02/25/09 Baltimore, Maryland “We must preserve and strengthen 401(k)s,” says Rep. George Miller (D-California), chairman of of the House Education and Labor Committee, and the man who might yet degrade and destroy 401(k)s.
Miller held another hand-wringing hearing yesterday on how American 401(k) plans have turned into 201(k)s since the stock market fell from its (nominal) record heights in October 2007. Reading between the lines of reporters’ accounts of the hearing, it appears the most loopy and frightening proposals trotted out in similar hearings last fall have been shelved. For now.
There was no talk this time about eliminating the tax deferral that was the whole raison d’etre for 401(k)s to begin with, on the theory that it’s mostly “the wealthy” who take advantage of it. Nor was there further discussion of “Guaranteed Retirement Accounts” [.pdf] — in which everyone would have 5% of his or her paycheck withheld for investment in government bonds that would (in theory) return an inflation-adjusted 3% a year.
But lefty economist Dean Baker threw out a variation of it, “a government-managed system that would provide a modest rate of return for employees,” according to Bloomberg. “He said it would build on Social Security and allow workers a voluntary default contribution of at least 3 percent of their salaries.”
Baker’s proposal would be voluntary, but not that of former Clinton aide Alicia Munnell, which Reuters describes as “a new tier of retirement income… set up with the goal of paying out about 20 percent of pre-retirement income to retirees.”
“Participation should be mandatory, participants should have no access to money before retirement, and benefits should be paid as annuities,” said Munnell. “The system should be funded and reside as much as possible in the private sector.”
This writer was among the first to pick up on this story last fall and follow up as the story caught fire online. Rep. Miller has more hearings scheduled in the weeks ahead. We’ll be watching.
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We’ve got to keep Miller’s grubby hands off our money… but on the other hand, conventional 401k’s have been a dismal failure. We need a Plan B, I think.
“American 401(k) plans have turned into 201(k)s since the stock market fell”
That’s no joke. This is worse than a divorce. I lost half of my net worth and still have my wife.
Dave is a chump, I couldn’t bring myself to read this article in the same way as Dave couldn’t bother to spent fifteen minutes researching Rick Santelli before dismissing him in his article earlier this week.