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.
Remember, Norman Hsu was a trustee at the New School?
Charlatans all!
Maybe we should listen more closely to the rantings of Jesse Jackson. He’s a nutcase, for sure, but maybe he lets slip some clues once in a while.
Several years ago JJ was talking about the problems with - I believe - Social Security. He then said that Federal employees have “X” dollars in their private retirement accounts and “why can’t we have some of that money?” I remember screaming - “because it doesn’t belong to you!”
We’re at the point where they could do just that - and BO is out there talking about trickle up economics. How is he going to accomplish that? Trickle down confiscation and redistribution.
“Why do they need to convert 401Ks into a similar guaranteed payout plan???????”
Because Democrats can BUY VOTES with the money then.
Vote Democrat, because those EVIL REPUBLICANS will take everything away from you!
I am a life-long bookkeeper.
When 401K’s and all the other alpha/numeric plans were first coming out, I warned my clients to be very careful.
What looked good then could boomerang in the future:
What the Congress giveth, the Congress can taketh away I told them.
I am not surprised that the Democrats want to pull the rug out from all these people who bought into the enticed savings plans called 401k’s and other names.
I am also not surprised that they now want to complicate the lives of these believers.
The sad part is alot of the people I counseled in the past will vote Dem their whole lives, and they just don’t get it.
Has anyone noticed the inconsistency?
They opposed Bush's SSI reforms yet a liberal like Treasury Sec. Paulson now has us owing big chunks of banks via fiat and fear?
Just in time for Obama?
At least with the Chrysler Bailout the Fed got "Warrants" and made money and was done with it.
When will be be done with this bank ownership?
Not without them taking 50% off the top for leaving the country...
Hidden in a bill last spring, Thank You Charlie Rangel.....
Bump
Current employer + employee “contributions” are 14.65%. So an additional 5% of pay would result in a 33% increase in EVERYBODY’S tax rate. A 33% increase in taxes. I thought Barry was going to cut everybody’s tax.”
Slight adjustment to your calcs:
EmployEE gets 7.65% deducted from pay for FICA and MED.
EmployER matches that with another 7.65%.
That totals 15.30%—not 14.65%
If a person is self-employed- they pay the whole 15.30% themselves, along with the income taxes on their earnings.
Thanks.
Radio host Jim Quinn, in Pittsburgh, wrote it. It’s been around in email for a while.
Behold the liberal Think-Speak. Not confiscating $80 billion in taxes from the citizens is not "an investment" in anything! Once again, we see the democrats displaying their belief that all money is actually the government's money, and that when they don't take it from you by force, that is somehow an "expenditure" on their part. Un-friggin'-believable.
I won't even go into the part where he says that the policy isn't producing the results they expected (people are still not saving as much as the government would like, despite their oh-so-gracious tax break). The idea of these *ssclowns having control over the White House, Senate, and House of Representatives is truly frightening.
I bet none of those advisors were trained on how to prevent theft.
Low mentality and years and years of communist brainwashing.
I don't know. All I know is that I feel like Alice in a really dangerous Wonderland where down is up and wrong is right. I really want to get back to my rugged, independent America and I'm beginning to think it no longer exists.
I remember Clinton’s Secretary of HHS, Donna Shalala, said that she wanted to “recapture” the tax revenues lost to 401k’s. Clinton had enough political (and economic) savvy to tell her to STFU.
This would be a disaster, I hope more for the Democrats than for the country.
Don’t the American people see through these frauds?
ping
I say take the money and run. This, along with the wealthy taking their money overseas on Nov. 5th or sooner and the stock market will drop like a lead weight.
These socialists don’t want anyone to have any money. They want you totally dependent on the government so they can control you.
What they don’t realize is this country will be so weakened we’ll be attacked by all of our enemies at once and the socialists will be beheaded just like the rest of us. Obama won’t be. He’s a muslim.
God, I hope I’m surprised on Nov. 4th. I’ll go ahead and vote so I can say I voted against 666.
If you would have heard the socialists calling Sean Hannity today you’d understand that this is exactly what the Obama supporters want. Every caller I heard stated plainly they wanted money taken from the rich and given tot he poor. One person said the government should own all the houses and let us live in them. Scary.
“Will they go after my 1.888% savings account interest too?”
Yes, of course.
If you’ve got it, they’re going to come AFTER it.
- John
You now have my complete attention - what this all about?
The Brits did this kind of crap years ago....as did the infamous Park Chug Hee late of South Korea
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.
I think you’ve got something there. Actually, I think he should say he’s going to give everyone a 200% tax cut. 0bama will say “You can’t do that.” McCain: “Neither can you!”
I like your idea better than mine! Good thinking.
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