The Impact and Influence of Tax Incentives on Health and Retirement Benefits

Workers routinely rank their employment-based health coverage as the most important benefit they receive, followed by a retirement plan—but the tax preferences that support them are drawing increased scrutiny.

To examine the implications for private-sector health and retirement benefits, as well the costs and consequences and what the numbers are, the nonprofit, nonpartisan Employee Benefit Research Institute (EBRI) recently held a day-long policy forum in Washington, DC. Titled “’After’ Math: The Impact and Influence of Incentives on Benefit Policy,” this was EBRI’s 70th biannual forum on benefits issues. It drew about 100 experts, benefits professionals, and policy makers to provide their perspectives and predictions.

As a new EBRI report about the forum notes, the reach and impact of these benefits is immense. Employment-based health benefits are the most common form of health insurance in the United States, covering almost 59 percent of all nonelderly Americans in 2010 and about 69 percent of working adults. Assets in employment-based defined benefit (pension) and defined contribution (401(k)-type) plans account for more than a third of all retirement assets held in the United States, and a significant percentage of assets held today in individual retirement accounts (IRAs) originated as a rollover account from an employer-sponsored program. Workers routinely rank their employment-based health coverage as the most important benefit they receive, followed by a retirement plan.

Since private-sector health benefits alone rank as the largest single “tax expenditure” in the federal budget, various proposals have been made to either reduce or even phase out the cost of that program to the government. Both for employers that sponsor these benefits—and the workers who receive them—the implications are enormous, the EBRI report points out.

“When you look at some of the recent proposals for reform, benefit plan tax incentives are an area of total and complete volatility, and neither employers nor workers can have any certainty of what lies ahead,” said Dallas Salisbury, president and CEO of EBRI.

The press release is online here. The full report is online here.

About ebriorg
President and CEO, EBRI

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