By Neal Boortz
When Barack Obama and the Democrats were trying to push ObamaCare, what was the line that we heard over and over and over again? Let me remind you: “45 million Americans don’t have health insurance!” Well despite the fact that that number is entirely incorrect, the point is that Democrats wanted to push the idea that a lot of Americans were without something that they were entitled to .. in this case, it was health insurance. As we know, eventually the Democrats succeeded by implementing an individual mandate; now it is against the law NOT to have health insurance.
Well if Democrats were up in arms over 45 million Americans, wait until they get a load of this number: 78 million. What is that number? That is the number of Americans who “aren’t able” to systematically save money for retirement through automatic paycheck deductions. In other words, they work for someone who does not provide access to employer-based retirement accounts. So here we go – another mandatory entitlement that Congress would be able to provide to 78 million Americans! Washington has already forced employers to provide access to healthcare coverage, or face a fine, why not do the same for retirement plans? I can hear the campaign soundbites now, “And I supported legislation that forced your employer to provide you with a retirement plan!”
Barack Obama is already working on a “solution.” Included in Obama’s budget proposal is a plan for “Automatic IRAs,” which would require companies to offer workers automatic deductions into individual retirement accounts. That plan would be for the big fish in the pond, but what about the little guys? More than 30 million Americans work for businesses with less than 100 employees and are not offered the benefit of an employer-based retirement plan. This does not mean that 30 million employees don’t have access to a retirement savings plan; it simply means that they must save on their own, rather than through an employer. So along comes an idea called the Multiple Small Employer Plan, which would enable small employers to join together to offer a single retirement program. These are often negotiated by unions .. but that is a whole other issue. Is this concept sounding familiar? Similar to what ObamaCare does – creating these pools for small businesses to buy into. But what else does ObamaCare do? It then mandates that these businesses provide health insurance .. wonder if it will be the same in terms of providing automatic retirement accounts?
At this point you are probably thinking, “Yeah right. You are a conspiracy nut.” Well Democrat Rep. Ron Kind has already introduced legislation called the SAVE Act – Small Business Add Value for Employees – which would include provisions for Automatic IRA enrollment and these Multiple Small Employer Plans. The legislation would, according to Investors Business Daily, do the following:
* First, it would mandate many of the ‘best practices’ of traditional defined contribution plans, including automatic enrollment and automatic contribution escalation. The bill would also direct the IRS to develop a model plan to ensure consistency across plan providers and keeping costs low.
* Second, the SAVE Act would remove a significant disincentive to pooling that exists today. Under current multiple employer plans, noncompliance by a single employer can jeopardize the tax-exempt status of the entire plan. Rep. Kind’s bill seeks to eliminate this obstacle.
* Finally, the bill includes a provision to align a plan sponsor’s fiduciary responsibility with its decision-making authority.
This legislation echoes some of Barack Obama’s proposals in his 2011 budget. As I already mentioned above, automatic IRAs is one idea, but there are more. Here, according to US News and World Report, is what the president has asked Congress to fund …
* Automatic IRAs. Companies that don’t offer a retirement plan may soon be required to enroll their employees in an IRA account. Under Obama’s current proposal, 3 percent of employee pay would be direct-deposited into a Roth IRA, the default savings vehicle. Workers may opt out, chose a traditional IRA, or elect to save a different amount. Small firms with 10 or fewer employees or companies that have been in business less than two years would be exempt from participation. Employers could claim a temporary tax credit upon automatically signing their workers up for the IRA for $25 per enrolled employee up to $250 for two years. Another tax credit would be available to small businesses that begin their own retirement plan equal to 50 percent of the start-up expenses for establishing or administering a new retirement plan up to $1,000 per year for three years, an increase from the $500 businesses are eligible for under current law. The proposal would become effective in 2012.
* A government 401(k) match. The Obama administration is proposing expanding the Saver’s Credit in 2011 to provide a 50 percent match on the first $500 of retirement savings for individuals who earn less than $32,500 annually. Couples who take home less than $65,000 could receive a match on their first $1,000 of savings and the match would be gradually phased out for couples with income between $65,000 and $85,000. The maximum credit would be $250 for a single filer and $500 for a married couple and be fully refundable.
* New 401(k) regulations. The White House supports adding more consumer protections to 401(k)s. The administration is calling for legislation that will require a transparent list off all 401(k) fees charged and disclosures about how target-date funds work. The Department of Labor also aims to streamline the process for workers to annuitize their retirement assets and outline who can give retirement savers investment advice to prevent conflicts of interest.
* More Social Security funding. Obama’s budget allocates $12.5 billion to the Social Security Administration, up 8 percent from 2010’s budget. The increase in funding is primarily to boost the number of employees, who will focus on processing retirement and disability claims and disability appeals faster. Also, $796 million is designated to scrutinize Social Security payments to make sure that only eligible beneficiaries receive checks and are paid the correct amount.
* Caregiving assistance. The Administration on Aging would be given $103 million, according to the budget, for a Caregiver Initiative that will allocate funds to agencies that provide senior and caregiver support services such as transportation and adult day care.
It’s coming, folks .. Democrats will remind you that you were the ones who wanted them to focus on small businesses, so this is their way of doing so. Look for the “crisis-speak” to ramp up, then the federal government will be the knight in shining armor swooping in to save us from our own inabilities … our inability to be self reliant and save for our own retirements.