A new paper from the Center for Retirement Research at Boston College challenges the assumption that the tax deferral advantage offered by 401(k) plans mainly benefits high-income workers, who face higher marginal tax rates.
Most studies “assume that employer contributions to 401(k)s do not affect the total compensation that each worker receives — that is, every worker ‘pays for’ employer contributions in the form of lower wages,” write the authors, Eric Toder, co-director of the Urban-Brookings Tax Policy Center and Karen E. Smith, senior research associate at the Urban Institute.
