HR Management & Compliance

Bulletin Item: Budget Proposal Includes Sweeping Pension Changes

President Bush has proposed important changes to the types of retirement accounts available to American workers. The changes are designed to make retirement savings simpler and more attractive. The president proposes to create Employer Retirement Savings Accounts (ERSAs), which would streamline, consolidate, and simplify the maze of employer-sponsored plans, including 401(k), SIMPLE 401(k), 403(b), and 457 plans. The proposal would also create new Lifetime Savings Accounts (LSAs), which would replace various existing medical and education savings accounts, and new Retirement Savings Accounts (RSAs), which would replace IRAs and Roth IRAs. There would be no income limits on an individual’s contributions to LSAs and RSAs, and while contributions wouldn’t be deductible, earnings and distributions would be tax-free. We’ll keep you posted.