President Bushs proposed Employer Retirement Savings Accounts, if approved by Congress, could launch a major battle for business among service providers.
The biggest fights for market share will be in local and state governments with a number of different plans including 457, 403(b), 401(a) and 401(k) that will have to be converted to one new ERSA.
The proposal would be a boon for record keepers that see small defined contribution accounts as big money losers. It also might give providers a way to renegotiate asset-based fee arrangements that have caused a large decline in their profitability with the three-year down market.
However, insurance companies pushing variable annuities for defined contribution plans will be big losers, because the new individual retirement plans included in the presidents reform proposals will have a bigger tax advantage.
"We have concerns. The obvious concern is on how it will affect 403(b)s, said Jim Tolve, spokesman for TIAA-CREF. "We use annuities (in) our 403(b)s. We are reviewing the proposal and waiting for more information.