ERSAs on Comeback Trail
October 30, 2003 (PLANSPONSOR.com) - Plan sponsors
who thought the Bush Administration's retirement savings
proposals were DOA are in for a surprise next year.
Speaking at the annual American Society of Pension
Actuaries Conference (ASPA) in
, Bill Sweetnam, Treasury Benefits Tax Counsel, confirmed
that the Bush Administration plans to push for its new
breed of retirement savings programs in next year's budget.
The proposal, outlined last January (see
ERSAs Bear Major Changes for Plan Sponsors
), includes the Employment Retirement Savings Account
(ERSA), which would replace employer-sponsored deferral
programs, including 401(k)s, 403(b) and 457, SIMPLE and
SARSEP programs; the Retirement Savings Account (RSA),
designed to replace the current IRA; and the Lifetime
Savings Account (LSA), designed as an after-tax, tax-exempt
savings account, much like today's Roth IRA.
Sweetnam told attendees that "These proposals are
very popular in the administration. You'll see them again
in the next year's budget proposals."
He explained the Administration's goals as two-fold:
simplification of the current system, and expanding current
savings opportunities, particularly for smaller businesses,
and the workers they employ.
He did acknowledge input on the original proposals
from a number of sources (including ASPA), noting that
"There's a financial calculus that a small business owner
goes through in deciding to offer a retirement
Critics of the proposal have argued that it would
provide incentives for small business owners to take
advantage of the proposed new Lifetime Savings Accounts
(LSA) for their retirement savings, rather than undertake
the work, risk and expense of establishing a retirement
program in their workplace (see
Industry Groups Fret About Impact of Bush Proposal
Sweetnam acknowledged those concerns, and while he
admitted that the proposal could affect that calculus, he
cautioned that "every change in the tax system" has an
He also said the Administration's sense was that
this impact would only happen at the "very" small plan
Most employers would continue to view offering a workplace
retirement plan as necessary to remain an "employer of
choice," according to Sweetnam.
For those concerned about the potential impact of the
proposals introduced this year, Sweetnam noted that the
2004 version will "look slightly different."
Noting that Treasury had met with various interest
groups over the past year, he said "you will see some
changes that reflect the comments received."