Benefits February 12, 2025

American Benefits Council Advocates for Tax Preferences in Policy Guide for Next 5 Years

The national trade association emphasized the importance of protecting retirement and health plans under ERISA and maintaining the current tax incentives associated with these plans.

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The American Benefits Council released on Wednesday its public policy strategic plan for employer-sponsored retirement and health plans for the next five years—with an emphasis on the next several months, as lawmakers debate tax and economic policy.

“DESTINATION 2030: A Roadmap for the Future of Employee Benefits” is a more-than-150-page guide that enumerated 79 specific policy recommendations to support employer-sponsored plans and the “millions of American families who rely on them,” according to the American Benefits Council—a national trade association based in Washington, D.C., that advocates for employer-sponsored benefit plans.

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The 2030 strategic plan identified the five most pressing challenges facing plan sponsors today, four goals to address each challenge and policy recommendations for meeting these goals. The main challenges it identified were: improving holistic well-being; legal and regulatory uncertainty; demand for personalized and individualized benefits; increased individual responsibility; and aligning health care cost and quality.

The American Benefits Council also identified core issues impacting the Employment Retirement Income Security Act of 1974 and tax policy—one of them being to “preserve, protect, defend and enhance the current tax incentives supporting participation in employer-provided retirement plans—both the full federal tax deferral for participating employees and the tax deduction for plan sponsors.”

The concern comes as Congress is in discussions to extend the 2017 Tax Cuts and Jobs Act, a major priority for President Donald Trump.

According to the council, tax incentives for employer-provided health and retirement plans are regularly scored as “the two largest income tax ‘expenditures’ in the federal budget. Together, the exclusion from individuals’ income tax of contributions to employer-sponsored health and retirement plans represents a theoretical cost to the federal government of $6.1 trillion over the next 10 years.”

The “forgone revenue” attributable to the tax incentives for retirement plans (setting aside the future taxes collected at distribution) equaled $204 billion in 2023, according to the report. The Bureau of Economic Analysis reported that employer plans paid out $1.9 trillion in benefits in that same year. Dividing $1.9 trillion by $204 billion reveals $9.31 in benefits provided for every tax dollar spent.

“Policymakers who advocate scrapping employer-sponsored benefits—or the tax incentives making these benefits possible—should be aware of this compelling return on investment and understand it would cost far more to provide the same level of health and financial security outside of the employer-sponsored system,” the council wrote in its report.

As Congress pursues comprehensive tax reform or smaller tax measures, the council urged lawmakers to do no harm to the tax structure of employer plans, treat tax incentives for employer plans as “prudent investments” and pursue opportunities to expand the employer-sponsored system.

The council argued in the report that pre-tax retirement savings is a powerful motivator for individuals, and it encourages employers to sponsor plans that deliver “meaningful benefits” to Americans along the income scale. As opposed to after-tax or Roth retirement vehicles, the pre-tax structure allows employees to save more on a paycheck-by-paycheck basis than would be the case with after-tax contributions. This benefit is particularly important for low- and middle-income families who are very dependent on their monthly income, the council stated in the report.

“This is not money that’s lost to the government,” says Lynn Dudley, the council’s senior vice president of global retirement and compensation policy. “It’s money that’s delayed to the government, and that actually has a value to the government too. … You want some people to do Roth, and some people not. And I tend to think the proposals that you will see on the table will preserve [both pre-tax and after-tax] options.”

Beyond tax policy, the report addressed issues related to safe harbors and compliance, implementation of the SECURE 2.0 Act of 2022, retirement plan investments, defined benefit plans, small employer plans and more.

Data and Research February 11, 2025

DC Plan Growth Keeps US Retirement Market as World’s Largest

Global retirement assets reach $58.5 trillion in 2024, according to data from the Thinking Ahead Institute.

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Global retirement assets rose by 4.9% in 2024, reaching $58.5 trillion, 65% of which were in the U.S., according to new research from WTW’s Thinking Ahead Institute. At the end of 2023, pension assets were valued at $55.7 trillion.

WTW attributed the growth in defined contribution assets in 2024 to DC plans’ higher exposure to growth assets. DC assets have grown by an average of 6.7% per year since 2014, while defined benefit assets have grown at 2.1% per year, according to WTW.

“The rise of DC becomes more pronounced every year that we conduct this study,” said Jessica Gao, director at the Thinking Ahead Institute, in a statement. “While global pension assets continue to reach new record levels, it is those markets with larger pools of DC assets that are the main engine behind this continued growth.”

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The four countries with the most assets – including the U.S, Japan, Canada and the U.K. – accounted for 82% of all global retirement assets globally.

Growth in the U.S. and across most of the large markets was driven by defined contribution plans, which in many countries made up a majority of retirement assets. When adding Australia, the Netherlands and Switzerland to the four largest retirement asset markets, defined contribution accounts made up 59% of total assets in those seven countries.

Traditional pension funds are usually defined benefit plans, in which the retiree receives an income for life based on their tenure with an employer and their salary level. Defined contribution plans provide a retiree the assets accumulated from their own and their employer’s contributions, plus investment earnings.

Growth does vary by country. In Australia, with its mandatory superannuation system, pension assets have grown 110% since 2014 and 500% over the past 20 years. WTW expects Australia to have the world’s second-largest pension market by 2030 if this growth trajectory continues.

U.S. pension assets have grown by 75% since 2014. Like Australia, a majority of U.S. pension assets are in DC plans. In Australia, this figure is 89%, while in the U.S., 69% of assets are in DC plans. 

The U.K., with only 27% of assets held in defined contribution plans, was the only one of the seven countries with the most retirement assets in which those assets declined over the past year, shrinking 0.7%.

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