"This will make a lot of plan sponsors happy," said Ron Gebhardtsbauer, senior pension fellow at the American Academy of Actuaries, Washington. Mr. Gebhardtsbauer added the academy had backed such an effort to alleviate sponsors' concerns about the volatility in contributions from year to year.
President Bush might find it easier to make plan sponsors happy than the groups lining up against efforts to overhaul Social Security.
"The pension funding issues are quite distinct from the Social Security debate, so I don't see the fate of pension funding proposals rising or falling with the fate of Social Security," said James M. Delaplane Jr., partner in the Washington law firm of Davis & Harman.
The AFL-CIO, National Association for the Advancement of Colored People, the Alliance for Retired Americans and women's organizations, formed a coalition — the Campaign for America's Future — to "work together to stop President Bush's plan to dismantle Social Security."
AARP, the powerful Washington lobbying organization representing older Americans, notified all 35 million members that it opposes the creation of private accounts that divert payroll taxes out of Social Security.
"Most of us would then have to pay twice to gamble on this new plan — first to keep our commitments to current retirees and again to pay into these private accounts," AARP President Bill Novelli said in a recent e-mail to members.
And while retirement experts generally agree that the Depression-era program — which is projected to be underfunded by $3.7 trillion, on a present value basis, over the next 75 years — needs to be recast, they disagree broadly on whether Mr. Bush's effort to "carve out" individual accounts from the payroll taxes is the right recipe. Mr. Bush, who has said little about the proposal except that it will not rely on increased payroll taxes to pay for the estimated $2 trillion cost of moving to individual accounts, has already come under fire, even from those who advocate reform.
"The system is significantly underfunded and the creation of individual accounts and the diversion of some portion of the payroll tax will not by itself solve the problem," warned Sylvester J. Schieber, director of research at Watson Wyatt & Co., Washington, and an outspoken advocate of reforming Social Security.
Mr. Schieber, a member of a national quadrennial advisory council on Social Security in the mid-1990s and author of books on Social Security reform, pointed out that keeping the employer and employee payroll tax constant at 12.4% will not make up the shortfall in the Social Security trust fund.
Instead, Mr. Schieber — along with Robert Pozen, chairman of MFS Investment Management and JohnStanford Universityst at Stanford University — suggested an alternative that would eliminate the need for creating individual accounts. The proposal, first published in the American Economic Review last June and one of only many ideas for fixing Social Security, suggests retirement benefits be indexed on a sliding scale to the Consumer Price Index instead of average national wages, which are estimated to grow 1.1% per year faster than inflation. The Bush administration is apparently considering an across-the-board switch to the CPI, which would have disproportionately high impact on lower-paid earners who depend solely on Social Security for retirement income, Mr. Schieber warned.
The changes he proposes "would solve the whole problem, and there would be no need to go to individual accounts, although that would still be beneficial," Mr. Schieber said. He rates Mr. Bush's chances of succeeding in getting lawmakers' approval of his individual accounts plan as 50-50.
Others, including Mr. Delaplane, are less optimistic. He places the odds of enactment of Mr. Bush's Social Security proposal at "25% to 30%, considering all the impediments."