19 June 2019

Retirement Cap Proposal Draws Fire

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Small-business groups have joined the chorus of retirement professionals upset with President Barack Obama's proposed retirement cap.

Opposition to the plan emerged almost immediately. The proposed $3 million cap on retirement savings could force small businesses to stop offering workplace retirement plans, the American Society of Pension Professionals & Actuaries said shortly after the president's plan was unveiled earlier this month.

The criticism hasn't stopped.

“Obviously it won’t hurt every small business, but there are a significant number it will hurt,” said Judy Miller, director of retirement policy at ASPPA.

In his budget blueprint, President Obama proposed a $3.4 million cap on how much money individuals can put into retirement accounts. The move would raise about $9 billion for the federal government over the next 10 years. The cap would prohibit taxpayers from taking advantage of the pre-tax deferral into their 401(k) or defined contribution pension plans after they cross that $3 million threshold, which is enough to fund a $205,000 annual annuity for a person wanting to retire at age 62.

According to data from the Employee Benefit Research Institute, a very small percentage of IRA and 401(k) investors would be affected by the cap. In 2011, only 0.06 percent of total IRA account holders had $3 million and only 0.0041 percent of 401(k) accounts had that much money in them at the end of 2012.

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