October 19, 2010

Will the U.S. Government Seize Your Private Retirement Accounts? (Updated 5/27/11)

I hate to use the “S” word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers’ retirement accounts. Now, even Uncle Sam isn’t that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans. House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created “guaranteed retirement accounts” for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5% of pay into the accounts, to which the government would pay a measly 3% return. Rep. Jim McDermott, a Democrat from Washington, said that since “the savings rate isn’t going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that’s not generating what we now say it should.” - James Pethokoukis, Will Obama And The Democratic Majority Congress Kill Your 401k Retirement Plan?, October 23, 2008

Teresa Ghilarducci would force all workers to save 5% of their annual income in a new type of retirement vehicle, which she calls a Guaranteed Retirement Account. These savings could not be controlled by workers like IRAs and 401(k) assets, but would instead be deposited with the government. Workers could not touch the money until retirement, she says, and even then the savings could not be drawn out any way workers might desire, but would be converted to an annuity -- a guaranteed stream of income for life. Ghilarducci argues that these new accounts would avoid stock market risks; the government would guarantee that the savings earn a 3% annual return on top of inflation. The government would also pay each worker $600 a year in the form of a tax credit, which would help workers who now earn too little to take advantage of a tax deduction because they owe little or no federal income tax anyway. At the Oct. 7 hearing, Ghilarducci further proposed that Congress address the recent stock market drop by allowing workers to trade their existing 401(k) or IRA accounts for her proposed Guaranteed Retirement Accounts. (Her words can be heard starting at 33 minutes and 23 seconds into the video of the hearing.) - IRAs, 401(k)s and You, FactCheck.org, November 26, 2008

Congress plans to slash social security 'entitlements' at a time when Wall Street has destroyed the home equity and private retirement accounts of potential retirees. Worse, they plan to increase the social security tax, disguised as a “mandatory savings tax.” This added tax would be automatically withdrawn from your paycheck and deposited to a “Guaranteed Retirement Account” managed by the Social Security Administration. Since the savings would be “mandatory,” you could not withdraw your money without stiff penalties; and rather than enjoying an earlier retirement paid out of your increased savings, a later retirement date was being called for. In the meantime, your “mandatory savings” would just be fattening the investment pool of the Wall Street bankers managing the funds. And that may be what really underlies the big push to educate the public to the dangers of the federal debt. - Ellen Brown, Paying Down the Federal Debt When Money Is Already Scarce Just Makes Matters Worse, Web of Debt, March 2, 2010

If you have a 401(k) or equivalent retirement plan, you've probably been watching nervously the past few weeks as your nest egg has shrunken owing to the current turmoil in the markets. The market turmoil has some politicians on Capitol Hill eyeing the end of the 401(k) as we know it. Workforce Management reports on a hearing of the House Education and Labor Committee earlier this month. In her congressional testimony, Theresa Ghilarducci offered a sweetener: "Short-term I propose . . . that the Congress allow workers to swap out their 401(k) assets, perhaps at August levels, for a guaranteed retirement account--just a one-time swap." How would this work? You go back to your districts and meet up with a 55-year-old who had had $50,000 in his account last month and now has $40,000 in the account. He can swap out that $50,000, valued in August, for that guarantee of what would become, if he retires at 62, a $500 a month addition to Social Security. Ghilarducci proposes limiting everyone's ability to take risks (and enjoy the corresponding rewards) and greatly increasing government control of Americans' retirement funds. It is by no means a certainty that Congress or a President Obama would embrace such a proposal, but this is a direction in which things may move if the Democrats make big gains next month. - James Taranto, Eyeing Your Pension Are 401(k)s safe from congressional Democrats?, Walls Street Journal, October 24, 2008

Will Obama Nationalize U.S. Pensions?

That was the serious question I proposed one year ago in my blog — and it’s time to ask that question again.

Why now? Because President Obama has proposed what one of our experts sees as the “first step in stealth nationalization and forced investment of our retirement benefits.”

The bad news comes as part of a tax package said to be aimed at middle-income Americans in Obama’s State of the Union speech, as reported by Business Week magazine.

