Shifting the Burden of Funding Pensions
New York Times (02/20/03) p.E3; Walsh, Mary Williams

Recent proposals by the Bush administration call for the creation of new savings plans that would allow Americans to make withdrawals from their accounts tax free, but would eliminate immediate tax incentives and would have broad implications for the Social Security system. One of the proposed accounts, the Retirement Savings Account, would offer no tax incentive upon contribution, but would keep withdrawals free from federal income tax and allow higher annual contributions, while the administration could eliminate tax deductions for corporations that place money in pension funds. The administration could then use the money that used to be deducted by corporations to cover the lost revenue from the double taxation of dividends, while at the same time reduce corporations' ability to use pension growth estimates as revenue rather than actual pension figures. The second savings plan proposal, the Roth 401(k), calls for the creation of an after-tax 401(k) that allows tax-free withdrawals after retirement, a plan that has already been signed into law, and accounts are slated to appear beginning in 2006.


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