Citation URL: http://www.urban.org/ChristopherGeissler

One promising aspect of retirement saving policy in recent years is the "automatic" or opt-out features in 401(k) plans. Automatic 401(k)s enable saving even if the worker makes no effort to participate in their 401(k) plan. Prior research has shown that automatic enrollment increased participation in 401(k) from 75 percent to as high as 90 percent of newly eligible employees; with the highest change among lower-income and minority workers. This paper provides estimates of the effects - on federal revenue and the distribution of after-tax income - of a policy under which all 401(k) plans are converted to automatic 401(k)s.

The tax code limits the extent to which individuals may take advantage of the tax benefits associated with traditional and Roth IRAs. The only eligibility criteria for contributing to a Roth IRA are income and filing status. In contrast, eligibility for deducting contributions to a traditional IRA depends on those factors as well as on whether the taxpayer and the taxpayer’s spouse participate in an employer-provided pension. Taxpayers are subject to an assortment of phaseout ranges based on those criteria.

Recent tax acts sharply lowered tax rates on long-term capital gains and dividend income. For millions of taxpayers, however, the alternative minimum tax limits the benefits from these cuts by increasing the effective marginal tax rates on capital gains and dividend income. The culprit is the phaseout of the AMT exemption.

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