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.
When Obama claims he’ll give tax cuts to 95% of Americans, all McCain has to say is that he’ll give tax cuts to 100% of Americans. Then Americans would truly have the ability to help the economy recover.
Folks don’t bother to try and save anything for your retirement anymore. If you dare to try, the Demonrats will just take it away.
It won’t get legs until after the election, when it will likely be under serious condition.
The 401K plan is a great thing and I would be pis—d if they mess with it. It saves on taxes and helps people finance their OWN destiny. My only regreat is we did not start one soon enough for me at my place of work. I put in the MAX every year. Wonderful way to save.
You mean like Bush's "privatized" SS plan?
No..remember, the social security ponzi scheme is collapsing...time to raid the billions of dollars in 401K’s!
Marxist scum, the lot of them. A pox on Pelosi’s politburo.
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Obama Says A Baby Is A Punishment
Obama: “If they make a mistake, I don’t want them punished with a baby.”
He spoke about it that day. I'm sure one had nothing to do with the other.
Do a google search on this 'school' in NYC and run down the list of teachers. You'll see some familiar names there.
L
I support the opposite - turn Social Security into a rather conservative, perhaps even partially insured, 401k-like plan.
As if this country doesn’t have enough of a problem with people not proactively saving for retirement........now the dems want to take away one of the biggest reasons to contribute to a retirement account.
I can’t even begin to fathom how they believe taking way the pre-tax benefit of contributing to your main retirement account is a good thing.
Let's see, I am already obligated to contribute to Social Security. My 401K was voluntary and I choose to contribute. So this is basically unfair to those who did not contribute to their own 401k, so I must make up the difference for them. Do I have that right?
That’s a great way to get yourself ran out of office next election.
I knew this day would come. There was no way they were going to leave that huge pot of gold untouched. I’m cashing mine in, paying off my debts and living debt free. Bastards.
EXACTLY....I sure hope some willing media person asks him the question soon.....
This would be a “tea in the bay moment” if passed. I’ve been a mizer over the years to supplement my retirement not 10 other people who have not wisely invested.
The new Nazi Party says (Ve vill take all zee money from zee people, and make them all poor) Schnell, Achtung, Heil Obama
McCain needs to ask Obama if he endorses this. Don’t know how to contact him to suggest it, or what venue he might use, but it is a really legitimate question. Obama will say, “No,” but the mere act of asking the question plants the seed of doubt in voter mind.
...and I firmly believe they'll find a way to tax the $$$ from the last stimulus package. Hey, I think they'd tax my tax return if they had a chance. 'Course there won't BE a tax return anymore after Obamanation takes office.
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