Administration Advances Plan to Federalize Private Pension System

[The Northerner]

RALEIGH — In February, the U.S. Treasury and Labor departments jointly announced they were seeking public comment on proposed design changes to employer-sponsored 401(k) plans and individual retirement accounts that would centralize the private pension system under structures created and administered by the government.

Supporters say these changes are needed to ensure Americans save more for their retirement and have lifetime income options that prevent them from outliving their retirement savings, protecting them from market risk.

At stake for the millions of Americans with private retirement plans: Would they be able to continue making their own investment decisions? Or would Congress mandate both investment options and distribution methods? Government Retirement Accounts also would prevent workers from owning their retirement savings fully, as they could bequeath only half of their remaining account balances to their heirs.

Government officials, labor unions, and some industry groups favor GRAs and mandatory annuitization. Under the proposal being discussed, workers and companies alike would contribute a minimum of 2.5 percent of pay, up to the Social Security earnings cap, to their GRA. In return, workers would be guaranteed a 3 percent return on their investment. This system would not replace Social Security, forcing workers to contribute to both systems.

According to the Department of Labor, 61 percent of all private-sector workers and 71 percent of all full-time private-sector workers had access to an employer-provided retirement plan in 2008, and another 47 million households currently participate in IRAs. Proponents of a government takeover of the private pension system say the housing and financial crises have jeopardized retirement security and left Americans less trusting of the financial system.

However, a survey conducted in fall 2008, even as the financial crisis was unfolding, found strong support for the current system. The Investment Company Institute, a national association of U.S. investment companies that manage about 50 percent of the nation’s 401(k), 403(b), and IRA assets, surveyed 3,000 households and reported nearly nine of 10 rejected the idea that government, not individuals, should make retirement investment decisions. Even households without a 401(k) or IRA did not see a need for drastic changes to the private system.

Read more: http://www.carolinajournal.com/exclusives/display_exclusive.html?id=6491

[Zenlitened]

1. Is there a link to the Treasury and Labor announcement...

... mentioned in the first paragraph?

All I've been able to find via Google search suggests that this is nothing more than republican rumor-mongering.

Are there reliable sources reporting this as fact?

:)

Edit: Nevermind! Found DOL link:
http://www.dol.gov/federalregister/HtmlDisplay.aspx?DocId=23512&AgencyId=8

Reading it now, to see whether it contains actual proposals, or is just seeking ideas.

:hi:

[Zenlitened]

2. I don't see where the "federalize" talk is coming from.

:shrug:

Reading the Dept. of Labor request for comments, it seems more a matter of possible new rules for 401k/pension providers, to make these plans more reliable in terms of long-term retirement income.

From the DOL site:
http://www.dol.gov/federalregister/HtmlDisplay.aspx?DocId=23512&AgencyId=8

General

1. From the standpoint of plan participants, what are the
advantages and disadvantages for participants of receiving some or all
of their benefits in the form of lifetime payments?

2. Currently the vast majority of individuals who have the option
of receiving a lump sum distribution or ad hoc periodic payments from
their retirement plan or IRA choose to do so and do not select a
lifetime income option. What explains the low usage rate of lifetime
income arrangements? ...

We all participate in a lifetime annuity already: Social Security. For that reason, and because lots of the private annuity offerings out there are a rip-off, I don't favor making annuitization mandatory.

And, admittedly, that possibility is raised in the DOL/Treasury announcement, at least for defined benefit pensions:

13. Should some form of lifetime income distribution option be
required for defined contribution plans (in addition to money purchase
pension plans)? If so, should that option be the default distribution
option, and should it apply to the entire account balance? To what
extent would such a requirement encourage or discourage plan
sponsorship?

14. What are the impediments to plan sponsors' including lifetime
income options in their plans, e.g., 401(k) or other qualification
rules, other federal or state laws, cost, potential liability, concern
about counterparty risk, complexity of products, lack of participant
demand?

Frankly, I think the Republicans are off-base. (I know, shocking!)

They're seizing on one detail and inflating/conflating it into a Dire! Looming! Catastrophe!

Think "death panels." Remember their bullshittery on that one?

The real issue here, IMO, is that Social Security needs to be strengthened, not dismantled under the smokescreen of pension/401k reform.

That's the genuine liberal and progressive issue in all this, IMO.

And I'm, um, pretty sure that's not a concern the rightwingers share AT ALL.

Their blustering bullshit headlines about Big Gummunt Takin Over are just the same-old same old from them, a big distraction from real issues so they can continue their their Drown It In a Bathtub doctrine.

