Industry officials cautioned members of the House Ways and Means Committee that the first step in reforming the tax code as it relates to individual retirement tax policy should be to "do no harm."
At a hearing today on tax reform and tax-favored retirement accounts, Randolf H. Hardock, managing partner at Davis & Harman LLP, said that the "wisest course in most instances will be to 'do no harm' and avoid new laws or regulations that would disrupt the successes of the current system."
The hearing was convened by the full House Ways and Means Committee, which, by law, must originate tax policy legislation.
Judy A. Miller, Chief of actuarial issues and director of retirement policy for the American Society of Pension Professionals and Actuaries, reiterated that view in her testimony.
"The primary message I want to convey today is that the current tax incentives are working very efficiently to promote retirement security for millions of working Americans," Miller said.
She noted that the most important factor in determining whether or not taxpayers across the income spectrum save for retirement is whether or not there is a workplace retirement plan.
"If increasing retirement and financial security is the goal, increasing the availability of workplace savings is the way to get there and modifications to the current incentives should be evaluated based on whether or not the changes will encourage more businesses to sponsor retirement plans for their employees."
Miller also said that the discussion of simplification needs to be expanded beyond consolidation or otherwise limiting employer-sponsored plan design options.
"There are legislative and regulatory changes that could smooth the way for more small employers to adopt plans and ease compliance concerns but consolidation and loss of flexibility in plan design are not on that list," Miller said.
"Improved retirement security and meaningful simplification will be accomplished through thoughtful modifications to the existing structure without wasting resources on cosmetic overhauls that produce more change than gain," Miller suggested.
Hardock, testifying on behalf of the American Benefits Council (ABC), put it this way: "Since the employment-based retirement system is the most effective and significant source of retirement saving, any changes in that area should be approached with extreme caution."
Hardock cited on behalf of the ABC the many successes of the current system and the critical tax incentives that make employer-sponsored plans so effective — both as a source of personal financial security as well as a driver of economic growth.
"Individuals have heightened retirement income concerns resulting from the recent economic downturn," Hardock said.
