Dems discuss confiscating 401(k)s, IRAs

[Cavey]

RALEIGH — Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.

Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.

The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, in prepared remarks for the hearing on “The Impact of the Financial Crisis on Workers’ Retirement Security,” blamed Wall Street for the financial crisis and said his committee will “strengthen and protect Americans’ 401(k)s, pensions, and other retirement plans” and the “Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.”

Currently, 401(k) plans allow Americans to invest pretax money and their employers match up to a defined percentage, which not only increases workers’ retirement savings but also reduces their annual income tax. The balances are fully inheritable, subject to income tax, meaning workers pass on their wealth to their heirs, unlike Social Security. Even when they leave an employer and go to one that doesn’t offer a 401(k) or pension, workers can transfer their balances to a qualified IRA.

[deepsepia]

Um . . . where does this come from?

There's no byline, and other than an inflammatory assertion, there are no facts here. Doing a little Googling, all I can find is a claim that a witness who appeared before Miller's Committee -- Teresa Ghilarducci-- made some comments regarding tax treatment of pension plans, and not to the Committee.

Here's a link to the Committee hearing referenced in your post:
http://edlabor.house.gov/hearings/fc-2008-10-07.shtml

Can you find any "discussion" of "confiscation" in this hearing? Your posting appears to focus solely on the testimony of one witness, Teresa Ghilarducci . . . whether anything she says is "discussed" by Congressional Democrats is unknown, as is the question of whether any aspect of her proposals end as legislative proposals.

Nothing in Ghiladucci's testimony suggests confiscation: her concern is that workers' retirement accounts run the risk of being wiped out, and offers them the choice of switching to a guaranteed pension

Originally Posted by Teresa Ghilarducci

Short term, I propose that since 401(k) accounts and the like are financial
institutions -- the bank about where 38% of the workforce2 can intend to save for their retirement -- Congress let workers trade their 401(k) and 401(k) - type plan assets (perhaps valued at mid-August prices) for a Guaranteed Retirement Account composed of government bonds (earning a 3% return, adjusted for inflation). When the worker collects Social Security, the Guaranteed Retirement Account will pay an inflation adjusted annuity, based on the accumulated funds.
http://edlabor.house.gov/testimony/2...hilarducci.pdf

That's her suggestion: she's an academic providing testimony, not a Congressional Democrat, and her use of the word let suggests a choice, not anything forced.

[Cavey]

It appears you may be correct. It seems to be a myth that rose out of something said... one of those, 'blown out of proportions' kind of things.
so far, I cannot find anything more than my initial post and remarks about it being either untrue or, like you pointed out, one suggestion.

[deepsepia]

Originally Posted by Cavey

It appears you may be correct. It seems to be a myth that rose out of something said... one of those, 'blown out of proportions' kind of things.
so far, I cannot find anything more than my initial post and remarks about it being either untrue or, like you pointed out, one suggestion.

I didn't mean to jump on you . . . the "we hate Obama" crowd is spinning out not-quite-news stories and mass emails, this looks like one of them.

The basic idea that Ghilarducci is talking about is one that I support, and which I think most people would support: a national pension system. We already have a national pension benefits guarantee system . . . but the problem is, its broke. And so workers have a kind of gamble -- go to work for a company when you're 25 or so . . . work 40 years . . . then find out if your pension plan can pay.

That's a crap shoot-- no one knows shich company is going to be around in 40 years. So a national pension plan of some sort makes sense, to me anyway.

[Tinysmasher]

Sound about right. Dems want as many people as possible dependent on federal social programs. If they can use a down market to scare people into opting out of their own plans and into the federal trough, that's another vote for life.

Shrewd long term vote locking for the dems.

[deepsepia]

Originally Posted by Tinysmasher

Sound about right. Dems want as many people as possible dependent on federal social programs. If they can use a down market to scare people into opting out of their own plans and into the federal trough, that's another vote for life.

Shrewd long term vote locking for the dems.

Look: what's to become of the guy who works for 40 years for a company that goes bust?

Punish him because he couldn't see 40 years into the future?

We actually have a "Pension Benefits Guaranty System" -- the problem is that it couldn't absorb the bankruptcy of a major company like GM. We could say "your bad luck" -- but what happens then? If we bail out the PBGS, then we effectively have a taxpayer-underwritten system, so shouldn't we get to write the rules for it, instead of just get left holding the bag?

If no company's pension is reliable-- then everyone's going to want a government job . . . so oddly, the "free market solution" would drive prudent workers into G-jobs . . . not exactly what a conservative would want.

A reliable pension and healthcare benefits system that is not tied to the fortunes of a particular firm benefits everyone. It benefits industry, which spends way too much time trying to manage their benefits, and it benefits workers, who can switch jobs without fear.

Ghilarducci is suggesting the creation of "Guaranteed Retirement Accounts"-- which sounds like a reasonable idea to me

How would this work? Take a 55 year old who had $50,000 in his 401(k) account
in August and faces job loss and eroded assets because of the erosion of his retirement
accounts. Let him swap out the $50,000 for a guarantee of $500 per month. The
economy is probably in a recession, but a guaranteed income from his former 401(k)
removes a source of financial anxiety, and -- this is not trivial – it end fruitless
discussions with brokers and financial sales agents, who are also desperate for more fees
and are often wrong about markets.

