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EBRI: Proposals for plan contribution changes have uninteded consequences

Research shows proposed changes to tax exclusion on retirement plans will affect lower-income workers

By Jenny Ivy | Updated on March 31, 2011

New analysis from the Employee Benefit Research Institute indicates lower-income workers are far more likely to say they would reduce their contributions if the tax exclusion for employee contributions for retirement savings plans were lowered or eliminated.

“Our research suggests that that some proposals to modify the exclusion of employee contributions for retirement savings plans from taxable income may have unintended consequences,” said Jack VanDerhei, EBRI research director and author of EBRI’s just-released 2011 Retirement Confidence Survey. “Instead of reducing the contribution levels of those with larger taxable incomes (and hence higher marginal tax rates), the RCS results indicate that workers with low levels of household income would be most likely to cut their contribution—in some cases completely.”

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