Two recent proposals to change the existing tax treatment of 401(k) retirement plans, if enacted, are likely to result in lower account balances for many 401(k) participants, according to a new analysis by the Employee Benefit Research Institute.
Currently, the combination of worker and employer contributions to a 401(k) plan is capped by the federal tax code at the lesser of $49,000 per year or 100% of a worker’s compensation (participants over age 50 can made additional “catch-up” contributions). As part of the effort to lower the federal deficit and reduce federal tax expenditures, two major reform proposals have surfaced that would change current tax policy toward retirement savings:
