As Washington policymakers turn their attention to tax reform, plan sponsors and retirement lobbyists are becoming increasingly concerned that the tax advantages of retirement savings are in real danger.
"My biggest concern is that they just reflexively look at the retirement system as a way to pay for it. Anybody who assumes they won't ignores history and ignores practical reality," said Lew Minsky, president and CEO of the Defined Contribution Institutional Investment Association, Washington.
While this latest tax reform effort might not be as dramatic as the 1986 overhaul that capped tax deductions for employee retirement contributions, negotiators will be looking "where they feel they have the least political pain," he said.
DCIIA is part of Save Our Savings, a broad industry coalition formed to prepare for the coming tax reform battle that congressional leaders have pledged will get underway in September.
When the White House unveiled a tax reform plan in April, National Economic Council Director Gary Cohn and Treasury Secretary Steven Mnuchin promised that deductions for retirement savings would be protected while other deductions would be sacrificed to pay for lower tax rates as well as tax code simplicity.
That mild reassurance has since been overtaken by growing alarm, with the White House and congressional leaders and staff members stopping short of echoing that promise. The most recent cause for worry were remarks at a July 31 Washington event by White House Legislative Affairs Director Marc Short, who said the tax advantage of retirement plan contributions is still under discussion.