Reducing current tax preferences for employment-based 401(k) retirement plans could decrease individual participant account balances as much as 22%, according to new research from the Employee Benefits Research Institute issued Tuesday.
EBRI combined data from an AllianceBernstein survey conducted in 2011 of 401(k) plan executives and its own 2012 Retirement Confidence Survey of plan participants to estimate the likely impact of proposed changes to the current tax treatment, including a plan to replace the preference with a flat-rate tax credit.
EBRI found the response strongly tied to plan size. Smaller plans with less than $10 million in assets were likely to see the largest declines in participant balances, between 23% and 40%, depending on plan size and participant incomes.
