The following are highlights from the testimony of Judy A. Miller, director of retirement policy for the American Society of Pension Professionals and Actuaries, before a hearing of the U.S. House Ways and Means Committee regarding Tax Reform and Tax-Favored Retirement Accounts on Tuesday.

"Americans depend on their employee sponsored plans to save for retirement. Two key features distinguish retirement savings tax incentives from other incentives in the U.S. Tax Code–the deferral nature of the incentive, and the non-discrimination rules that make employer-sponsored plans very efficient at delivering benefits across the income spectrum. Simply put, tax incentives for retirement savings play an important role in encouraging employers to sponsor and maintain retirement plans and encouraging participants to contribute to such plans.

Deduction Not Deferral First, unlike other individual tax incentives, incentives for retirement savings are deferrals, not permanent exclusions. When employer-paid health benefits are excluded from income, or mortgage interest is deducted, those amounts will never be taxed. With a traditional retirement savings account, no income taxes are paid on contributions or investment earnings the year they are credited to that account. However, both contributions and earnings are included in taxable income when the amounts are distributed from the plan at retirement. In other words, every single dollar excluded from income now because its retirement savings, will be included in income in a future year.