If fixing the U.S. tax code requires starting with a blank slate, as Sen. Max Baucus suggested in a "Dear Colleague" letter last week, the American Society of Pension Professionals and Actuaries wants to make sure that the tax incentive for retirement savings doesn't get erased in the process.

The tax incentive for retirement savings is a deferral, not an exclusion, and should not be lumped in with all the other incentives in the tax code, said Brian Graff, ASPPA's executive director and CEO. Unlike other exclusions, such as the homeowners' deduction, revenues lost today will be gained later, when retirement income is taxed. But eliminating the tax incentive to save for retirement will effectively reduce that future amount as Americans set aside less for their retirements.

According to Graff, Employee Benefit Research Institute data show that more than 70 percent of low- to middle-income workers participated in employer-sponsored plans while fewer than 5 percent of those without employer plans contributed to an IRA. Reducing or eliminating the incentive would severely damage retirement security for working Americans, he said.

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"The benefits of this deferral incentive are very real, and the revenue that would be gained by eliminating it is not," Graff said in a statement. "Every dollar of retirement savings excluded from income today will be included as income when it is paid out in retirement. Treating the retirement savings income deferral like a permanent exclusion is terribly misleading, and could lead to bad policy decisions."

Baucus, D-Mont., is helping to lead an effort in Congress to rework the U.S. tax code, starting out by wiping out hundreds of perks that ordinary taxpayers claim, including sacrosanct policies such as the child credit and the deduction for mortgage interest.

Popular breaks could be restored but every credit and deduction will be scrutinized, Baucus and other Senate tax writers said last in a letter to their colleagues. Breaks that cannot be justified will be eliminated, they wrote.

The lawmakers leading the effort said they are aiming to complete the overhaul by the end of 2014, but neither President Obama nor other congressional leaders have shown much enthusiasm for the task.

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