As lawmakers debate potential changes to the US retirement system, a new report from the Investment Company Institute is urging policymakers to preserve the beneficial structure of 401(k) and similar defined contribution plans for American workers.
Drawing from its research report titled American Views on Defined Contribution Plan Saving, 2024, ICI said nearly three-quarters of Americans hold favorable views of employer-sponsored retirement plans. Among DC plan participants, 85 percent said the tax advantages of their plans were a key incentive for them to contribute.
"Employer-sponsored DC plans have helped American workers achieve long-term saving goals for decades with favorable features like employer contributions, a strong lineup of investment options that are diversified and cost-effective, and tax-deferred growth," Sarah Holden, senior director of retirement and investor research at ICI, said in a statement Friday.
The report found a strong majority of Americans would push back against changes that would roll back tax benefits for retirement savings plans. The report found that 85 percent disagreed with eliminating the tax advantages of DC plan accounts, while 86 percent opposed lowering the contribution limits for these plans. Opposition was even stronger among those who actively contribute to such accounts, ICI said.
The research comes as Congress considers the fate of certain provisions from the 2017 Tax Cuts and Jobs Act, some of which are set to expire in the coming years. With policymakers discussing potential tweaks and measures to maintain funding for various government programs, ICI argued putting retirement-related tax incentives on the chopping block would be a big mistake.
"It's important when discussing changes to our retirement system for policymakers to note that current plans are working for millions of Americans," Holden said.
ICI's research also highlighted how workplace retirement plans encourage long-term savings, with nearly half of defined contribution plan participants agreeing they would likely not be building up their nest egg if not for their employer-sponsored plan.
More broadly, 86 percent of US adults surveyed rejected the idea of restricting individuals from making their own investment decisions in defined contribution accounts. In line with that, 77 percent opposed the notion of shifting all retirement investments into an investment option chosen by government-appointed experts.
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