U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > U.S. Forums > General U.S.
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
Old 10-26-2008, 01:55 PM
 
1,314 posts, read 2,989,309 times
Reputation: 943

Advertisements

Quote:
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.

At that hearing, the director of the Congressional Budget Office, Peter Orszag, testified that some $2 trillion in retirement savings has been lost over the past 15 months.

Under Ms. Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3% a year, adjusted for inflation.

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

"I want to stop the federal subsidy of 401(k)s," Ms. Ghilarducci said in an interview. "401(k)s can continue to exist, but they won't have the benefit of the subsidy of the tax break."

Under the current 401(k) system, investors are charged relatively high retail fees, Ms. Ghilarducci said.

"I want to spend our nation's dollar for retirement security better. Everybody would now be covered" if the plan were adopted, Ms. Ghilarducci said.

She has been in contact with Mr. Miller and Mr. McDermott about her plan, and they are interested in pursuing it, she said.

"This [plan] certainly is intriguing," said Mike DeCesare, press secretary for Mr. McDermott.

"That is part of the discussion," he said.

While Mr. Miller stopped short of calling for Ms. Ghilarducci's plan at the hearing last week, he was clearly against continuing tax breaks as they currently exist.

SAVINGS RATE
"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.
What do you think? Should the federal government take over the 401(k) program and impose mandatory worker contributions on top of Social Security?

 
Old 10-26-2008, 02:21 PM
 
3,596 posts, read 7,713,516 times
Reputation: 2878
Quote:
"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.
That pretty much sums it up.

I hate Democrats.
 
Old 10-31-2008, 08:58 AM
 
6 posts, read 22,966 times
Reputation: 21
Unbelievable... and to think we are THISCLOSE to having Democrats having complete control of our Government. Heaven help us if Obama gets elected (ranked most liberal senator of 2007), there will be NO checks and balances and Liberals/Democrats will believe that our tax dollars are theirs to spend as they wish because they truly believe Government (i.e. they) knows what is best for the people and not the people knowing what is best for them.
 
Old 10-31-2008, 09:17 AM
 
28,905 posts, read 46,792,267 times
Reputation: 46061
Surely they're not this stupid.

I think, if this is true, the Democrats will suffer exactly the same fate as the Republicans--where an impressive electoral victory is interpreted as a mandate to do whatever they want. The reality is, people are voting Democratic this year because they really hate anything to do with Bush. Once the catharsis is done on November 4th, then the public will start viewing the Democrat's legislative views with suspicion.

If the Democrats move to do this, count on a serious backlash from just about everybody who is saving for requirement.
 
Old 10-31-2008, 09:45 AM
 
Location: Southie
103 posts, read 323,903 times
Reputation: 64
Perhaps if Bush hadn't taken the national dept from $5.7 trillion to over $10 trillion, the house wouldn't be forced to look for additional sources of revenue.

And with that said, it will never happen.
 
Old 10-31-2008, 09:47 AM
 
1,763 posts, read 5,386,622 times
Reputation: 798
If they take away the deductibility of 401k plans, then I imagine all that money would be re-directed by individuals to their Roth IRAs, for obvious reasons.

At that point, the "new" plan would essentially become a forced savings plan for all Americans, that pays 3% and is also adjusted for inflation.

Now, I would personally abhor being told what to do with my investments, but the success of this program really depends on what lies ahead, in macro-economic terms.

Let me explain:

Everything right now points to a recession, but there are increasing concerns that hyper-inflation may follow that recession. If that happens, God help us all. Nothing survives that event, unless you are a very astute investor, and know which investments will save your bacon. Most American's 401k accounts would be completely wiped out.

HOWEVER, if Americans are forced to save money, in accounts that are inflation-protected, that money may turn out to be the only pension they would have after such a macro-economic event, in addtion to social security.

CBSMarketWatch, before they became just MarketWatch, had an article one time that stated only 8% of Americans save enough for retirement. The other 92% depend heavily upon social security. If that is the case, the additional forced savings the Dems are proposing would be a lifeline to that 92%, particularly after a hyper-inflationary event.

Again, I detest being told how to invest, and believe I have taken the appropriate steps to protect my family from both a depression, and also from hyper-inflation. Most of us have not, though, and would suffer horribly as a result.

Maybe the Dems/Congress know something we don't. Or maybe they're just being Dems...
 
Old 10-31-2008, 09:47 AM
 
Location: Near L.A.
4,114 posts, read 9,241,473 times
Reputation: 3352
Oh dear, just what I need. More of government telling me where my money is supposed to go.

Of course, the large majority of the American electorate are (1) stupid and/or (2) grossly ignorant about ANYTHING concerning government. So, they'll just keep on eating their daily value meal #5s at McDonald's unaware that a Democratic Congress, if this passes, is seizing more money.

Quote:
Originally Posted by cpg35223 View Post
If the Democrats move to do this, count on a serious backlash from just about everybody who is saving for requirement.
I was only born in 1986, so correct me if I'm wrong.

I get the impression that this year will be 1976 #2. Then, you had an unpopular incumbent President Ford who was a nice guy but not seen as "bright." We had just come out of a long, painful Vietnam War. Jimmy Carter was seen as fresh change and new vision by the American and they, especially the younger generations, voted for him. Carter didn't win, however, with a huge mandate; the electoral count was only 297-240. Much will be the same this time, I predict; as they say, "there is nothing new under the sun."

Look what happened four years later. Ronald Reagan. If Obama gets in and Democrats gain seats in Congress, it will be detrimental for this country. Yet it will be good for conservatism in a way. I think we can expect a major conservative revival in 2012 or 2016.
 
Old 10-31-2008, 09:54 AM
 
Location: The Rock!
2,370 posts, read 7,001,787 times
Reputation: 804
This is basically a duplicate thread of House Democrats contemplate abolishing 401(k) tax breaks - Mandatory contributions from workers considered and posted to the wrong forum to boot. Closing this thread, anyong wishing to comment may refer to the above thread.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Closed Thread

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > U.S. Forums > General U.S.
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top