Saturday, April 01, 2006

Democrats Trying to Require Mandatory Retirement Plans from Employers

This came from a professional journal I read that does not allow links to the online version so I have quoted a major portion of the text from the EAJournal :

"Baucus introduces retirement savings bill
Senator Max Baucus (D-MT) last week introduced S. 2431, the Savings Competitiveness Act of 2006, which seeks to increase personal retirement savings through a number of different tax provisions. The bill would require employers who do not sponsor retirement plans to set up a payroll deduction system for employees to make automatic deposits into individual retirement accounts (IRAs). Companies with fewer than 25 employees would be eligible for a tax credit up to $250 to offset the costs of starting such a program and would be eligible for the credit for another two years if employees were automatically enrolled in the program. The bill would redesign the saver's credit, making it refundable, and providing for its direct payment into a taxpayer's Roth IRA. Taxpayers would also be able to direct the IRS to deposit their tax refunds straight into their IRAs. Further, the bill would encourage low-income workers to save by prohibiting the inclusion of retirement savings in means testing for federal assistance programs."

This idea sounds vaguely familiar, hmmm kind of like .... SOCIAL SECURITY!!!!! The solution offered by Democrat icon FDR to provide retirement and death benefit security to American citizens -- the one that Democrats in Washington vehemitly deny being broken. Employers are already forced to contribute to a Democrat created "retirement" plan, so why should employers have to be forced to pay into another mandatory retirement plan unless the Democratic party is (underhandedly) admitting that Social Security has gone the way of every other government social plans -- into bureaucracy and abuse.

Social Security private accounts is best solution offered so far, and one of the few really good ideas that GW has come up with. Your Social Security taxes would go into individual accounts (like IRAs) which would be invested in the private market offering a POSITIVE return on your taxes -- currently Soc. Sec. goes into the general fund and pays benefits for current retirees and other government social programs. With private accounts the money that is forcibly paid by you and for you could be properly invested. For example, the average wage earner makes 40,000 dollars a year at a combined employee and employer contribution rate of 12.4% for a combined contribution of 5,000 dollars for one citizen. If that 5,000 dollars (excluding the fact that the same amount would be contributed a year) were placed in a regular bank savings account earning 3% interest annually that original sum would grow to 5,800 dollars in 5 years.

I'm guessing that most Americans would rather that their "retirement" money be invested in a manner that would offer even meager returns. However, here we are Congress refusing to take logical steps to ensure better retirements for Americans opting instead to create more bureaucracy that will make doing business in America less and less affordable and attractive.


Anonymous said...

Why don't you start simple like changing the 401K to eliminate the vesting period. With people changing jobs like they do underwear, no employer is contributing to retirement at all. If a company needs to be competive for employees. Make the employer have to pay the retirement money they committ to in an intial offer to an employee.

pramahaphil said...

I certainly can agree with eliminating the vesting period --Anon.

However, here is my contention with Sen. Baccus' bill. The original intent of Soc. Sec. was to provide retirement for all Americans' once they reached a certain age. Social Security is already a major tax burden on business in America, and it already is falling short of its original intent. There is a potenial for Soc. Sec. to be a strong savings engine if Congress and the government were to allow Soc. Sec. to be placed into individual accounts that could actually provide a return on investment. If it were done right, and I may be a little overly stary eyed, Soc. Sec. could be a sufficient retirement engine for most Americans.