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Old 11-05-2008, 11:23 AM   #1
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Step 1 to "fixing the economy "

READ IT! Then go jump off a bridge.
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House Democrats Contemplate Abolishing 401(k) Tax Breaks



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-California, and Rep. Jim McDermott, D-Washington, 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 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 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 percent 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 percent 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,” 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, Ghilarducci said.
“I want to spend our nation’s dollar for retirement security better. Everybody would now be covered” if the plan were adopted, Ghilarducci said.
She has been in contact with Miller and McDermott about her plan, and they are interested in pursuing it, she said.
“This [plan] certainly is intriguing,” said Mike DeCesare, press secretary for McDermott.
“That is part of the discussion,” he said.
While Miller stopped short of calling for 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, 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.
“This is a battle between liberalism and conservatism,” said Christopher Van Slyke, a partner in the La Jolla, California, advisory firm Trovena, 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 America 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 advisors to provide advice for 401(k) plans was also addressed at the hearing. Rep. Robert Andrews, D-New Jersey, was critical of Department of Labor proposals made in August that would allow advisors to give individual advice if the advice was generated using a computer model.
Andrews characterized the proposals as “loopholes” and said that investment advice should not be given by advisors who have a direct interest in the sale of financial products.
The Pension Protection Act of 2006 contains provisions making it easier for investment advisors to give individualized counseling to 401(k) holders.
“In retrospect that doesn’t seem like such a good idea to me,” 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.
On Thursday, October 9, the Department of Labor hastily scheduled a public hearing on the issue in Washington for Tuesday, October 21.
The agency does not frequently hold public hearings on its proposals.
Filed by Sara Hansard of Investment News, a sister publication of Workforce Management. To comment, e-mail [email protected].
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Old 11-05-2008, 01:08 PM   #2
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I wonder how many of these 401Kers voted Democrat yesterday & how many would have done it all over again if they knew what they now know now?
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Old 11-05-2008, 01:12 PM   #3
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I wonder how many of these 401Kers voted Democrat yesterday & how many would have done it all over again if they knew what they now know now?
Some people, known as democrats, don't oppose higher taxes.
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Old 11-05-2008, 01:25 PM   #4
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CK judging by the pics you put up yesterday, I'm guessing you work in an office environment and probably have a 401k option. Do you take advantage of it? Should you be taxed on a SAVINGS PLAN? What's next checking acct taxes, express checkout fees at the grocery store?
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Old 11-05-2008, 01:31 PM   #5
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CK judging by the pics you put up yesterday, I'm guessing you work in an office environment and probably have a 401k option. Do you take advantage of it? Should you be taxed on a SAVINGS PLAN? What's next checking acct taxes, express checkout fees at the grocery store?
I do have a 401k. I don't mind paying more taxes, even on the 401k.

There are things that need to be paid for in this country. I'd rather sacrifice a little bit of my savings plan than allow our infastrcture to further crumble while we fall deeper into debt with China.

I'm sorry, but I think we can all sacrifice a little bit for the greater good.

Furthermore, I am of the opinion that Obama's policies will have a positive impact on the economy, meaning my 401K will grow at a faster rate. Therefore, I beleive that I will do better, even if he slightly taxes my savings.
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Old 11-05-2008, 01:32 PM   #6
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Some people, known as democrats, don't oppose higher taxes.
More catch phrases/talking points...

Yep, every situation that comes up is easily answered with a Democratic quip.
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Old 11-05-2008, 01:34 PM   #7
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More catch phrases/talking points...

Yep, every situation that comes up is easily answered with a Democratic quip.
*sigh*

That's not a catch phrase... It's a fact.

I don't mind higher taxes.
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Old 11-05-2008, 01:38 PM   #8
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So why not just take that money out of your pay check and open a Money Market acct instead of paying the taxes on the 401k?
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Old 11-05-2008, 01:41 PM   #9
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So why not just take that money out of your pay check and open a Money Market acct instead of paying the taxes on the 401k?
Because my employer matches my contributions to the 401K - as many employers do.

And besides, it's your patriotic duty to pay taxes

:lol:
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Old 11-05-2008, 01:42 PM   #10
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I do have a 401k. I don't mind paying more taxes, even on the 401k.
Being single with no responsibility will make a person feel that way, I guess.

Quote:
There are things that need to be paid for in this country. I'd rather sacrifice a little bit of my savings plan than allow our infastrcture to further crumble while we fall deeper into debt with China.
Yea, things need to be paid, were being paid, & now are being cloaked as a "We can do it" which means a more flowery way of 'Bailout.Translation: Pay more.

Yep, I'm feeling so hopeful/inspired I could wet myself...


Quote:
I'm sorry, but I think we can all sacrifice a little bit for the greater good.


You are just now starting to get the chance to 'sacrifice a little'. There's some people here with a lifetime of doing that & look where we're at again? "Sacrificing a little bit".


Quote:
Furthermore, I am of the opinion that Obama's policies will have a positive impact on the economy, meaning my 401K will grow at a faster rate. Therefore, I beleive that I will do better, even if he slightly taxes my savings.
Ahhh, yes, the debates & commercials...:thumbup:

Life condensed into 2 hour increments & 30 second spots. No better way to get the pulse of the situation...:thumbup:

It's just funny that the next day, we're not reading about the plan on reduction of this bloated government or wasteful spendings but of how the American people's money can be relocated some more. :thumbup:
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Old 11-05-2008, 01:45 PM   #11
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Being single with no responsibility will make a person feel that way, I guess.
No, being a humanist will do that.

Quote:
You are just now starting to get the chance to 'sacrifice a little'. There's some people here with a lifetime of doing that & look where we're at again? "Sacrificing a little bit".
Irrelevant.

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Ahhh, yes, the debates & commercials...
No, my opinion, developed well before I knew who Barack Obama was.
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Old 11-05-2008, 01:47 PM   #12
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*sigh*

That's not a catch phrase... It's a fact.

I don't mind higher taxes.
No, my young Padawan, it's called double talk.

That phrase was used to do exactly what you did...segue off commenting on the point I said with something that has no bearing at all.

Maybe there's some Dems that have no problem 'donating' more of their money but don't assume all Dems have great financial security to think that's a great idea..
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Old 11-05-2008, 01:47 PM   #13
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I'm just saying keep an eye on it. If the tax break is lifted and your employer is being taxed on the am't they match do you really think they will continue to match even the 3 %or 4% they already do?
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Old 11-05-2008, 01:52 PM   #14
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No, my young Padawan, it's called double talk.

That phrase was used to do exactly what you did...segue off commenting on the point I said with something that has no bearing at all.

Maybe there's some Dems that have no problem 'donating' more of their money but don't assume all Dems have great financial security to think that's a great idea..
Ok Tarkus.

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I'm just saying keep an eye on it. If the tax break is lifted and your employer is being taxed on the am't they match do you really think they will continue to match even the 3 %or 4% they already do?
Perhaps, maybe not though. If they don't continue to match, they will be less competitive in recruiting employees. The average employee will be less qualified as a result, and the company will suffer.
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Old 11-05-2008, 01:55 PM   #15
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*Answered in the CK mode of one liners*

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Originally Posted by CKFresh View Post
No, being a humanist will do that.
No, a young person with no responsibilities.

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Irrelevant.
Only to a young person who hasn't paid for anything yet & who fell for the lure & hype of a savvy political team who saw the chance to exploit the younger internet crowd into believe they have the power.

Quote:
No, my opinion, developed well before I knew who Barack Obama was.
Yes, when you were a teenager, foregoing food/sleep & employment, just so you could cram as much political knowledge as you could absorb into your brain in a short period of time.
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