business expense.