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Posted on 10/16/2008 8:32:17 PM PDT by Keyes2000mt
Powerful House Democrats are eyeing proposals to overhaul the nation's $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive.
House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.
A plan by Teresa Ghilarducci, professor of economic-policy analysis at The New School for Social Research in New York, contains elements that are being considered. She testified last week before Mr. Miller's Education and Labor Committee on her proposal.
House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.
A plan by Teresa Ghilarducci, professor of economic-policy analysis at The New School for Social Research in New York, contains elements that are being considered. She testified last week before Mr. Miller's Education and Labor Committee on her proposal.
"The savings rate isn't going up for the investment of $80 billion," he said. "We have to start to think about ... whether or not we want to continue to invest that $80 billion for a policy that's not generating what we now say it should."
"From where I sit that's just crazy," said John Belluardo, president of Stewardship Financial Services Inc. in Tarrytown, N.Y. "A lot of people contribute to their 401(k)s because of the match of the em-ployer," he said. Mr. Belluardo's firm does not manage assets directly.
Higher-income employers provide matching funds to employee plans so that they can qualify for tax benefits for their own defined contribution plans, he said.
"If the tax deferral goes away, the employers have no reason to do the matches, which primarily help people in the lower income brackets," Mr. Belluardo said.
"This is a battle between liberalism and conservatism," said Christopher Van Slyke, a partner in the La Jolla, Calif., advisory firm Trovena LLC, which manages $400 million. "People are afraid because their accounts are seeing some volatility, so Democrats will seize on the opportunity to attack a program where investors control their own destiny," he said.
The Profit Sharing/ 401(k) Council of America in Chicago, which represents employers that sponsor defined contribution plans, is "staunchly committed to keeping the employee benefit system in American voluntary," said Ed Ferrigno, vice president in the Washington office.
"Some of the tenor [of the hearing last week] that the entire system should be based on the activities of the markets in the last 90 days is not the way to judge the system," he said.
No legislative proposals have been introduced and Congress is out of session until next year.
However, most political observers believe that Democrats are poised to gain seats in both the House and the Senate, so comments made by the mostly Democratic members who attended the hearing could be a harbinger of things to come.
ADVICE AT ISSUE
In addition to tax breaks for 401(k)s, the issue of allowing investment advisers to provide advice for 401(k) plans was also addressed at the hearing. Rep. Robert Andrews, D-N.J., was critical of Department of Labor proposals made in August that would allow advisers to give individual advice if the advice was generated using a computer model.
Mr. Andrews characterized the proposals as "loopholes" and said that investment advice should not be given by advisers who have a direct interest in the sale of financial products.
The Pension Protection Act of 2006 contains provisions making it easier for investment advisers to give individualized counseling to 401(k) holders.
"In retrospect that doesn't seem like such a good idea to me," Mr. Andrews said. "This is an issue I think we have to revisit. I frankly think that the compromise we struck in 2006 is not terribly workable or wise," he said.
Last Thursday, the Department of Labor hastily scheduled a public hearing on the issue in Washington for Oct. 21.
The agency does not frequently hold public hearings on its proposals.
Then again, this COULD be a ploy to GET people to cash out their 401k's and 'revive' the economy, just like when they squeezed every inflated drop of equity from their homes and maxed out their credit cards. Why not, if they think they're going to lose the money anyhow. One last party for people to strip themselves of personal wealth.
So-called tax cuts are a joke anyway, as long as the government keeps spending. They merely increase the federal deficit, and we just borrow the money from our enemies.
if the dems get away with this,
then the american working people are either asleep or they don’t care.
No, all McCain has to say is that he'll give tax cuts to 100% of the Americans that actually pay taxes. No more welfare - it's already screwed up this country enough.
What caliber?
They seem to be testing just what it will take for real people to march on Washington, torches and pitchforks in hand.
They want to get a piece of it before it’s all worthless.
Careful. That's what we decided to do. A large portion was withheld to cover taxes and penalties, but now the IRS is telling us we owe even more in taxes. (Talk about living up to one's screenname.) I'm kicking myself because not rolling it over was my idea. But, if the Dems do manage to put through this new plan, then maybe we made the right decision after all...
“...George Miller, D-Calif., and Rep. Jim McDermott, D-Wash.,.....are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.”
What, these fools haven’t yet heard of Social inSecurity?
lets email and call the mccain camp, asap!
The big lie here is in how they compute savings. The gov't uses the Keynesian idea that savings and investment are two different things. If you put money into a savings account, it is called savings by the government. If you buy stock, that's not savings, that's investing. If you buy a new truck for your plumbing business, that's investing not saving.
A couple of years ago, I tried (not all that hard) to find out what really was considered 'savings', but could not find a clear definition.
Any complaint about the 401K/IRA system for not prompting folks to save is silly on the face of it, considering how much the value of those funds had increased over the years, or how much was flowing into those accounts.
All the more reason for a 10% flat conumption tax...abolish the IRS and get the government out of the PANDERING and EMPTY PROMISES business every election cycle.
And corporate boards, who can ignore individual shareholders, when they are mostly invested via 401(k) mutual funds.
TANSTAAFL
This is a battle between the DemocRATS and lower paid workers.
“The savings rate isn’t going up for the investment of $80 billion”
He thought the money was his to begin with. He thinks his letting people invest their money safe from lefty spending is an investment. This is the whole problem with everything in a mere 12 words.
“This could be a devastating commercial for McCain.”
My thought also.
Wouldn’t you just know that Jim McDirtmouth is working on this one. We get ever closer to the brink, don’t we?
Key word here: OBLIGED!!!!!
The Democrats are giving us a glimpse of their radical agenda, which Obamam will sign into law.
This is a new version of Social Security -- forced contribution and likely not seeing a dime of it by the time retirement comes around. They just want to take more money from the people.
I bet most Obama voters have no clue about this.
My folks lost over 100K in their 401(k) - they’re worried...
They’re really concerned about the Dem plan with raising taxes...
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