Obama Administration Revenue Proposals Affecting Retirement Savings
The Obama Administration announced its intent to push for several significant measures which will affect retirement plans and the benefits that are payable under those plans. The administration’s 2014 budget plan proposes to set a limit of approximately $3 million on accumulated retirement savings under IRAs, 401(k) plans, 403(b) plans, and 457(b) plans. The $3 million cap is tied to the approximate maximum payments that an individual who retires at age 62 could receive under a defined benefit plan under current law (currently, defined benefit plans may not pay an annual benefit in excess of $205,000). The proposed limitation would be determined at the end of a calendar year, and would apply to contributions or accruals for the following calendar year. If the individual reached the maximum permitted accumulation, no further contributions or accruals would be permitted, but the individual’s account balance could continue to grow with investment earnings. In addition, the administration proposed to require automatic payroll deduction IRAs, for businesses that have more than 10 employees and have been in business for at least two years. Contributions to IRAs would be made on a payroll-deduction basis. If the employer sponsored a retirement plan, it would not be required to provide this automatic IRA option. In response to these proposals, opposition has been strong and well-publicized.