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Abstract:
The authors explain that because the legislated limits on considered compensation, benefits, and contributions in tax-qualified retirement plans have been changed many times - generally in a downward direction - even with indexation to consumer prices, their absolute (that is, nominal) dollar values have been flat or have increased only modestly from 1987 to 2007. By contrast, Social Security's main parameters, which are indexed to average wages and some of which were increased by legislation, have increased significantly over the same period. They argue that if a public policy approach goal is to maintain fairly stable relative roles for public and private retirement plans and stable redistribution when both public programs and private plans are considered together over time, the legislated limits on tax-qualified retirement plans should be stable and be indexed to the same average index used by Social Security.
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