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Retirement Planning > Saving for Retirement

NAIFA: Savings Bills Could Backfire

By Arthur D. Postal

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A key producer group says a package of savings account bills could cut savings and threaten existing employer-sponsored retirement plans.[@@]

The National Association of Insurance and Financial Advisers, Falls Church, Va., put out a statement arguing one of the bills, S. 545, which would create “lifetime savings accounts,” could combine with another bill, S. 546, which would create “retirement savings accounts” could depress long-term savings efforts and eliminate any incentive employers have to sponsor retirement plans.

A third bill, S. 547, would create a system of employer retirement savings accounts.

The 3 bills, which together make up the “Savings Account Vehicle Enhancement” initiative, were introduced in the Senate by Sens. Craig Thomas, R-Wyo., and Jon Kyl R-Ariz.

Similar legislation was introduced in the House by Rep. Sam Johnson, R-Texas.

NAIFA says it is most worried about LSAs.

“LSAs are a prescription for lifetime spending instead of lifetime savings,” NAIFA says. “There is little or no incentive to save for the long term with LSAs.”

Annuities and permanent life insurance do provide long-term financial security, but the LSAs would not, NAIFA says.

“NAIFA’s second issue is LSAs combined with RSAs,” NAIFA says. “This proposal, as we understand it, would allow a small business owner to put away a substantial amount of money yearly.”

The proposal is fine for the business owner, but it would undercut any incentive the business owner has to establish retirement programs for employees, NAIFA says.

“Many years down the road, the business owner retires nicely, but the employees have little or no pension security for their retirement,” NAIFA says. “Why put employer-sponsored programs that are in place at risk? Why put the security of individuals, families and businesses at risk with an untried idea?”

Earlier in the week, Frank Keating, president of the American Council of Life Insurers, Washington, said the RSAs and ERSA proposals, “represent good ideas.” He said the ACLI could support RSAs and ERSAs if minor changes were made in the ERSA proposal.

However, the LSA “represents the one proposal ACLI opposes because it would not boost long-term savings,” Keating said.

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