To emphasize the point, he added this fact: "IRAs, a voluntary savings vehicle that was only created in 1974, now hold $2.3 trillion more than the entire Social Security system, a mandatory program that has been with us since 1935. That's almost double the assets, just in IRAs. The numbers suggest that 401(k) plans and IRAs have been a resounding success."

Yet many of the proposed reforms seem to attack this very success. The National Commission on Fiscal Responsibility recommends lowering the pre-tax contribution cap to $20,000. The Congressional Budget Office wants to cut annual contributions in 401(k) plans by $7,650 and in IRAs by $1,500 for older individuals only!

For more than a quarter century, IRA and 401(k) contribution limits stayed the same despite the ever increasing erosion of their value by inflation. When those limits were finally raised in 2001, people over 50 (that would be those eligible to join AARP), were granted special "catch-up" provisions that allowed them to save more. Congress is now considering the removal of those "catch-up" provisions.

Currently, without the catch-up provision, IRA tax-deferred contributions are limited to $5,000 per year and tax-deferred contributions to corporate plans are capped at $16,500. Dr. William G. Gale, Senior Fellow, Brookings Institution, in his testimony offered a proposal to eliminate the tax-deferral and to treat employer contributions as taxable income. In its place, Gale suggests the government provide the matching contribution. He claims this would increase tax revenues, but it assumes contribution rates remain unchanged.

This represents a classic problem with Washington thinking – the overriding assumption changes in policy will not generate changes in behavior. We've all seen the greatest inducement to behavioral change is a change in tax policy. Dr. Jack VanDerhei, Research Director, Employee Benefit Research Institute, warned the committee exactly of this when he testified: "…the potential increase of atrisk percentages resulting from (1) employer modifications to existing plans, and (2) a substantial portion of lowincome households decreasing or eliminating future contributions to savings plans as a reaction to the exclusion of employee contributions for retirement savings plans from taxable income, needs to be analyzed carefully when considering the overall impact of such proposals."

Not surprisingly, Karen Friedman, Executive Vice President and Policy Director, Pension Rights Center, came out in favor of going back to the future and reinstituting pension plans as the cornerstone retirement policy. She testified, "While encouraging savings is a worthy goal, 401(k) plans are not a substitute for good secure pensions."

Apparently, she's forgotten the lesson of the 1980s when pensions – in essence, miniature Ponzi schemes – destroyed more than a few companies. We're still seeing this today at a few dinosaur-like corporations (q.v., auto companies) and in many municipalities. Discouraging pensions and encouraging defined contribution plans in the private sector led to an unprecedented growth in both the value of the capital markets and private retirement assets.

Maybe Judy A. Miller, Chief of Actuarial Issues/Director of Retirement Policy, American Society of Pension Professionals and Actuaries understood this best when she told the committee, "the current tax incentives are working very well to promote retirement security for millions of working Americans. Modest changes can and should be made to expand coverage, but care should be taken to preserve and enhance the basic framework of the current incentives that motivate employers to sponsor retirement plans, and both employers and employees to contribute to these arrangements."

This issue appears far from retired.