Basically, her idea is you give up control over assets for a guaranteed retirement income. I think that's a reasonable idea. What people need for their retirement is the certainty that income will be there. Taking more risk-- with the possibility that there's no retirement income-- that's an unacceptable strategy.

[Tinysmasher]

It's not that I didn't understand the concept of what they want to do. It's that the general idea of people less and less responsible for themselves is not good for this country. The democrats want that however, they've made their bread and butter the last 80 years by building dependency programs.

The biggest downside of social security has been a major shift away from the country saving for themselves because they'll "be taken care of".

You point to the problem being taxpayer backed pension funds which IS a problem. However your solution is to just give government control of all of it (hey, I'm sensing a consistent theme with you, how large exactly do you want government to be?).

Government, if you think the problems we create are bad - wait till you see our solutions.

[lost in melb.]

I couldn't agree more with getting pension funds and putting them somewhere safe. It benefits the employee - they actually get their money. And it benefits the company, as they know that they are not living on borrowed money that they must repay should the worker retire or be layed off.

The last people who should have your retirement money is the company you work for.

[deepsepia]

Originally Posted by Tinysmasher

It's not that I didn't understand the concept of what they want to do. It's that the general idea of people less and less responsible for themselves is not good for this country. The democrats want that however, they've made their bread and butter the last 80 years by building dependency programs.

The biggest downside of social security has been a major shift away from the country saving for themselves because they'll "be taken care of".

I don't disagree. I'd say another big downside is that the program becomes more generous than it would be under solid financial models. Social Security benefits are way more generous than could have been achieved by an average saver-- and the political pressure to ratchet them up is always there.

Its a problem, no denying it.

Originally Posted by Tinysmasher

You point to the problem being taxpayer backed pension funds which IS a problem. However your solution is to just give government control of all of it (hey, I'm sensing a consistent theme with you, how large exactly do you want government to be?).

I really would prefer that the Government wasn't in any of these businesses. The problem is that they --meaning we-- are. That's where we are now. We can wish that GM had put aside enough money to pay for all their retirees . . . they didn't. So we're going to be picking up the tab. That's already fixed.

I agree that its not what we should want: but it is "what is".

So the question now isn't "will we or won't we" have a Federal role in the economy: its "what should the rules be?"

I expect that over time the system will creep back into the private sector -- and I suspect this will be a platform issue for Republicans in the future, but right now, this is what we've got.

[DelusionsOfGrandeur]

All I know is that they are taking large chunks of money out of each of my paychecks. Money I worked for and earned. When I get to the point where I retire, somebody better have my money.

[Tinysmasher]

Originally Posted by DelusionsOfGrandeur

All I know is that they are taking large chunks of money out of each of my paychecks. Money I worked for and earned. When I get to the point where I retire, somebody better have my money.

or??

[lost in melb.]

Originally Posted by Tinysmasher

It's not that I didn't understand the concept of what they want to do. It's that the general idea of people less and less responsible for themselves is not good for this country.
The biggest downside of social security has been a major shift away from the country saving for themselves because they'll "be taken care of".

Originally Posted by deepsepia

I don't disagree. I'd say another big downside is that the program becomes more generous than it would be under solid financial models. Social Security benefits are way more generous than could have been achieved by an average saver-- and the political pressure to ratchet them up is always there.

Its a problem, no denying it.

Here in Australia we have compulsory superannuation. The money is spread across a variety of investments - some of which is guaranteed by the government. There is some control over where it goes, but no option to opt out of it. I also believe that the income from this when you retire is not taxed...

If it is not enough to live on, then social security will help out with the rest. This should be less of a problem in the future when more as future generations will have had super all of their lives - and therefore hopefully enough to live on.

[lost in melb.]

Originally Posted by Tinysmasher

or??

he won't have enough money to live off...??

[Tinysmasher]

Originally Posted by lost in melb.

he won't have enough money to live off...??

i don't know about anyone else in the 20-40 range, but i'm not living life with the assumption it's going to be there

if anyone does, i'd call them shortsighted - at best

[deepsepia]

Originally Posted by lost in melb.

Here in Australia we have compulsory superannuation. The money is spread across a variety of investments - some of which is guaranteed by the government. There is some control over where it goes, but no option to opt out of it. I also believe that the income from this when you retire is not taxed...

If it is not enough to live on, then social security will help out with the rest. This should be less of a problem in the future when more as future generations will have had super all of their lives - and therefore hopefully enough to live on.

The difficulty here is that we have never been on a sound basis, in actuarial terms. When Social Security was created, life expectancy was around 67-70 years . . . the number of employed for each beneficiary was huge. The system has never been a retirement savings plan-- there is a trust fund, but what you get is not really related to what you put in, its paid for by those who are working and paying taxes today.

There has been a huge problem of temptation to expand benefits . . . Tiny is right that by putting these things in the hands of the government, they become a source of political power-- they have been used pretty much as he suggests.