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Possible Fiscal Cliff Deal Puts Small Business Retirement Plans at Risk

admin | December 19, 2012 | 0 Comments

Tax Proposal Would Penalize Small Business Owners

ARLINGTON, VA, (December 19, 2012)— The following is a statement from Brian H. Graff, CEO and Executive Director of The American Society of Pension Professionals & Actuaries (ASPPA) in response to President Obama’s latest offer to House Speaker John Boehner in negotiations to avoid the pending fiscal cliff.

“The President’s current bid to avoid the fiscal cliff includes a 28% cap on the current tax benefit for itemized deductions and exclusions (35% for charitable contributions).

This proposal means a small business owner with a marginal tax rate of over 28% will pay a surcharge on elective deferrals to a 401(k) plan the year the contributions are made, and then pay tax again on the full amount when the contributions are paid out at retirement. Simply put, this amounts to double taxation.

Penalizing small business owners for sponsoring a retirement plan that benefits small business workers would be an unfortunate outcome of these fiscal cliff negotiations. A double tax penalty will only discourage small business owners from setting up and maintaining 401(k) plans. The result will be reduced retirement plan coverage, threatening worker’s retirement security.

Retirement savings is the only deduction or exclusion that will be subject to this double taxation because the retirement saving tax incentive is the only tax incentive that is a deferral, and not permanent tax deduction.

Getting our fiscal house in order should not come at the expense of our future retirement security. We urge the President and Congress not to put American workers retirement plans at risk.”