Issues with Politico Claiming the 401(k) industry owns Congress

These are the top five fallacies I found in the Politico article.

• Five months before Congress faced a near-catastrophic standoff over the debt ceiling, with Republicans demanding restrictions to food and Medicaid programs to rein in spending, a bill that raised the cost of private retirement savings accounts to $282 billion per year was quietly signed into law. In this era of deeply divided politics, the 2022 bill known as Secure 2.0 was hailed as a bipartisan success.
• Tax-advantaged savings has become a staple of the American retirement system, with 60 million savers squirreling away $6.6 trillion in their 401(k)s, alone. But a yearlong POLITICO investigation found that Secure 2.0 and its predecessor bills have expanded the system well beyond its goal of helping the middle class. Today, wealthy taxpayers can protect up to $452,500 per year in tax-advantaged accounts in a single year, saving up to $203,600 on their taxes.
• “The 401(k) industry owns Congress,” said Daniel Hemel, a professor and tax law scholar based at NYU School of Law. “Either lawmakers were trying to pull a fast one on the American people or lobbyists were trying to pull a fast one on Congress. I don’t know which story is better. I don’t know which one I should want to believe.”
• Besides creating a new kind of retirement plan geared toward small businesses, the first Portman-Cardin package repealed a rule coordinating how much individuals could put into both defined-benefit plans and 401(k)s — a change of enormous consequence that allowed wealthy taxpayers to max out both plans at once. Suddenly, as a result of the repeal, a person who had fully funded their 401(k)s could also put over $79,000 into their defined benefit plans — up from less than $20,000.
• The [2001] legislation increased contribution limits for 401(k)s and more than doubled the amount individuals could put in IRAs. It also relaxed something called the “top-heavy rules,” which prevented retirement plans from primarily benefiting small business owners at the expense of employees.

I would argue:

• $282 billion more in retirement savings is a good thing if those who need it most get their fair share.
• $452,500 per year? Really! Even with 415 limits? The personal problem for me is that if a client or advisor were to stumble upon this Politico article I might get a call asking why they are not getting $452,500 each year. This is particularly confusing in that you can have contributions to a Defined Benefit plan these days in excess of $452,500 but that would be to make up prior funding shortfalls and take advantage of the cushion amount to overfund the plan.
• It is true that the American Retirement Association does some effective lobbying but I don’t see representatives from the Pharmaceutical, Insurance, or Trial Lawyer industries lining up to ask Brian Graff if they can borrow Congress for their own interests for a bit.
• The 1999 repeal of 415(e) was welcome primarily due to the calculation complications with DB/DC combo plans but 404(a)(7) is still there to limit deductions for non-PBGC-covered plans and we still have 401(a)(4) to protect discrimination against Non-Highly Compensated Employees to some extent. And as for $79,000 that can be put into a Defined Benefit plan if your 401(k) is fully funded (presumably at the $73,500 limit for 2023), that seems a long way from the $452,500 in the second bullet point.
• IRC 416 still exists and it is not very relaxing.