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Biden proposes 401(k) changes to give low-income savers bigger tax benefits

September 19, 2020. Summarized by summa-bot.

Democratic presidential candidate former Vice President Joe Biden speaks in Wilmington, Del., Friday Sept. 4, 2020. (AP Photo/Carolyn Kaster)

Democratic presidential nominee Joe Biden has a plan to change 401(k) retirement savings accounts to give low-income earners a bigger tax break up front.

Washington (CNN)Democratic presidential nominee Joe Biden has a plan to change 401(k) retirement savings accounts to give low-income earners a bigger tax break up front.

The plan, which calls for changing the way 401(k) accounts are treated in the tax code in order to encourage low earners to save more, would likely mean higher earners would see a smaller tax break than they do now.

The Tax Policy Center assumes that credit would be equal to 26% of anyone's retirement contribution, regardless of their income.

The Biden plan doesn't mention changing the contribution cap, which is currently tied to inflation.

Biden is also proposing to establish automatic retirement savings accounts for workers who don't already get 401(k)s or pensions from their employers.

Since 2016, several states have created their own retirement accounts for those workers.

In 2017, Republicans in Congress repealed an Obama-era rule that had paved the way for states to create their own retirement plans.

Some Republicans floated a proposal to decrease the contribution limits for 401(k)s in 2017 amid negotiations over their massive tax overhaul legislation, as a way to raise tax revenue.

But the final law ultimately left retirement plans untouched.

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