PSCA Succeeds Again

Right goals, focus, and persistence pay off

With the enactment of HR 4, The Pension Protection Act of 2006, the final pieces necessary to bring the employer-sponsored defined contribution plan system to its full potential are now in place. Because of PSCA’s efforts, the regulatory structure established in the 2001 Tax Act (EGTRRA) has been made permanent; the Saver’s Credit has been renewed, made permanent, and indexed. The barriers to automatic enrollment have been removed. 

The enactment of these provisions adds to the list of PSCA’s successes. Beginning with its successful resistance in the early 1950s to a legislative effort to eliminate lump sum distributions from defined contribution plans and including the passage of Section 401(k) in 1978, PSCA has a long history of legislative accomplishment. 

PSCA’s continued legislative success comes from taking positions based on the best interests of plan sponsors and their participants; supporting those positions with credible arguments; and staying focused on our goals, working for their accomplishment every day, even when there is no end in sight. PSCA has not accepted legislative setbacks as permanent but instead redoubles its efforts to reverse them. 

The damage done to the defined contribution system by the revenue acts passed in the 1980s is far more significant than most realize. I believe that hundreds of billions of dollars were not saved for retirement because these changes drastically lowered contribution limits and straight-jacketed plan design flexibility. For example, traditional cash and deferred profit sharing plans that 401(k) was passed to preserve were virtually wiped out. 

In the early 1990s, PSCA began its effort to reverse the previous decade’s legislative decisions. We were able to get our changes included in EGTRRA, but plan sponsors could not count on them for the long term. Now they can. 

PSCA has long recognized the need to reach out in a special way to lower-paid workers if we are to make them savers. When President Clinton proposed his Universal Savings Accounts in 1999, PSCA saw an opportunity to address this unique community of non-savers and worked with policy makers to develop what is now termed the Saver’s Credit. Unfortunately, it was due to sunset this year, and little was made of it. Fortunately it is now permanent, and I foresee that most of the 10 million workers eligible will soon be saving for retirement. 

There was a collective gasp at our conference in the 1996 when Karen Barnes said that McDonald’s Corporation was automatically enrolling its employees in the company’s 401(k) plan. This bold innovation is now seen as the future of the defined contribution system. Since then, PSCA has worked to identify best practices and remove barriers so that automatic enrollment could prosper. PSCA began to lay the groundwork for the changes in HR 4 even before legislative staffers knew what automatic enrollment was. 

In any large system, there are different views and interests. PSCA unifies defined contribution plan interests around goals that are best for those we are serving. We then work every day unswervingly toward their accomplishment. For nearly 60 years this has been a recipe for success.