There is growing evidence that the Obama Administration wants to adopt ideas being pushed by the AFL-CIO and SEIU to radically change the nation's private pension system. They want individuals to have less control over and less access to their own retirement savings.
The White House recently released its "Annual Report on the Middle Class" advocating new "retirement options" and imposing new regulations on 401(k) retirement savings.
The plan calls for the creation of something called "Guaranteed Retirement Accounts" (GRAs). (See White House Report, pdf )
The Departments of Labor and Treasury have also jointly issued a "Request for Information" to implement the "annuitization" of 401(k) plans through "Lifetime Income Options." Their plans also call for an enlarged role over pensions by the Department of Labor.
In an economy suffering from excess debt, insufficient savings and unfunded government obligations, it is hard to imagine a more misguided policy than to discourage savings by reducing individual access to assets and creating a new government entitlement. Think of it, the same federal department with responsibility for mine safety, the Department of Labor, could assume a larger role over your retirement savings.
The impetus for this pension scheme comes from a new group, "Retirement-USA,"[1] founded by the AFL-CIO, SEIU [2] and a number of labor affiliated organizations. Their plainly stated goal: "The system should be administered by a governmental agency or by private, non-profit institutions that are efficient, transparent, and governed by boards of trustees that include employer, employee, and retiree representatives."
Other Retirement-USA goals include restricting employees from taking lump sum distributions at retirements, preventing savers from accessing funds before retirement or from stopping remaining pension assets from being left to family members at death.
Given the performance of union managed pension plans, SEIU seems a surprising source of advice on private pensions. According to the Wall Street Journal, public records based on the SEIU's own filings show that the SEIU National Industry Pension plan - which covers some 101,000 workers - was only 75% funded in 2006. "Put another way, the plan had only three-fourths of the money it needs to meet its retirement obligations. And the national chapter is only the start. Some 13 local SEIU pension plans in 2006 were less than 80% funded; several didn't reach 65%."[3]
Despite this record, the links between Retirement-USA" and the Obama Administration are apparently very close. Last fall at an "Envisioning Retirement Security" conference sponsored by the group, Labor Secretary Hilda Solis praised the group's objectives.[4]
Just this week in response to this threat, House Republican Leader John Boehner and other members of the House GOP sent a letter to Labor Secretary Hilda Solis and Treasury Secretary Timothy Geithner warning the Obama Administration that the government should keep its hands off of the retirement savings of Americans, and reject proposals that would dismantle or nationalize the private pension system in favor of a government-run retirement security regime: [5]
"[W]e write today to express our opposition in the strongest terms to any effort to 'nationalize' the private 401(k) system, or any proposal that would dismantle or disfavor the private 401(k) system in favor of a government-run retirement security regime.... Instead, we urge the Departments to make it easier for employers to include retirement income solutions in their savings plans and to help workers learn more about the value of their retirement savings as a source of retirement income."
As a positive alternative toward letting Americans rebuild their savings, Republicans have formed a "House GOP Savings Recovery Solutions Group." This group has proposed:
� Rebuilding Americans' Retirement Savings by extending the suspension of minimum pension withdrawals for an additional three years, through 2012.
� Rebuilding College Savings by extending the existing SAVERs Credit to contributions made to 529 college savings accounts, effectively reducing by up to half the cost of a family's contribution to a 529 plan.
� Increasing Retirement Income by reducing the Social Security earnings penalty by doubling the Social Security earnings limit from $14,160 to $28,320 and allowing more Americans to increase their income without being hit by the earnings penalty.
� Tax Relief for Investors and Seniors by suspending the capital gains tax on newly acquired assets for the next two years and raising and indexing to inflation the amount of capital losses allowed against ordinary income to $10,000.
The contrast between the two political parties on savings policy could not be clearer. The Obama Administration is moving toward a more collectivist strategy in which individuals have reduced access and less control over their own assets. Republicans instead would encourage improved individual balance sheets with more savings.
[1] Retirement-USA
[2] AFL-CIO, SEIU
[3] SEIU pension plans in 2006 were less than 80% funded
[4] Retirement-USA" and the Obama Administration
[5] GOP Solutions
