Sullivan explained to attendees of the 2014 Plan Sponsor Council of America (PSCA) Annual Conference that when Congress significantly overhauls federal law or implements new provisions, usually taxes are added or reformed to pay for the implementation. For example, he noted, the Patient Protection and Affordable Care Act (ACA) included fees and taxes to help pay for implementation of the sweeping health care reform law. The recent highway funding bill, another example, included a provision allowing defined benefit plan sponsors to reduce contributions made to the plan, which effectively reduces their tax deductions.

In addition, a main driver of tax reform is economic growth, Sullivan said. He pointed out that the U.S. has had slow growth coming out of the 2008/2009 recession. “We’ve recouped our losses, but have not grown past that.” Other drivers of tax reform are international competitiveness—he pointed out we have the highest tax rate of all OECD countries—and deficit reduction. So, many of the drivers for tax reform are out there, Sullivan said.

Sullivan discussed conclusions in a report by the Joint Committee on Taxation that show the committee feels the exclusion of health plan contributions, the reduced rates of tax on dividends and capital gains, and the exclusion of retirement plan contributions are the top three individual tax expenditures made by the federal government. Benefits and retirement plans account for four of the top 10 expenditures cited by the committee. “So, it’s likely tax reform will affect employee benefits,” he said.

According to Sullivan, both legislative chambers have looked at the sweeping proposal put forth by U.S. House Ways and Means Committee Chairman Dave Camp (R-Michigan). It omitted the ACA from the discussion, but every major industry was hit. He noted the Camp proposal is the first comprehensive look at the tax-exempt sector in many years. He added that Representative Paul Ryan (R-Wisconsin), Camp’s likely successor, has indicated he embraces the potential reforms.

The move to after-tax contributions in retirement plans is scored as raising more than $144 billion over 10 years, and inflation adjustments for qualified plan elective deferral limits would raise an additional $60 billion over the same 10-year period.

“He changed the dialogue, businesses have something specific to analyze. [They need to] figure out if they can we live with this,” Sullivan said. Camp’s proposal will not be enacted in 2014, but it is now the baseline by which most proposals will be measured, he contended. “If taxpayers do not actively oppose provisions they don’t like, they will likely be enacted,” he claimed.