THE SAVINGS COALITION OF AMERICA URGES CONFEREES TO INCLUDE THE 2001 BIPARTISAN RETIREMENT SAVINGS INCENTIVES IN PENSION REFORM BILL

July 14, 2006

With work being finalized on the pension reform bill, conferees will soon turn their attention to the tax portion of the bill. Under consideration is making the pension and retirement savings provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) permanent. These provisions cover many aspects of retirement savings for all Americans:

• Permit Americans to save more in employer plans and IRAs;
• Ease portability among various plans;
• Provide significant administrative relief to employers who sponsor plans, in particular, making it easier for more small businesses to offer plans to the more than 40 million workers they employ;
• Encourage low income Americans to save for retirement through the Saver’s Credit; and,
• Establish catch-up contributions that permit older workers to save more under the plans and IRAs.

Permanency is critically important to the millions of Americans that benefit from employer provided and individual retirement account programs. Trillions of dollars are invested in the economy through these programs. Hundreds of millions of dollars more are invested in systems that successfully administer these programs. The effect of not making these provisions permanent soon will result in plan sponsors having to confront uncertainty about legal compliance and the future design of their retirement plans. The resulting communications difficulties will confuse savers and possibly drain dollars from their accounts. Workers will be more reluctant to join savings programs when faced with confusing plan terms and uncertain contribution limits, and employers will be more reluctant to establish or maintain plans. In addition, this will unnecessarily divert a portion of participants’ total savings to retooling these systems in anticipation of expiring provisions.

Unlike most tax provisions, most of the revenue cost associated with making these provisions permanent results from tax deferrals rather than tax exclusions. Taxes Americans would pay on retirement contributions and earnings are deferred until they take their money out of the plans or IRAs in retirement. This deferred tax revenue will actually help to relieve the fiscal pressure that the baby boomer retirement is expected to create.

We urge the conferees to ensure that both the pension reform conference report and the final pension reform bill retain this important provision. The time to act is now.