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ARA: Tax Reform Proposal Threatens Small Business Workers' Retirement


ARLINGTON, VA, December 7, 2017 -- Tax reform proposals being hurried through Congress could have a dramatic impact on the retirement security of small businesses and millions of small business workers, according to an analysis by the American Retirement Association.

More than 90% of businesses are organized as pass-through entities (partnerships, S corps, and small business limited liability corporations), and more than 320,000 of these entities sponsor a retirement plan for their workforce. Unfortunately, both the Senate and House tax reform proposals currently under review by the conference committee include provisions that could put the retirement of some 24 million hard-working Americans at risk.

These proposals would reduce the tax rate on business income of these businesses, but would at the same time mean that many of those small business owners would be penalized financially for making retirement plan contributions, and for establishing a workplace retirement plan for their workers. And that's before taking into account the additional financial burdens of contributions to meet plan testing rules and administration costs, not to mention the ERISA fiduciary risks associated with operating and administering a qualified plan.

"While the American Retirement Association supports reducing taxes on pass-through businesses, an unintended consequence of the pass-through proposals under consideration is that they undermine the incentives for these small business owners to sponsor a retirement plan for their workers," explains Brian Graff, CEO of the American Retirement Association. The impact on small businesses is a particular concern since those who work for small businesses are significantly less likely to have access to a retirement plan at work than those who work for larger employers.

There is a simple solution to this problem: have the owner's allocable retirement plan contribution be separately stated and applied solely against income that is taxed at ordinary rates. However, thus far the legislation is being rushed through without addressing this critical issue.

"The retirement security of Americans is a matter of economic and fiscal concern for the nation," cautions Graff. "Hard-working Americans need to stand up for their future, and tell Congress to leave their retirement alone."

The American Retirement Association is providing Americans an opportunity to speak out against this threat to small business retirement plans. Tell Congress to leave your retirement alone at www.leaveretirementalone.org.

Additional information about the potential impact of these proposals is at http://usaretirement.org/wp-content/uploads/2017/12/Senate-Pass-through-Memo.pdf

About the American Retirement Association

The American Retirement Association, based in the Washington, D.C. area, is a non-profit professional organization established to empower retirement plan professionals who are dedicated to building a better retirement for Americans. The American Retirement Association is comprised of four premier retirement industry associations: the American Society of Pension Professionals & Actuaries (ASPPA), the ASPPA College of Pension Actuaries (ACOPA), the National Association of Plan Advisors (NAPA), and the National Tax-deferred Savings Association (NTSA). For more information, visit www.usaretirement.org.


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