NU Online News Service, April 10, 4:55 p.m. – The U.S. General Accounting Office says Congress should beware of making “improvements” to private pension benefits that might do more harm than good.

Some lawmakers want to expand employer plan sponsorship and increase worker participation rates with new tax incentives.

Other lawmakers support new restrictions on workers’ ability to take cash from retirement plans; requirements that all employers offer access to retirement savings plans; and even mandates that all workers participate in retirement savings plans.

“Each type of reform introduces issues that make the likely effects of reform difficult to determine,” Barbara Bovbjerg, the GAO’s director of education, workforce and income security issues, writes in a report available on the Web at http://www.gao.gov/new.items/d02225.pdf

Bovbjerg gives the example set by the individual retirement account program as an example of the difficulty of changing voluntary retirement savings habits.

Most U.S. taxpayers can contribute either to a Roth IRA or a conventional IRA, and 47% have some kind of IRA, Bovbjerg writes.

But rollovers from employer-sponsored plans account for most IRA assets, and a study by the U.S. Office of Tax Analysis found that only about 5% of wage earners reported contributing to an IRA in 1995, Bovbjerg writes.

Bovbjerg discusses possible problems with a variety of proposed pension-reform incentives and mandates:

? If Congress increases retirement savings tax incentives, it could accidentally reduce the actual value of the incentives by cutting tax rates for everyone.

? If Congress forces workers to leave retirement savings in retirement plans, workers might refuse to participate at all.

? If Congress requires all workers to save for retirement, it could take away income that low-income and moderate-income workers need to pay for education, housing and health insurance. In many cases, Bovbjerg suggests, “they might prefer cash wages.”