Tax Incentives For Retirement Plans: Lessons From Denmark?
A recent study found that tax incentives for retirement savings in
Maybe not, according to a new report by the nonpartisan
At issue are so-called "tax expenditures" in
The authors of the study on Danish savings behaviors offered statistical evidence that changes in tax preferences for Danish work place retirement savings plans had virtually no effect on total savings of those affected by the change.
This has drawn the attention of those interested in considering a modification of the long-standing tax preferences for employment-based retirement savings plans in this country.
However, aside from the differences in incentive structures between the two countries, the EBRI report notes that study of Danish workers examined only the impact that changes in tax incentives for work place retirement plans might have on worker savings behaviors--but did not address how employers might react to changes in retirement savings tax incentives.
The EBRI report notes recent surveys have found many American private-sector plan sponsors have expressed a desire to offer no plans at all in the absence of tax incentives for workers. If this happened, low-wage workers--who are generally less prepared for retirement--would suffer on several counts, said
"The Danish study provided insight into the savings behavior of Danes, conditioned by the culture and influences of public policies and programs of
"While the study of Danish savings behaviors presented the impact of tax-incentives and the 'nudges' of automatic mandatory savings as an 'either/or' solution, the optimal solution--certainly for a voluntary system such as the one currently in place in the U.S.--may well be a combination of the two," noted
The full report is published in the
TNS rd43 130130-4184374 StaffFurigay
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