Feds, States To End Private Pensions, Retirements
InÂ a postÂ nearly a year ago, I sounded this warning:
The governments of five European countries â€”Â Hungary, Poland, Bulgaria, Ireland and FranceÂ â€“ have taken overÂ their citizensâ€™ privateÂ pension moneyÂ to make up deficits and budget shortfalls. Given the American Leftâ€™s oft-stated admiration forÂ Europeans, who are further down the ruinous road of socialism than the United States,Â this should sound the alarm for all Americans who want toÂ hang ontoÂ our private pensions andÂ savings.
That was not paranoia speaking because a year before,Â in January 2010,Bloombergâ€™sÂ Business WeekÂ had reportedÂ thatÂ the Obama administration wanted toÂ convert all 401(k) savings and Individual Retirement Accounts (IRAs) into annuities or other steady payment streams.
Business WeekÂ also reported that the Treasury and Labor Departments was planning to solicit the publicâ€™s reaction, although a report by the Investment Company Institute had already found that Americans oppose any government initiatives that would force us to give up control over our 401(k) accounts. Seven in 10 U.S. households indicated they wanted to preserve their present retirement account features and flexibility, and objected to the idea of the government requiring retirees to convert part of their savings into annuities that supposedly guarantee a steady payment for life.
Now, it appearsÂ the Obama administration and Americaâ€™s various state governments indeed are moving to get rid of private pensions and retirement plans.
Linda Stern reports for Reuters,Â Feb. 29, 2012, that baby boomers may be the last generation to retire with 401(k) plans. A week before,Â a hearing on the future of pensions and retirement was held in the U.S. Senate, attended by representatives of unions, employers, financial services providers, government agencies and consumer groups. The only thing they all seemed to agree on was that the 401(k) plan has been sort of a failure, which is a most curious consensus, given the fact that current and future retirees have successfully amassed some $4.3 trillion in 401(k) and other defined contribution accounts.
Stern reports that â€śpolicymakers are now looking beyond the once-vaunted 401(k) because it has two significant shortcomings: (1) Itâ€™s not powerful enough to secure the retirements of low-income workers who canâ€™t afford to stash away enough money; and (2) It leaves each accountholder alone to manage risks.â€ť Without being able to pool risk, participants have to settle for lower returns and lower withdrawals. That, in turn, reduces the amount that they can spend in retirement, and reduces the likelihood that their money will last until they die.
Blah, blah, blah.
In other words,Â there is a rising crescendo of voices calling for the conversion of privately-managed 401(k) and IRAs in favor of Government Retirement Accounts (GRAs)Â â€” government-managed retirement instruments like annuities that â€śpromiseâ€ť to â€śguaranteeâ€ť retirees a â€śsteady stream of retirement incomeâ€ť thatâ€™ll last until they die.
Sounds just like Social Security, doesnâ€™t it? The government takes money out of our monthly paychecks and puts it into our separate Social Security accounts. In return, when we retire, weâ€™ll get a Social Security check every month until we die.
And we all know how well that turns out.
Stern concludes her report for Reuters by warning that policy changes down the road could change the shape of our retirement savings significantly because â€śeverything from a curtailing of 401(k) tax breaks to new state-run programs is under consideration somewhere, by somebody.â€ť
AÂ NewsMax reportÂ describes the latest move towards replacing private pensions and retirement plans with Government-run Retirement Accounts (GRAs):
The Latest move can be found in the Obama Administration`s, 256 page-FY 2013 Budget Proposal.Â The revival of his 2008 presidential run, the â€śAutomatic IRAâ€ť which has now â€śEvolvedâ€ť into two proposals:
Secure Choice Pension & Government Retirement Accounts (GRAâ€™s), both of which automatically â€śMandateâ€ť 5%-6% contributions into Government Run Pension funds.
One feature of GRAsÂ is once a participant dies, the uncollected equity belongs to the government. Â Itâ€™s no wonder the Retirement age for GRAs will be 67, and one proposal calls for 69 years of age.Â Theyâ€™re â€śoff the hookâ€ť as soon as youâ€™re dead.
Another change to the retirement account laws, the Tax Benefit.Â The current Tax Deduction will be replaced with a â€śCreditâ€ť, which is only redeemable after retirement. To be EligibleÂ for the Tax Credit, you will be given the â€śOptionâ€ť to place Your Equity into Annuities composed of U.S Treasury Bonds, that will payout an estimated 3% annually.
Yes, you`ll be Investing/Buying what China No longer wants,Â U.S. Debt(Treasury-Bonds). [...]
No matter who wins [the 2012 presidential eleciton], our government is Neck-Deep in Debt. When faced with the Reality of a Complete government Collapseâ€¦ a Politician will do, what a Politician, needs to do!Â Â The $4.6 Trillion in IRAâ€™s and the $4.3 Trillion in 401(k)s â€¦ are all too tempting!
Some legislators already have introduced bills toward transforming Americansâ€™ private pensions and retirement accounts into Government Retirement Accounts (GRAs):
- S. 1020: Saving Enhancement by Alleviating Leakage in 401k Savings Act of 2011Â â€“Â A U.S. Senate bill introduced on May 18,Â 2011, by senators Herb Kohl (D-WI) andÂ Mike EnziÂ (R-WY). If approved, S. 1020 would â€śamend the Internal Revenue Code of 1986 to modify the rules relating to loans made from a qualified employer plan, and for other purposes.â€ť In other words, S. 1020 (orÂ the federal government) would impose restrictions on how 401(k) owners can access the money accumulated in their accounts.You wouldnâ€™t even be able to borrow from your own 401(k) account!
- California state bill,Â SB 1234: Golden State Retirement TrustÂ â€“ A bill introduced on February 23, 2012, by California congressman Kevin De Leon, to replace private pensions and retirement accounts with GRAs. Hereâ€™s a quote from SB 1234: â€śExisting federal law provides for tax-qualified retirement plans and individual retirement accounts or individual retirement annuities by which private citizens may save money for retirement. This bill would establish the Golden State Retirement Savings Trust Act, which would create the Golden State Retirement Savings Trust that would be administered by the Golden State Retirement Savings Investment Board, which would also be established by the bill. The bill would require eligible employers, as defined, and would authorize other employers to enroll eligible employees, as defined, into an employer-sponsored retirement plan or pension plan, as specified, offered by the trust, or a personal pension in the case of a nonparticipating employer, as specified. The bill would require a specified percentage of the annual salary of an eligible employee participating in the retirement or pension plan to be deposited in the Golden State Retirement Savings Trust, which would be segregated into a program fund and an administrative fund, both of which would be continuously appropriated to the board for purposes of the act. The bill would limit expenditures from the administrative fund, as specified.â€ť
- Connecticut state billÂ HB 5337: An act â€śto create a task force to study the need for a public retirement plan,â€ť introduced on May 6, 2012, by Lauren Schmitz, a research analyst at the Bernard L Schwartz Center for Economic Analysis, the very same institution that had originated the GRA concept.
- Other states such as, Massachusetts, Florida and Ohio have made or are actively conducting moves such as GRAs.
And what will happen to all those Government Retirement Accounts? Why, like that mythic Social Security â€śtrust fund,â€ť the money in those GRAs will simply be dumped into the governmentâ€™s ever-dwindling general funds to pay for the governmentâ€™s ever-increasing expenses, of course!
Donâ€™t believe me?
In May 2011, with little media publicity, the Obama administration beganÂ
dipping â€śtemporarilyâ€ť intoÂ raiding the pensions of federal government employees to keep funding government operations.