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1 1 (August 12, 2021)

handle is hein.crs/goveehw0001 and id is 1 raw text is: Congressional SResearch Service Data on Retirement Contributions to Defined Contribution (DC) Plans August 12, 2021 Individuals can save for retirement in two types of tax-advantaged accounts: defined contribution (DC) and individual retirement accounts (IRAs). DC plans are employer-sponsored retirement plans in which contributions from a worker, the employer, or both are placed in an individual account. Individuals with wage income can also contribute to IRAs, which are privately held retirement savings accounts. Contributions-and any investment earnings-in DC accounts and IRAs can be used as a source of income in retirement. Both DC accounts and IRAs may accept rollovers. Rollovers-transfers of funds from one retirement account to another-preserve the tax advantages of retirement savings. This Insight provides Internal Revenue Service (IRS) data on contributions to DC accounts in 2018. Congress has an interest in contribution data because (1) the tax expenditures for retirement plans (estimated to be $153.6 billion for DC plans and $23.8 billion for IRAs in FY2020) are one of the largest categories of revenue losses attributable to provisions in the tax code, and (2) recent legislation has included provisions that would modify contribution limits for certain individuals. CRS Insight IN11722, Data on Contributions to Individual Retirement Accounts (IRAs) provides similar data for IRAs. Employers sponsor a variety of DC plans, such as 401(k) plans (for private-sector employers), 403(b) plans (for public education systems and nonprofit employers), 457(b) plans (for state and local government employers and nonprofits), the Thrift Savings Plan (for the federal government), Savings Incentive Match Plan for Employees (SIMPLE, for businesses with 100 or fewer employees), and Salary Reduction Simplified Employee Pension (established prior to 1997 for businesses with 25 or fewer employees). In March 2020, 60% of U. S. workers had access to DC plans through their employers. The tax benefits of DC accounts depend on whether the account is a traditional or a Roth account. Contributions to traditional DC accounts are excluded from taxable income in the year in which the contributions are made (i.e., they are made with pre-tax funds); investment earnings accumulate on a tax- deferred basis. Withdrawals from traditional accounts are included in taxable income when received. Contributions to designated Roth accounts within a DC plan are not excluded from taxable income in the year in which they are made (i.e., they are made with after-tax funds). Investment earnings accumulate on a tax-free basis: Qualified distributions from Roth accounts (those taken by an individual who has held the account for five years and made after death, on account of disability, or on or after attainment of age 59%2) are not included in taxable income. Congressional Research Service https://crsreports.congress.gov IN11721 CRS INSIGHT Prepared for Membersand Committeesof Congress

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