Tax Reform: Defined Contribution Dodges a Bullet

For most of the year, tax reform has been a burning issue for DC plans, which now appear to have emerged from the political process unscathed. However, the story of tax reform is a case of “what could have been” for DC plans.

Various proposals were discussed, particularly “Rothification,” which would have required some -- or all -- contributions to be made on an after-tax basis, similar to Roth IRAs, rather than on a pre-tax basis. At Mercer, we believe that this would have resulted in lower contributions from participants, undermining retirement savings and people’s ability to retire into happy and healthy lives. Our mission is to help secure retirement outcomes for millions of people across the world. We worked hard to ensure that our voice and the voice of our clients were heard by legislators and we welcome the fact that this provision was removed from the final legislation.

That said, we will not be complacent. We will continue to focus on tackling the ever-expanding retirement savings gap, which was estimated at $27.8 trillion at the end of 2015 by the World Economic Forum.

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