[18639]
March 9, 2005
TO: 529 PLAN MEMBERS No. 5-05
PENSION MEMBERS No. 9-05
PENSION OPERATIONS ADVISORY COMMITTEE No. 9-05
RE: SENATOR THOMAS INTRODUCES RSA/LSA/ERSA LEGISLATION
Senator Craig Thomas (R-WY) has introduced three bills that reflect the RSA, LSA and
ERSA savings initiatives proposed by the Administration in its budget for fiscal year 2006.1
Representative Sam Johnson (R-TX) plans to introduce companion legislation in the House of
Representatives. On March 8, 2005, U.S. Treasury Secretary John Snow, Senator Thomas and
Rep. Johnson held a press conference to announce the introduction of the three bills, collectively
termed the “Save Initiative.”2
The “Lifetime Savings Account Act of 2005” (S. 545) reflects the Administration’s LSA
proposal. LSAs would permit individuals to contribute up to $5,000 each year (indexed for
inflation). Like Roth IRAs, LSA contributions would not be deductible, but amounts could be
withdrawn tax-free at any time and for any purpose.
The “Retirement Savings Account Act” (S. 546) reflects the Administration’s RSA
proposal. RSAs would be used only for retirement savings and would consolidate traditional,
deductible and Roth IRAs into one account that would be taxed like Roth IRAs under current
law. Existing Roth IRAs would be renamed RSAs. Deductible and traditional IRAs could be
converted into an RSA; those not converted would be unable to accept new contributions. RSAs
would permit individuals to contribute up to $5,000 each year (indexed for inflation) for
retirement regardless of income. Like Roth IRAs, RSA contributions would not be deductible,
but earnings will accumulate tax-free and distributions after age 58, death or disability would
be tax-free.
1 See Institute Memorandum to 529 Plan Advisory Committee No. 8-05, Operations Members No. 3-05, Pension
Members No. 8-05, Pension Operations Advisory Committee No. 8-05, Tax Members No. 7-05 and Transfer Agent
Advisory Committee No. 8-05 (18642), dated March 9, 2005.
2 Go to http://www.treasury.gov/press/releases/js2298.htm to see Secretary Snow’s Press conference remarks. Go
to http://www.treasury.gov/press/releases/reports/fact_sheetjs2298.pdf to see Treasury’s fact sheet on the
Administration’s savings proposals.
2
S. 547 reflects the Administration’s ERSA proposal. The ERSA would consolidate 401(k),
thrift, 403(b), governmental 457 plans, SIMPLE IRAs and SARSEPs into a single type of plan
that would be subject to a simplified version of rules applicable to 401(k) plans.
Lisa Robinson
Associate Counsel
Attachment (in .pdf format)
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