This is the beginning of an incremental approach.
Posted on 04/10/2013 10:51:41 AM PDT by machman
The federal budget that President Obama will propose today is expected to contain a provision limiting IRA and defined contribution plan accumulations to $3 million. Alternatively, it seeks to accomplish the same goal by imposing a limit based on the cost of purchasing an annuity equivalent to the top benefit allowed for defined benefit plans. Even before the plan was unveiled, the Employee Benefit Research Institute (EBRI) began analyzing its possible impact.
At the same time, the proposal has been blasted as a “plan killer” by Brian Graff, Executive Director and CEO of the American Society of Pension Professionals and Actuaries (ASPPA). “As business owners reach the cap, they will lose their incentive to maintain a plan, and either shut it down or greatly reduce benefits,” he said in a statement prior to the budget proposal’s release. “This would leave workers with a greatly diminished plan or without any plan at all,” he predicted.
Jason Hammersla, speaking for the American Benefits Council, said the organization in principle opposes imposing taxes on retirement plans, and is waiting for the fine print to reveal key details.
Small Impact in Percentage Terms
EBRI’s analysis looks at the number of plan participants who might be impacted -- both immediately and in the future, based on various assumptions. As one would expect, the number of participants is very small in percentage terms, but as Graff noted would likely hit business owners or key employees whose continuing support for the plans could be important to their survival.
If combined IRA and 401(k) assets are to be counted toward a $3 million cap, about .0041% of accounts would be affected, according to EBRI’s analysis. Older participants (60 and above) are more likely to be hit -- .107%, EBRI projects.
If the cap applied to married couples, the impact would be greater still.
In either case, the impact would grow over time. For example, 1.2% of participants in the 26-35 age bracket would be affected by the time they reach retirement and, with inflation, the dollar would have less value.
If the mechanism that would establish the cap isn’t a fixed dollar amount like $3 million but instead tied to the cost of purchasing a $205,000 annuity (i.e. the current Section 415(b) limit for defined benefit plans), “the account balance threshold would fluctuate over time, based on discount rates,” EBRI notes. In 2006, before interest rates were forced down dramatically by the Fed, the actuarial equivalent of the $205,000 threshold would have been as low as $2.2 million. At that level, about 3% of 401(k) accounts would be impacted, according to EBRI. As interest rates rise above the levels prevailing in 2006, the threshold would grow smaller.
None of the analysis factors in “the administrative complexities of implementation and monitoring such a cap,” EBRI points out.
Opponents of the measure may fear that if the principle of the cap were adopted even with a relatively high threshold, the door would be opened for future downward adjustments, broadening its impact.
If the rat's get to determine what is a "reasonable levels of retirement savings", watch that number go down from $3 million, to $2 million, to$1 million, then to "well, its not fair that anyone gets more in retirement than another person, we will just take all your money and give you a stipend equal to the minimum wage.....
I agree machman. This is the beginning of an incremental approach. I’d be looking to move my IRA/401(k)/savings accounts into hard assets, if at all possible or practical.
At some point it’s going to make more sense to take the enormous tax hit and cash out retirement plans in lieu of cash, gold, silver, platinum, guns, ammo, food, water, etc.
I’ve said it before, put your hands on my IRA and that is where they are going to stay.
Exactly, the amount of revenue generated by this tax is infinitesimal so the only reason for this has to be equalization of outcomes.
And that scenario assumes that the chickens to be plucked don't do anything about moving it.
Yet some public employees like FUBO get pensions of $300-400,000 a year paid for by you and me.
This is the beginning of an incremental approach.
“At some point it’s going to make more sense to take the enormous tax hit...”
Obama wins if people do this, too. The Dems would love to have a huge infusion of tax money into the treasury right now. They’ll either get your money now or get it later. It’s a lose-lose situation for taxpayers.
When Bernanke Inflation hits all-of-a-sudden, $3M will buy you a few month’s food.
And 0bambi will confiscate everything else you worked for.
Since the Hawaii home of Tyrant Kim Un Obama prices out at 20 Million Dollars, will the greedy Tyrant Obama be forced to demolish the extra 17 million dollar West Wing?
Well, that is the beauty of Comrade Sotero’s plan. He isn’t really limiting your assets at $3 million, he wants to limit your INCOME to $205,000 per year.
The idiots are using the assumption it takes $3 Million to generate that $205,000 per year, but that assumes a 7% annual return. Maybe stocks will get you 7% in the long run, but the prudent thing to do at retirment age is to put your money in fixed income products. You can’t get anyting today that will get you 7% that has any safety surrounding it. So maybe you get 4-5% now, now you are down to $120,000 to $150,00 per year at best. That is the new “rich” according to Odingo.
And when you die, the government wants to come after as much of your principal as it can too.
So work hard all your life, be responsible, scrimp and save, plan to take care of yourself in retirement, and the Marxist’s want to come in and tell you how much you can earn on your money, and want most of it when you die, all to pay for more Obamaphones, etc.
Bottom line, they want to steal from you to buy votes...to keep them living high on the hog.....
Yep. How pathetic and disgusting. What small, insignificant men.
When does the revolution start again?
I’m itchy.
I can’t remember who said this, but it was a comment along the lines that a rule like this will cause annuities and charitable gift annuities to explode.
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