401 (k), friend or foe?

 

Thursday, Mar 05,2009, 12:42:54 PM   Click:

Miller: 401 (k), friend or foe? The position reports on the future of pension plans put on the defensive legislature

Kelley M. Butler



Depending on whom you ask, Rep. George Miller (D-Calif.) is either the champion of the nation or harm to the 401 (k) system. To see how the legislature, to the point where he had to publish a statement of November in support of what should be obvious - ensure that "our pension system is as strong as it can be for our nation, workers and retirees - you have to return to a congressional hearing of the House Education and Labor that Miller has held more than three months.

October surprise

The hearing, held in October - just weeks before election day and weeks after September drag on financial markets in near collapse - focused on how Americans from the coast to retirement security in the midst of the economic crisis.

Miller, as chairman of the committee, presided over the testimony of various economic actors and experts of retirement, including Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research.

Although the audience seemed nothing else, the testimony was Ghilarducci news-making.

"The sooner we admit that our 30 years of experience with 401 (k) has failed, the sooner we can use these precious government subsidies efficiently and equitably," she says. "I want to end the federal subsidy of 401 (k) s, 401 (k) s can continue to exist, but they will not benefit from the grant of tax relief. "

Ghilarducci alternative Establish guaranteed retirement accounts that workers would be required to pay 5% of earnings and supplemented by an annual contribution of $ 600 from the federal government.

How the proposal is firmly committed to Miller is not clear.

Even if it is in the record to support 401 (k) tax breaks in their current form, Miller has never Ghilarducci expressed explicit support of the proposal.

However, Congress has been on the defensive against since many critics Ghilarducci's plan, including U.S. News blogger James Pethokoukis, who called Ghilarducci the most dangerous woman in America. "

Jane White, a former columnist EBN and President of Retirement Solutions LLC, said: "His proposal is another example of extreme ignorance on the part of those who influence economic policy. On the right you have the position that stocks are magic, and on the left you have the "stocks are scary" position which would replace one already puny 3% 401 (k) the employer is the second lowest in the world with infinitely pitiful $ 600 value of obligations State. And because the bonds pay such a low profitability, it was the taxpayers to subsidize the return. "

Ed Ferrigno, Vice President of the Profit Sharing/401 (k) Council of America - which represents the employers offering 401 (k) - "We are strong supporters of the voluntary, employer-provided system . But beyond the plan it offers is extremely lacking in the discussion of fiscal policy. "

Following the sting of criticism, including a November editorial in the Wall Street Journal that said: "If Democrats want to improve the prospects for American retirees, their first priority should be to eliminate obstacles to economic growth" Miller himself from the proposal publicly.

In a press release, Miller said: "I do not support" deleting "401 (k) s, the displacement of these plans or change their tax status."

Now what?

The rage on the Ghilarducci plan is deceased significantly, leaving employers with the same question in October: How can they help employees provide effective retirement in the midst of these economic turbulence?

Lynn Finkelstein, national director of Ernst & Young, employees of financial services, said that employers must provide employees not only to a pension plan, but also financial planning advice and services, such as employees now have many questions about their asset allocation and how to give priority to competition savings goals.

"We were extremely busy - we have the land, about 750 to 1000 calls a day," she estimates.

Finkelstein advises employees to save for retirement first, then reduce the debt and then put money aside for the upbringing of children.

College of Economics comes last, because "it's like being on a plane. They tell you to put your mask on first, then the mask of your child. "Plus, she says," there are no grants, no scholarships, for retirement. "

Employers must do a better job of communication, financial planning is something all employees can benefit, "said Finkelstein. It can help all employees, not just people with millions of dollars. "

It also encourages employers to continue to practice retirement savings and education for employees, even after the economy improves. "Do not let it become a second, third or fourth priority, when things change. It can affect your future."