[blondeatlast]

4. I thought I smelled a rat here. Nice work, ZL, thank you. nt

[Zenlitened]

14. You're welcome!

:)

[pnorman]

7. Thanks for doing the homework!

I know a few RWers who'll soon be spouting that meme, so I'll be prepared.

[Zenlitened]

15. Happy to help out!

:hi:

[NC_Nurse]

3. Sounds like a clusterf*ck to me. We already have social security. Why have a second

govt pension program. Maybe they just need to regulate the private programs a bit more.

[Zenlitened]

11. I think that's exactly what this is all about: more rules for private plans.

All this talk of "federalizing" is just the Repukes' idea of a summer sequel to last year's blockbuster, "Healthcare Reform: Rise of the Death Panels."

Call it "Death Panels 2: First Your Life, Then Your Money."

:D

[femrap]

5. Right....give the gov't my

money. No fucking way.

[kelly1mm]

6. +1. And what is up with only 1/2 of the balance going to your heirs?

Who/what gets the other 1/2? If this is a serious proposal (I doubt it) this will make the health care debate look like a day in the park.

[Nuclear Unicorn]

9. Just another part of inherentence taxes

The alternative is to prop up the multi-generational monied families, i.e. Bush et al.

[kelly1mm]

16. Inheritance taxes used to start at 1 million per person. Assuming

they were set at that amount,is the proposal for only taking 1/2 of the account upon death if the assets of the person are over 1 million? Or is this 1/2 of, say $200,000 left in the account upon death (assuming no other assets)? No exception for spousal transfers?

If the proposal is to add these asserts to the estate for estate tax purposes then I understand (not agree) with the purpose and intent of the change. Still going to be a loser issue though.

[newblewtoo]

22. oh I think they got enough to do ok in any case

butI sure would like give my kids and grand kids a better start.

[femrap]

18. You got that right!!!!

Since W couldn't get SS invested into the Stock Market, now the Wall Street boyz are thinking we'll just take our private retirement funds and 'managing' them for the stupid peons.

It'll be interested to see how they frame this.

[Nuclear Unicorn]

8. We already do for schools, roads, police, SocSec etc. and now healthcare

Look at the privatized areas of the economy and you see failure, i.e. mortgages, hedge funds, that have to be bailed out by the government.

If the government has to bail them out maybe we should have government administration from the get-go.

[femrap]

17. No, I think what they're talking

about is taking over YOUR 401K. There's been whispers about this....turning that money into some kind of annuity and paying it out.

You want to give the gov't the money in your 401K or IRA rollover?

No, I think I'll keep it. Thx.

[Nuclear Unicorn]

19. Please don't take this the wrong way, I'm not saying this about you

but for so long the people who drive on government roads and collect gov't SS checks have said the gov't is too incompetent to manage retirement funds.

It was the thrust of Bush's efforts to privatize SS. It's nothing but a tax dodge for those who can afford it.

The fact of the matter is private retirement accounts take money out of the economy and out of the SS pool. Poor people don't have them and as soon as they retire whatever social safety nets were in place during their working years are torn out from under them when they are most vulnerable.

Worse still, it allows one more shell for brokers and investors to play their shell games with. Every dollar given to the investors and bankers is one more dollar for them to gamble and if they lose (which they seem to do with annoying regularity) then its is the poor--again, those who can't afford to play Wall St Roulette--who get saddled with the bailout bill.

[femrap]

20. I'm not against paying my

taxes for roads, bridges, libraries, etc. I hate that so much goes to the damn Pentagon and interest on the debt. So very little goes to helping people.

But if I have an IRA that I contribute to or participate in a 401K program that has a match from the employer, why would I want to give that money to the gov't who gives it to Wall Street. The gov't isn't going to manage it. Wall Street and the Big Insurers will.

I'd rather keep it in a small local bank. You can't get to the money until you're 59 and 1/2 unless you want to be penalized.

The 401Ks replaced the Employer-offered Pension Program. I've never had one of those. My mother did but those years are gone.

Regarding SS. IMHO, it is an INSURANCE program. If you don't need that insurance when you retire (you have had a successful life and have lots of money), then you don't get any. I believe in 'means testing' SS. It's like Home Insurance....you pay it every year. You sell the house...it didn't burn down. Do you get all of that Home Insurance you paid back? NO! I think the same principles should govern Social Security.

Wouldn't that help those who are truly dependent on SS...those funds would be available to them.

[Shadow Creature]

10. Another payroll tax

Just hurts the working poor the most.

[upi402]

12. Reagan, Bush 1 & 2, Clinton, Obama

no opposition to corporatism still.


g/l USA

[Greyhound]

13. Another gusher of dumb...

[Lance_Boyle]

21. Uncle Sam wants *half* of whatever's left in my retirement account when I die?

Fuck you, Uncle Sam.