NSBA Comments on Retirement Security

October 5, 2011

NSBA recently submitted written testimony to the U.S. Senate Committee on Finance for their hearing, “Tax Reform: Promoting Retirement Security.” NSBA is fully committed to broad tax reform, and in his comments, NSBA President Todd McCracken outlined how the current tax code is impeding retirement security for America’s small businesses.

The two primary impediments McCracken cited are: 1) that the current administrative burden imposed on small businesses considering implementing a retirement savings plan is too high; and 2) the tax system is biased against savings. Most of the plans available to small businesses—simplified employee pensions (SEPs), salary reduction simplified employee pensions, SIMPLE IRA plans, SIMPLE 401(k) plans, regular 401(k)s, profit-sharing plans, money purchase pension plan, Keogh plans, defined benefit plans, defined contribution plans, and employee stock ownership plans—are subject to the minimum coverage requirements, minimum vesting standards, the actual deferral percentage test, the non-discrimination requirements, and the top heavy plan requirements.

The complexity in determining which plan is a good fit and then ensuring everything has been done correctly is extremely difficult, and can subject small businesses to high taxes and higher penalties. McCracken urged simplification of current retirement rules in the near term as on option, but stated that broad, fundamental tax reform, in the form of the Fair Tax, is the best way to address this complexity and lack in savings.

Please click here to view the full testimony.