Cuts or eliminations of tax breaks for corporate pension plan contributions are among the options under consideration by the Obama administration’s National Commission on Fiscal Responsibility and Reform, confirmed a senior commission official who asked not to be identified.
But details of any potential changes for companies with defined benefit or defined contribution plans were not detailed in a draft of deficit-reduction recommendations released by the commission’s co-chairmen Wednesday and have yet to be determined by the commission’s 18 commissioners, the senior official said.
“The commissioners can and will add back the tax expenditures that they think are most important,” the official said. “We’re asking the commissioners which tax breaks are most important to them and how they want to pay for them.”
The existing annual maximum benefit payable to an individual from a defined benefit plan is $195,000. Reducing the benefit would decrease the amount of tax-deferred contributions that an employer can make to the plan.
The annual cap on tax-deferred contributions to 401(k), 403(b) and 457 plans is currently $16,500 annually, with employees age 50 or older able to contribute an additional $5,500. The commissioners could either eliminate the tax-deferrals altogether or reduce the amount that can be contributed to a DC plan on a tax-deferred basis.
The bipartisan commission’s final report is due by Dec. 1. The commission’s co-chairmen are former Republican Sen. Alan Simpson and Erskine Bowles, who served as chief of staff under President Bill Clinton.
