President’s FY 2015 budget proposal would limit retirement tax deductions, allow PBGC to set risk adjusted premiums

President Obama’s fiscal year 2015 budget proposal would impose a limit on the total accrual of amounts in qualified plans and IRAs and would give the Pension Benefit Guaranty Corporation (PBGC) Board the authority to set risk-adjusted premiums. The proposals are similar to those offered in last year’s budget request.

Retirement limits

The budget request retains a proposal from last year’s request that would limit the rate at which deductions and exclusions related to retirement saving reduce a taxpayer’s income tax liability to 28%. In addition, a taxpayer who has accumulated amounts within the tax-favored retirement system (i.e., IRAs, qualified plans, 403(b) plans, and funded 457(b) arrangements maintained by governmental entities) in excess of the amount necessary to provide the maximum annuity permitted for a defined benefit plan under current law (currently an annual benefit of $210,000 payable in the form of a joint and 100% survivor benefit commencing at age 62 and continuing each year for the life of the participant and, if later, the life of the participant’s spouse) would be prohibited from making additional contributions or receiving additional accruals under any of those arrangements. Under current rules, the maximum permitted accumulation for an individual age 62 would be approximately $3.2 million.
The budget request also contains proposals to establish automatic IRAs and to increase the tax credit for small employer plan start-up costs, proposals similar to those contained in earlier budget requests.

PBGC premiums

The President’s budget request also proposes to give the PBGC Board the authority to adjust premiums in both the single and multiemployer programs and directs the PBGC to “take into account the risks that different sponsors pose.”
Source: General Explanations of the Administration’s Fiscal Year 2015 Revenue Proposals, Department of the Treasury, March 2014. FY 2015, Department of Labor, Budget in Brief.

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