Capping Tax-Preferred Retirement Contributions: Preliminary Evidence of the Impact of the National Commission on Fiscal Responsibility and Reform Recommendations
THE “20/20” PROPOSAL: Among the debt-reduction recommendations by the National Commission on Fiscal Responsibility and Reform is a proposal to cap annual “tax-preferred contributions to [the] lower of $20,000 or 20% of income” for 401(k)-type retirement plans.
HIGHEST- AND LOWEST-INCOME WORKERS MOST AFFECTED: New results from EBRI’s Retirement Security Projection ModelTM (RSPM) show that the highest-income quartile within each age cohort would see the largest average percentage reduction in projected balances at retirement. However, for each age cohort other than the oldest one, the lowest-income quartile would see the second-highest average percentage reductions. Phrased another way, the proposed cap would, as expected, most affect the highest-income workers; but it also would cause a very big reduction in projected retirement accumulations for the lowest-income workers.
Union Status and Health Care Coverage of Workers: The Impact of the Recession
UNION WORKERS HAVE MUCH HIGHER HEALTH COVERAGE: Union workers are much more likely to have employment-based health benefits than nonunion workers. In 2009, 80.4 percent of union workers were covered by health benefits through their own job, compared with 52.2 percent of nonunion workers. Overall, 91 percent of union workers had coverage either through their own job or as a dependent, while 70.6 percent of nonunion workers had any employment-based coverage. In 2009, 5.6 percent did not have any health insurance coverage. Among nonunion workers, 20.2 percent were uninsured in 2009.
UNION COVERAGE LESS AFFECTED BY RECESSION: Both union workers and nonunion workers were affected by the recession, but it affected nonunion workers more than union workers. Union workers covered through their own job fell from 82 percent to 80.4 percent between 2007 and 2009, a 2 percent decline. In contrast, the percentage of nonunion workers with coverage through their own job fell from 55.9 percent to 52.2 percent, a 6.5 percent decline. Overall, the percentage of union workers with any employment-based coverage fell from 93.4 percent to 91 percent (a 2.6 percent decline), while among nonunion workers it fell from 74.3 percent to 70.6 percent (a 5 percent decline).