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GOP Nixes Obama Retirement Rule

Another last-minute regulatory initiative by the Obama Administration has made its way into the dustbin. Investment News reports:

President Donald J. Trump on Thursday signed into law a resolution that nullifies Obama-era retirement rules meant to encourage cities and other municipalities to develop auto-IRA programs for private-sector workers.

The resolution, H.J. Res. 67, was passed by the Senate in late March and by the House in mid-February, largely along party lines, with Republicans in favor of overturning the rule.

The regulation, issued by the Department of Labor a month before Mr. Trump took office in January, was meant to ease liability concerns among cities when creating automatic-enrollment, payroll-deduction individual retirement account programs to be offered through the workplace.

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  • Andrew Allison

    As I’ve written before, the problem is not the availability of vehicles for saving but the unwillingness of Americans to utilize them. It’s much more important to have a smartphone, and a late model gas-guzzler in the driveway.

    • Fat_Man

      See my reply to Boritz. It is a case of pay me now or pay me twice as much later.

    • Anonyme

      Sorry, not true. I manage five different jobs, and not one of these employers provides me any benefits. No health care, sick days, vacation time or retirement plans. I make use of an IRA, but I would really prefer to have a 401k as you can save more and there are better tax benefits. But since they are employer sponsored, I cannot. And I drive four year old compact car that I intend to keep for at least six more years.

      • Andrew Allison

        Sorry, but you’re mistaken. In addition to the IRA there’s HSA (which turns into an IRA at 55). And then, heaven forbid, you could use a plain old savings account. Are you seriously suggesting the fact that you aren’t getting tax benefits is stopping you from saving for retirement?

        • Anonyme

          Heaven forbid, those of us who do not have access to employer-sponsored benefits should enjoy the same tax-advantaged plans others do. The HSA’s you mention are only available if you have a high-deductible plan. And you are seriously suggesting that people like me should not get the same tax savings others receive, even though we are willing to save as much? Are you seriously suggesting that we should be content with plain old savings accounts?

          The state and local initiatives around retirement saving options are a start at addressing the needs of people outside employer-based plans, and encouraging everyone else to save as well.

          And P.S., when you work for companies that do all their scheduling via the web, a smart phone is essential.

          • Andrew Allison

            What I’m suggesting is that you save for retirement, and that not having access to a 401(k) is no excuse not to. Since you don’t have employer access to a 401(k), you can open a personal pension plan, contributions to which are tax deductible. If you have ACA insurance, it’s HDHP by definition. A family HSA gives you a $6,750 MAGI deduction, which may give you or increase your premium assistance (do not use an insurance company HSA [major rip off] but open your own — mine has no fees and pays 1-2% depending on balance). If none of that appeals, every major brokerage has self-directed savings accounts.

          • Anonyme

            I am saving for retirement, I just want the same options others have. I max out my IRA, and save quite a bit beyond that. What, exactly, is a personal pension plan? Any links are much appreciated.

          • Andrew Allison

            I may have been mistaken wrt your situation(I was self-employed) but I would talk to a tax accountant or financial adviser to see what your options are as a multi-employer employee (S Corp?). BTW, the minimum HDHP deductible is only $2,600 and you can choose to pay your medical expenses from after-tax income and let the HSA grow until you are 65 (not 55 as I wrote), when it can be used for any purpose. Note also that HSA contributions are not limited to earned income. Hope this helps.

          • Anonyme

            Yes, my situation is different, I get W-2’s not 1099’s, which limits my options. If I were to create an S-corp, I doubt the companies I work for would be willing to issue checks to it, rather than me, even if the arrangement would pass IRS muster.

          • Andrew Allison

            Since, presumably, you are not working full time for any of your employers and they are not providing benefits, can you persuade any of them to employ you as a contractor, thus making you self-employed? Either way, I’d still seek out a tax accountant to see whether there’s a way around your problem.

          • Andrew Allison
  • Boritz

    The no. 1 reason people don’t save for retirement is that 12% already comes off the top for retirement related stuff.

    • Andrew Allison

      I beg to differ. The number one reason is that they’re grasshoppers (https://en.wikipedia.org/wiki/The_Ant_and_the_Grasshopper).

      • Boritz

        And of course the modern story ends with the ant being shamed and plundered for the benefit of the grasshopper.

        • Andrew Allison

          Sad, but true.

    • Fat_Man

      Taxes have to go up. Way up. It is clear that people want their benefits and their free health care, and that they are not willing to save to cover those expenses.

