AIM announced its support today for a resolution co-sponsored by Springfield Congressman Richard E. Neal that would affirm the support of Congress for retirement savings tax incentives.
In a letter to the Massachusetts Congressional delegation urging them to support the Gerlach-Neal Resolution, AIM said tax incentives provide important benefits to Americans who face the challenge of planning for a financially secure retirement. The ability of Americans to save through pre-tax contributions to 401(k) plans and other instruments is expected to come under scrutiny once Congress begins to wrestle with the nation’s widening budget deficit.
AIM also noted that the financial services industry that offers retirement savings plans represents a major component of the Massachusetts economy, employing more than 170,000 Bay State residents.
Employer-sponsored plans are a key component of the nation’s retirement system. Approximately 670,000 private- sector defined-contribution plans cover 67 million participants in the United States. More than 48,000 private-sector defined-benefit plans cover another 19 million participants.
The U.S. private retirement plan system paid out more than $3.824 trillion in benefits from 2000-2009, while public-sector plans paid out $2.651 trillion during the same period.
The Gerlach-Neal Resolution notes that the taxation of amounts contributed to pension and retirement plans is simply deferred, not lost; that more than 70 percent of American workers making between $30,000 and $50,000 contribute when covered by a retirement plan at work; and that current law requires business owners and managers who sponsor a retirement plan to also must cover and provide benefits to lower- and middle-income employees. It resolves that:
- Tax incentives for retirement savings play an important role in encouraging employers to sponsor, maintain and promote participation in retirement savings plans
- Existing tax incentives have increased the number of Americans who are covered by retirement plans
- A reformed and simplified tax code should include properly structured tax incentives to allow employees to maintain and contribute to such plans in order to strengthen retirement security for our citizens.
Massachusetts, the birthplace of the mutual fund industry, faces significant risk if Congress changes the rules for retirement tax savings. The commonwealth is home to three of the top 10 defined benefit/defined contribution money managers, and to the top provider of record keeping for retirement assets.
A recent report issued by MassInsight found that the 170,000 people who work in the financial services sector in Massachusetts earn an average wage of about $110,000. Industries that directly touch the finance sector, such as legal services, consulting services, computer systems and design, and accounting and payroll services employ another 150,000 Bay State residents.
Republican representative James Gerlach of Pennsylvania joins Democrat Neal of Massachusetts as primary sponsor of the resolution.