Regulation Blizzard

“This will probably be our biggest issue next year,” he says.

While encouraging workers in their 20s and 30s to go for shrinking paychecks now in favor of a more secure future later is always challenging, Wood thinks the case can be made for the new savings vehicle.

“Unlike traditional 401(k)s, funds are taken out after taxes are deducted,” Wood says. “A lot of people have built up sizable 401(k)s but are reluctant to withdraw the funds when they are eligible because of the taxes they have to pay,” Wood adds.

While Tanner may heap some good-natured scorn on the raft of changes coming from Capitol Hill, he does look forward to one in particular that could provide some real incentives to small business owners looking to provide for their employees.

Differing bills introduced by Sen. Jeff Bingaman, D-N.M., and Rep. Rahm Emanuel, D-Ill., will encourage automatic enrollment in defined contribution plans and automatic increases in participation.

In introducing his bill, Emanuel noted that automatic enrollment was an option in only 8% of all companies that offered 401(k) plans in 2003.

The legislation would preempt state law and expand fiduciary protection for plan sponsors that give so-called life cycle funds and managed accounts to employees who don’t choose other investments. It would also guarantee employees the right to opt out whenever they wish.

“I think these hold more promise in our field than anything that has come down the pike in a long time,” Tanner says.

Tom Foster, national spokesman for the corporate retirement plans for The Hartford, says one outcome of EGTRRA was the opportunity for small businesses such as medical practices to take advantage of the defined benefit option. “The problem with the small business owner is that the defined benefit market always was perceived to be the big case market,” he says.

The Solo Defined Benefit Plan provision in the act gives the workers getting closer to retirement the chance “to get a little bigger bang for my buck.”

“Even though in the old days if I wanted to have a defined benefit plan, if I chose to do so, they just made it a little easier for me,” Foster says.

For Foster, along with an army of brokers, agents and specialists he serves, the main challenge remains persuading the estimated 75% of the small business market that offering retirement options is not only affordable but not as complex as once thought.

“If I look at a picture, and I see the picture constantly changing, I am going to have a hard time understanding it,” Foster says. “Our job is to let them know there is help available to lessen the complexities.”

Retirement plan regulations underwent major revisions in 2001 under the Economic Growth and Tax Relief Reconciliation Act