Democrats to kill 401k plans?

Another fight for conservatives against liberals’ socialism:

House Democrats, looking for a way to have government take over more aspects of our lives, recently heard testimony on a plan promoted by Teresa Ghilarducci, a professor at the New School of Social Research in New York, "on her idea to eliminate the preferential tax treatment of the popular retirement plans."

In place of 401(k) plans, she would have workers transfer their dough into government-created "guaranteed retirement accounts" for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return.

The topic is also covered in an article in Workforce Management. The Democrats' plan would target "the $80 billion in annual tax breaks that 401(k) investors receive." In essence, the 401k would lose the benefits that make it popular including the "employer-matching" feature upon which so many average Americans rely.

"From where I sit that’s just crazy," said John Belluardo, president of Stewardship Financial Services Inc. in Tarrytown, New York. "A lot of people contribute to their 401(k)s because of the match of the employer," he said. 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," Belluardo said.

The article quotes Christopher Van Slyke, a partner in the La Jolla, California, advisory firm Trovena. Van Slyke makes a key observation which I will repeat here: "This is a battle between liberalism and conservatism. 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."

Let's think about that quote for a second and let it sink in. Van Slyke is absolutely right, and it's how the left-wing Democrats and Barack Obama are trying to move more and more power away from the people and put it in the hands of the government. Even some Republicans are joining in.

Comments

[Missourimule]

And wouldn't this be just the beginning? Think of all those people who, up to this point, haven't had the opportunity to HAVE a 401K to "throw into the mix" . . . wouldn't it only be "fair" for them to be able to be given a "share" from those who have been more fortunate? So surely, a portion of MY 401K money would go to to someone who never had the opportunity to have one - to make us more "equal".

If this plan could be made be broadly known between now and the election, it would surely affect a lot of votes.

[Hal]

For what it's worth, do the math using this idea, and compare it to where so many people are now, using the last fifteen years as a model....on the surface, not a bad idea. BUT I DON'T LIKE IT! THE MAIN PROBLEM IN OUR ECONOMY IS THAT WE THREW BASIC ECONOMIC THEORY, AND CHECKS AN BALANCES OUT THE WINDOW, STARTING WITH REAGAN, AND EVERY ADMINISTRATION SINCE HAS CONTINUED THE PRACTICE!ITS CALLED DEREGULATION, AND DEFICIT SPENDING.
I AM TIRED OF ALL THE PARTISAN GARBAGE COMING AROUND...WHAT WOULD BE SO WRONG WITH RIGHT V. WRONG, INSTEAD OF DEMOCRAT V. REPUBLICAN?