      We need to raise the payroll tax to about 30% to cover that. Some of the pain can be mitigated by channeling some of that money into saving bond IRAs, annuity payout IRAs, HSAs, and permanent health insurance policies, and by replacing the income tax with a VAT.

      The alternative is a severe political and economic crisis tantamount to a collapse of the Federal Government. You don’t want to live through that. A liberal out come cannot be guaranteed.

      Republicans don’t want to do this because they don’t want to raise taxes. Democrats don’t want to do this because most of the money must be used to pay the debt and to pay Social Security benefits. Therefore, the Democrats cannot do the one thing with the money they really want to do, which is to hire millions of unionized government employees.

      It is an ugly situation, but I cannot make it better than it is.

      • Andrew Allison

        It’s complicated. The subject of this thread is saving for retirement, and I think we’re faced with the choice of increasing Social Security tax (it needs to go up anyway to compensate for increased longevity to provide a decent living or letting the grasshoppers eat cat food.
        There’s no such thing as free healthcare, so the question is, how do we pay for it? As anybody who follows this blog knows, I think the only viable solution is Medicare-for-all (with increases in the Medicare tax sufficient to pay for it). That would eliminate the disaster that is Medicaid, the public financing of private insurance via tax deductability, the ridiculous overhead of private insurance companies (four times that of Medicare), and the cost associated with the lack of transparency in private insurance reimbursement.

        • M Snow

          I, too, favor Medicare-for-all, but I would much prefer to finance it with a consumption tax rather on one based on labor. Far too much of the economy is now “underground” and immune to the tax burden that those of us in the legitimate economy must shoulder.

          • Andrew Allison

            I agree, but it isn’t going to happen, if for no other reason than it would be harder for our reprehensatives to do favors for their owners.

          • M Snow

            Oh, I have no expectations that such an policy would ever be implemented, just a dream. Love your spelling of “reprehensatives”. I’ll be adding it to the dictionary on my tablet.

        • Ofer Imanuel

          The problem with Medicare for all (and with Medicare) is that there is no motivation on the part of the consumer to limit consumption.
          Additional issues with our health system is that health providers have excessive unnecessary costs (overly expensive education for doctors, lawsuits), and expect excessive unnecessary compensation (partially as a result of the above, but also due to lack of transparency in prices, and lack of consumer motivation.

          • Andrew Allison

            Actually, the lack of incentive to limit consumption is a characteristic of private insurance. It’s the low deductibles and co-pays made possible by private insurance “all-in” risk pools and taxpayer subsidies that encourages extravagant consumption. No argument that the lack of price transparency fostered by the private insurers increases costs, as does the provider overhead associated with multiple payers all doing the same thing.

  • D4x

    Deconstruction at work, one law, one regulation, at a time.

  • FriendlyGoat

    When one considers the near-certain future GOP assaults on both Social Security and Medicare, especially against those not yet benefitting from either, then the probability of Republicans being involved in some “bi-partisan” solution which actually improves (net of their takeaways) the old-age outlook for the lower economic half is—–wait for it—–absolute zero. The GOP may propose all kinds of tax-favored savings vehicles for people who have 1) money to put in them and 2) a predisposition for doing so (because they have money to put in them), and which 3) are favored by the money-making institutions which might manage them. For instance, we could easily imagine loosened rules and higher contribution limits for Roth vehicles where some classes of people have more money to put in them and would do so if allowed. That’s about it. Everything else violates a GOP principle.

    • seattleoutcast

      I will probably not be getting Medicare. Not because of republicans, but because my elders have squandered it. The elder generation is the most entitled that this country has seen. Our government cannot uphold promises that it could never keep in the first place.

