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.
sheesh — the democrats never saw a pile of money they didn’t want to confiscate.
if they’d just cut taxes immediately,
the economy would repair.
Oh. My. God.
WHAT on GOD’S GREEN EARTH are PEOPLE WITH A EFFING “D” AFTER THEIR NAME DOING ANYTHING WITH FINANCES IN THIS COUNTRY????????????????????
Yup! This is "Change" alright!
I doubt this will get legs.
However, if it does, and in the next week or two, Obama endorses this, he loses the election. Period.
I thought that was called Social Security.
And Obama is not going to tax the middle class?
The new Beltway liberalism -— Democrats running wild.
Let me guess. Those new accounts would be in a "lockbox", eventually containing nothing but government IOU's.
I always doubted that they would let me keep it, anyway. Wouldn't have been "fair".
Now, they can't get it.
Next - stop paying the mortgage.
Congress will take care of me.
What a country.
This could make a devastating commercial for McCain.
The Democratic Party is a cancer on this nation.
Unless I am mistaken, Social Security exists now and is bankrupt -WTF is this ‘new’ program but the old busted program with a new name?
Man, every day Costa Rica is looking better and better
Sheesh, these are the guys who will run the country the next four years?
Welcome to CHANGE.
If you defer $70,000 in taxes over 35 years of work, you will pay about $775,000 in taxes over 35 years of retirement. Based upon contributioons of $6,000 per year. 7.5% growth and 33.3% tax bracket. 10 year roll out.
http://creepingsharia.files.wordpress.com/2008/05/obama_post_america.jpg
http://fareedzakaria.com/books/index.html
Seems to be right out of BHO’s favorite book !
Leave my 401K alone!
The whole point of 401Ks and IRAs is that the individual can invest as they see fit. These individual savings are supposed to be in addition to your Social Security. Social Security is a government run guarenteed payout plan. Why do they need to convert 401Ks into a similar guaranteed payout plan??????? And wouldn’t that result in gov’t control of your 401K, just as gov’t directly controls your Social Security?????
Wouldn’t this just create another Social Security system?
I firmly beleive the Feds will take back all of the tax breaks of 401(k)’s some day anyway.
Great! do it when there is also no capital gain as Nancy Pelosi,Harry Reid and Barney (Happy boy) Frank killed the stock market.
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