IMHO: An Uncertain Future

March 1, 2006 ( - Benjamin Franklin once observed that in this world, nothing is certain but death and taxes - and, certainly at this time of year, we're all reminded in an up-close and all-too-personal way of the certainty of taxes.

What we’re not as certain about, of course, is the rate of taxation, and how it will be applied to our individual situation(s).   And unfortunately, certainly for those of us who work with qualified retirement plans, we’re also increasingly uncertain about the prospects for the key provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 – EGTRRA.

The impact of that legislation on our business can hardly be overstated.   In a single stroke, it boosted stifling contribution limits for defined contribution programs, lifted arcane limits on compensation and benefits, provided economic incentives for lower income workers to participate in these programs, and gave older workers a chance to “catch up” on missed opportunities to save for retirement.   EGTRRA leveled much of the playing field between programs for private, public, and not-for-profit employers in terms of deferral limits, and provided savings portability for workers who move between those fields in the course of their working lives. Less widely appreciated, but no less significant to those of us who administer these programs, EGTRRA also made important regulatory simplifications, such as the repeal of the multiple use test and modification of the top-heavy rules.   And while it did so belatedly, EGTRRA also provided the genesis for the new Roth 401(k).

Ironically, the introduction of the latter has served to remind many of us of just how short-lived EGTRRA’s provisions could be.   Why go to the trouble to add this provision if it could all go away in just a few years, after all?   That’s a valid point, but just think – without legislative action, much of the good that EGTRRA has done for the nation’s retirement savings security could be just as fleeting.

To its credit, the House of Representatives has passed pension reform legislation that would give these vital provisions permanency – but the Senate’s version has no such provision.   Ultimately, if there is to be pension reform of any ilk in the near-term, those two must be reconciled, but as we have noted here previously, their primary focus has been driven by the pension funding crisis, not true retirement security.  

EGTRRA’s work is not yet done, of course – and though we’re still years away from the 2010 sunset, with so much at stake, we can ill-afford to be lured into a false sense of security, IMHO.   We may never have a better opportunity to press Congress to preserve the protections and incentives to save that EGTRRA provides.   It’s time to finish the job.  

Editor’s Note:   A number of retirement plan industry firms have are urging Congress to include  EGTRRA pension and retirement savings permanency in the pension reform conference report.  You can read more about this effort at

You can add your voice to the effort by emailing Ed Ferrigno at by close of business March 10.

A working draft of the letter is online at.