      • Andrew Allison

        Relax. The 2016 report of Medicare’s trustees finds that Medicare’s Hospital Insurance (HI) trust fund will remain solvent — that is, able to pay 100 percent of the costs of the hospital insurance coverage that Medicare provides — through 2028. Even in 2028, when the HI trust fund is projected for exhaustion, incoming payroll taxes and other revenue will still be sufficient to pay 87 percent of Medicare hospital insurance costs.[1] The share of costs covered by dedicated revenues will decline slowly to 79 percent in 2040 and then rise gradually to 86 percent in 2090. This shortfall will need to be closed through raising revenues, slowing the growth in costs, or most likely both. But the Medicare hospital insurance program will not run out of all financial resources and cease to operate after 2028.
        The 2028 date does not apply to Medicare coverage for physician and outpatient costs or to the Medicare prescription drug benefit; these parts of Medicare do not face insolvency and cannot run short of funds. These parts of Medicare are financed through the program’s Supplementary Medical Insurance (SMI) trust fund, which consists of two separate accounts — one for Medicare Part B, which pays for physician and other outpatient health services, and one for Part D, which pays for outpatient prescription drugs. Premiums for Part B and Part D are set each year at levels that cover about 25 percent of costs; general revenues pay the remaining 75 percent of costs.[2] The SMI trust fund always has sufficient financing to cover Part B and Part D costs, because the beneficiary premiums and general revenue contributions are specifically set at levels to assure this is the case. SMI cannot go “bankrupt.”.

      • FriendlyGoat

        You will be getting Medicare (or something like it) to the extent you elect government officials who are not bent on killing it. Seriously, the “free market” does not work for the elderly population now or ever, so there is no “good” GOP alternative to some kind of socialized elder insurance. What you personally get is depended on your politics and the political trend in your country.

        I’ll just tell you my personal situation. I hit 65 and went on Medicare six months ago. I bought a Blue Cross Medicare Advantage plan for which I pay an affordable $156.00/month and which involves out-of-pocket spending as well as “coverage”. My claims against Medicare are zero so far. My claims against other purchased health insurance were less than $300-400 during all of ten years prior to reaching age 65. The last three years were an Obamacare exchange plan where I paid premiums in and took zero claims out. I hope, seriously, to be healthy until I am not and then just die quickly and not be a cost burden to anyone.

        But it would be no fun at all to worry EVERY DAY whether one’s old-age savings could be completely wiped out on some episode at hospital “retail” over which no one has any control. It would be no fun for my one son or anyone else’s kids to wonder what day Mom and Dad or Grandma and Grandpa might have to spend every nickel and suddenly either be really eating cat food or depending on the kids for support. There are a lot of sides to this—–and the biggest most worthy goal for the country on the whole subject is to keep us oldsters out of hospitals and nursing homes.

        • seattleoutcast

          If you think anyone under 50 is getting Medicare, then you are truly delusional. We are 20 Trillion in debt. Do you understand the damage this has done? Do you understand the magnitude of our debt? You have sold your children into debt slavery yet you whistle past the graveyard.

          Sure, believe the lie. Think it’s just a partisan issue. Or look at the data:

          Last fiscal year the Federal Government spent $1.417 trillion on Medicare and Medicaid, 9.3% more than the $1.297 trillion it spent the previous year. Last year was not an aberration; it was in fact very close to the historical expansion rate from the 1990s forward. Spending has almost quadrupled on these programs since FY 1998.

          source: https://market-ticker.org/akcs-www?post=231917

          • FriendlyGoat

            If you are under 50, the best thing you can do is either be rich or keep socialized medicine alive—–preferably to such an extent that we stop double-paying for the whole enterprise compared to other countries. Seriously, the “average person” is NOT going benefit from killing elder programs. The old folks are not and their kids are not.

          • seattleoutcast

            So, you just ignored what I showed you.

          • FriendlyGoat

            No, of course not. The USA contains assets valued at MANY, MANY times the national debt.
            It is the pre-eminent economic and military power in the world. And, it prints money. You are going to have the medical arrangements that you and other citizens vote for. If you vote for greater risk and exposure in old age——you will have it. This stuff really is more simple than you think.

          • Isaiah601

            You are not going to convince Comrade FriendlyGoat that math matters. I’m personally not gonna get either Medicare or SS, but we can rest easily that our money will keep Comrade FriendlyGoat in the comfort he deserves.

  • Jim__L

    “State and local pension funds for public employees have been managed
    utterly incompetently, and there are legitimate worries that newly
    created plans for private sector workers would be vulnerable to similar
    mismanagement, leaving workers unprotected.”

    The underlying problem here is probably that the money would be allocated along partisan lines.

  • FrancisChalk

    State pension funds have long been used by Democrat politicians exclusively as a means to garner campaign contributions and votes with nary the slightest concern for the long-term financial viability of such funds. The SEIU and the two national teacher’s unions–NEA and AFT gave $80 million to Democrat candidates in 2016 alone. The consequences for these poor and highly partisan decisions must exclusively fall on these unions and their members. Not one penny of tax money should go to prop up these irresponsible, greedy and corrupt unions.

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