But doubts remain about whether Bush's proposals will be adopted.

President Bush's proposal to shake up the retirement savings arena with new tax-advantaged savings plans remains on the agenda this year-included in the budget proposal the president has sent to Congress.

But questions remain about whether Lifetime Savings Accounts (LSAs), Retirement Savings Accounts (RSAs) and Employer Retirement Savings Accounts (ERSAs) will actually replace the IRAs, 401(k) and 403(b) plans that investors and advisors have been accustomed to using for decades.

What's happened with the proposals to this point has left even proponents pessimistic. Designed to streamline and expand opportunities for personal retirement savings, the proposals languished last year under heavy opposition. The Bush administration has made some inroads in building support this year, but some still wonder how hard the White House is willing to push for passage in 2004.

Many in Washington feel it's virtually impossible for the legislation to get pushed through in a presidential election year, especially at a time of heightened concern about the federal budget deficit. That's why some are looking toward 2005 as a more realistic target for the proposals to move forward, particularly after President Bush failed to include them among a laundry list of initiatives he outlined in his State of the Union speech.

"I stayed up watching the State of the Union hoping to hear him say something," says Gordon Bernhardt, chair of the Financial Planning Association (FPA) Tax Subcommittee. The FPA has been one of the proponents of the proposals, saying they would expand opportunities for Americans to save for retirement. "You have to wonder just what will happen when push comes to shove," says Bernhardt. "Who knows?"

This is particularly true with the federal deficit ballooning to more than $500 billion in President Bush's budget proposal. While the elimination of tax-deductible IRAs will create a short-term revenue gain for the federal government, the long-term trend will be a steady loss in tax revenue because, theoretically, there will be a marked rise in tax-free retirement accounts. That has observers taking an even dimmer view of any changes for this year, as well as concern about whether or not LSAs and RSAs will actually remain untouched by taxes down the road.

Some modifications have been made to the proposals since last year, but their basic form remains the same: They would establish new, more flexible retirement savings plans.

The ERSA would represent a sweeping change, replacing most forms of employment-based retirement vehicles, including 401(k), 403(b), governmental 457 plans and SARSEPs. The ERSAs are designed to simplify nondiscrimination-testing rules, as well as allowing employees to contribute on an after-tax basis.

The two other components of the plan, RSAs and LSAs, allow for contributions of up to $5,000 per year each and would function similarly to Roth IRAs. Unlike traditional IRAs and Roth IRAs, these two vehicles would have no compensation limit. Nor would there be any limits on the age at which investors can make contributions. LSAs would be more flexible, allowing withdrawals for a multitude of reasons without any penalties and carrying no income limitations. Contributions to LSAs could come from any source, and would not be limited to earned income. Traditional IRAs would be eliminated and replaced by RSAs, although existing IRA accounts could be preserved without any further contributions.

What changes in the proposal can be expected form last year?

One thing that is already different from last year is the lowering of the annual contribution limits on the LSAs and RSAs from $7,500 to $5,000. Last year's proposal would have allowed business owners to set up LSA and RSA accounts for their spouses, children and grandchildren, which potentially could have been used to squirrel away significant sums in tax-free accounts. The benefits could have been so rich, it was argued, that small business owners would have no incentive to establish ERSA plans for their employees. It was one of the crucial issues in the debate over the proposal last year, because a minority of small business owners-less than 30% according to some studies-currently offer 401(k) or other retirement plans. In response to that criticism, the proposal was changed to allow only for the creation of an LSA or RSA for a spouse.

"The real problem last year is that there was an extremely high likelihood, if they passed it in the form it was, of having a severely negative impact on small businesses starting retirement plans," says Rick Meigs, founder and president of 401khelpcenter.com.

The White House may also adopt a different strategy to avoid an all-or-nothing battle in Congress. Thomas Foster, The Hartford's national spokesman for qualified retirement plans, says it appears that the proposals will be packaged as three separate pieces of legislation instead of one. The plan's components-LSAs, RSAs and ERSAs-would be dealt with individually in their own legislative proposals. "Each one can stand on their own merit," Foster days.

It's also likely, he says, that the push for adoption will be in 2005 rather than this year, meaning the results of the presidential election will weigh heavily in the outcome. Even with those changes, there are those who still expect a contentious debate over the proposals.

One issue that remains unclear, skeptics say, is who exactly will benefit from the new plans. The investors who will reap the most rewards, it is generally agreed, are high-income investors who are looking for extra places to put retirement savings on a tax-advantaged basis. But critics argue the proposals will do little for the overwhelming majority of Americans who fail to save adequately for retirement.

Some studies, for example, have indicated that as little as 4% of Americans actually make the maximum allowable contributions to their 401(k) plans each year. Matt Gnabasik, managing director of the Blue Prairie Group, a human resources consulting firm in Chicago, notes that about 25% of those eligible for employer-sponsored retirement plans don't even participate.

He sees little in the current proposal that would encourage further participation, he says. "If a small business employer wants to set up a retirement plan now, it's pretty easy," he says.

Meigs agrees, saying the proposal could go further by extending the tax credits available to businesses that set up such plans and making it easier for companies to institute automatic retirement plan enrollment.

Foster says automatic enrollment, where 401(k) deductions of about 2% or 3% are made from an employee's paycheck without his or her prior consent, has been done successfully by companies such as McDonald's. The way the plan typically works is that an employee can opt out at any time. "You are in the plan unless you march into human resources and insist you want out of the plan," Gnabasik says.

There's also another problem that the new accounts don't address, according to Lou Stanasolovich, CEO and president of Legend Financial Advisors in Pittsburgh: inadequate investment choices.

For most employees who are enrolled in their company's retirement plans, Stanasolovich says, the menu of investment choices is rarely adequate to construct a diversified portfolio. "Employers tend to take the easy way out and select only a few investment options," he says.