A Look at Bush's One-Size-Fits-All Retirement Plan

ERSAs would still be covered by ERISA, which was enacted in 1974 to ensure that employees actually receive the pension and other retirement benefits promised by their employers. ERISA is also inextricably bound to the Internal Revenue Code in order to encourage employers to even offer such benefits. ERISA rules, which cover 401(k)s but generally not the retirement plans offered by nonprofit or government employers, were also designed with several "tests" aimed at ensuring that these tax-favored retirement plans do not favor the highest-paid employees over the rest of the unwashed masses.

Essentially, these tests limit how much highly compensated employees (defined, for these purposes, as those with $90,000 a year or more in wages) are allowed to contribute, on the basis of the level of participation of lower-paid employees. In order for these highly compensated employees to contribute the full amount allowed by the Internal Revenue Service, lower-paid employees must have a certain level of participation.

Many companies help goose participation by offering a "company match." (That's right: As generous as it seems, the company match isn't driven by pure altruism.)

While some of the so-called discrimination testing will remain in place, a few tests will be eliminated. "Since it appears there will still be some discrimination testing, employers should still have some incentive to offer a match," says Dan Halpin, a benefits consultant with Grant Thornton in Washington.

Even so, ERSAs may still prove to be a boon for highly paid employees. "It certainly seems that highly compensated employees will come out doing better if there's less stringent testing," says Richard O'Donnell, a tax analyst and pensions editor at RIA, a provider of tax information for professionals.

The questions that surround ERSAs will no doubt be debated along with the other savings accounts created by the budget. But while LSAs and RSAs do seem to streamline an overly complicated system, ERSAs do not.

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