PLANADVISER - September/October 2020 - 10

trends
New Take on the 401(k)
Biden's controversial retirement savings tax credit proposal ON THE MOVE
" The antagonists are saying that if you
ONE provision in Democratic presidential
candidate Joe Biden's platform would
replace, with a tax credit, the tax deduction
workers get when they contribute to
their workplace retirement plan.
Ostensibly, the idea is to " level the
playing field " across income brackets.
Under the current system, higher earners
can benefit more from the tax deduction
relative to lower-income workers because
the former are able to make a higher
dollar-figure contribution to their retirement
plan.
remove the tax savings for the high earners,
they will abandon workplace retirement
savings, " Parks says. He observes that
the Biden platform also seeks to create
a renter's tax credit-another effort to
level the playing field, this time between
lower-income renters and higher-income
people claiming mortgage-related income
tax deductions. Parks says he applauds
Biden's efforts to encourage those at the
bottom of the income scale to enter the
financial system.
" The antagonists are saying that if
you remove the tax savings for the
high earners, they will abandon
workplace retirement savings. "
The Biden campaign has not released
specific details on how the tax credit
would work or how widely it would be
applied. Asked to contemplate the policy
change, retirement industry experts had
mixed opinions, though there seemed
to be a consensus that such a proposal
would probably be insufficient to motivate
substantially higher savings rates among
lower-income workers. Some recall the
" myRA " concept from the second Obama/
Biden administration-a federal
retirement
savings program that gained little
traction and was ended in 2017.
Chad Parks, founder and CEO of Ubiquity
Retirement + Savings, explains that,
under the current system, those in a 37%
tax bracket would get a $370 tax savings
for every $1,000 put toward their workplace
retirement
plan. Obviously,
for
those in a lower tax bracket, that savings
would be lower.
According to Parks, while the details
of how a Biden tax credit would work
have yet to emerge, he has heard some
" alarmed reactions " from within the
retirement industry.
➜ Empower Retirement
and Massachusetts
Mutual Life Insurance
Co. (MassMutual) have
entered into a definitive
agreement for Empower
to acquire the MassMutual
retirement plan
business.
➜ The IRS named
Rachel Leiser Levy as
associate chief counsel
for employee benefits,
exempt organizations and
employment taxes. Levy
has served as a principal
at Groom Law Group,
Chartered, in Washington,
D.C., since 2015.
Matt Berquist, managing director at
Intrepid Capital, says he gives Biden credit
for trying to find a way to equalize the tax
incentives for retirement savings in this
country. " However, the real question is,
are we trying to equalize the tax incentives
or help people save more for retirement? "
he says. " We need to find a way
to incentivize lower-wage earners to save
more. Maybe that means giving them the
tax credit and keeping the deduction for
the high-wage earners. "
As it is still assessing what the policy
could mean, the ERISA [Employee Retirement
Income Security Act] Industry
Committee has no official position on the
proposal. But, says its senior vice president
of
retirement and compensation
policy, Aliya Robinson, the association
has questions.
The group's first concern is " how would
impact our current system
[the change]
built on the idea of a tax deduction? "
Robinson says. She says she also wants to
know how much of a tax credit would be
offered and how the new approach would
be administered and paid for. -Lee Barney
➜ CAPTRUST has
acquired the retirement
planning practice of
Plante Moran Financial
Advisors. The " carveout "
acquisition brings
CAPTRUST's assets under
advisement to $400 billion.
10 | planadviser.com September-October 2020
➜ Wellington Management
announced that
Brendan Swords, CEO,
will retire from Wellington
next June 30. Jean Hynes,
a managing partner, will
succeed him as CEO.
➜ Northern Trust has
made two appointments
to its Front Office Solutions
unit: Jane Western
as chief operating officer
and Deirdre Cannell as
senior business development
executive.
➜
http://www.planadviser.com
PLANADVISER - September/October 2020

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