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Uncle Sam’s 2014 budget: Will it cap retirement savings?

by on
in Compensation and Benefits,Human Resources

With the sequester gripping Washington, D.C., all kinds of tax reforms are on the table. Recent FY2014 budget proposals by President Obama include a major change for retirement savers: A new $3 million limit would apply to assets in qualified retirement plans such as 401(k)plans, as well as defined-benefit pensions and IRAs.

Assets in excess of the cap would lose tax-preferred status.

Details of how this would work haven’t been released, but the Obama administration projects that the cap would bring in $9 billion in additional revenue over the next decade.

The Employee Benefit Research Institute estimates that only 0.03% of current retirement funds exceed $3 million.

Outlook: 50/50. Expect congressional committee hearings, but with so many moving parts in the federal budget process, the retirement cap might not make it into legislation.

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