Subchapter D of the Internal Revenue Code endows certain advance-funded, employer-sponsored retirement arrangements with the advantage of relatively pure income tax deferral. Most of the deferral is at least originally traceable to contributions to employer-sponsored plans, although individuals may also achieve tax deferral through direct contributions to individual retirement accounts. According to the tax expenditure budget prepared by the Joint Committee on Taxation, the estimated cost of the tax-deferral is currently over $100 billion annually.

This article accepts that the basic tax regime associated with Subchapter D will remain a part of our tax code and assumes that the regime has an accepted policy rationale: to help as many working Americans as possible create income security for that period of life when they are no longer supporting themselves with wage income. The purpose of this article is to suggest certain changes to the Internal Revenue Code and to ERISA that would, in my view, increase the probability that employer-sponsored retirement plans will enhance the retirement security of such working people sufficiently to justify our national tax-expenditure commitment to such plans.