Obama’s stealth proposal is billed by him as an “effort to increase retirement savings by requiring all businesses to offer automatic IRA accounts,” but it drew immediate opposition from U.S. small associations. Obama claims the plan would let employees automatically enroll in direct-deposit retirement accounts and expand matching tax credits.

Dangerous First Step to Nationalization

But Larry C. Grossman, CFP, CIMA, managing director of Sovereign International PensionServices (no relation) and a member of our Sovereign Society Council of Experts, sees the Obama idea as a dangerous move. Says Larry,

“If you read it closely you will see the heart of the proposal is the requirement to keep 10% of the funds in U.S. Treasuries. At the stroke of a pen the president has found a way to bolster the declining demand for Treasuries. I believe forcing retirement plans into U.S. government control is the next step.”

This alarm was echoed by Ron Holland, editor of the Inner Circle Intelligence Report published by BFI Consulting AG, a Swiss financial advisory firm, and a long time member of the Sovereign Society Council of Experts. Says Ron,

“I think the mandatory IRAs just proposed by Obama is the first step in stealth nationalization and forced investment of our retirement benefits to support the U.S. Treasury debt market.”

Should you be worried about this latest radical Obama move?

There is an estimated $15 trillion worth of private retirement plans in the United States; $4 trillion in IRAs alone; this constitutes 35% percent of all private assets in America. That is what Obama government is eyeing to help plug the multi-trillion dollar deficit in his big spending budget.

You could call this move Obama’s attempt to “pull an Argentina.”

What’s “An Argentina?”

In October 2008, Peronista president Cristina Kirchner of Argentina confiscated US$30 billion worth in that country’s ten privately managed pension funds. This was presented as an emergency measure to meet her faltering government’s financing costs. The Argentine congress went along with this radical property grab of individual retirement accounts, 401Ks and the like.

Could this happen in America?

Larry Grossman’s opinion,

“There have been several different academic papers published which have given rise to rumors. At least one congressional hearing on nationalizing pensions has been held. It is difficult to decide in what form it would take if something like this occurred in the U.S. Many believe that if indeed this is approaching, the best way to protect your assets is to place your retirement funds offshore now.”

Ron Holland says,

“I believe we must fight this proposal and similar plans or else the private retirement system and our retirement wealth will be history in a few short years.”
Ron has produced a special report on this radical grab entitled, “The Obama Retirement Trap Has Started!

Act Now

In my opinion, adopting such a retirement confiscation policy would be another major blow to Americans’ confidence and to any chance of economic recovery; it would further devalue the dollar; and it would destroy what little remains of the credibility of Obama and his socialist government.

Folks, I served in the U.S. Congress when Democrats were overwhelmingly in control. I’ve seen what happens when the Republicans are in charge, as well. Meaning simply, anything can happen — so hold on to your wallet…and your retirement account!

Obama Executive Order Moves Mandatory Savings Account Scheme Forward

The John Birch Society

The chairman emeritus of The Council on Foreign Relations, Peter Peterson would like to control your new mandatory savings account and president Obama is doing his best to accommodate him.

In his State of the Union address on January 27th, president Obama announced that he would be forming by executive order a biparitsan budget commission. On February 18th, he made good on that pledge.

In his address to the nation, the president said this commission would be patterned on the one envisioned in legislation introduced by senators Conrad and Gregg that had been defeated in the U.S. Senate just the day before. However, the commission envisioned by Conrad and Gregg was actually the brainchild of billionaire Wall Street insider Peter Peterson and the foundation bearing his name.

Peterson has been pedaling the idea of an independent commission as the way to address the budget deficit and debt crisis of the federal government since at least July 2008, when his foundation purchased and released the documentary film IOUSA. As stated in the Peterson Foundation press release issued before Obama's speech,

The proposed commission should "not rule out any potential solutions in advance--all spending and revenue related options should be on the table." (italic emphasis as in the original)

The all options on the table talking point has already been confirmed by the two co-chairs now named to the commission by president Obama: former Clinton Chief of Staff, Erskin Bowles and former Senator Alan Simpson of Wyoming. In a weekend interview on the Bloomberg News show Political Capital With Al Hunt, Bowles and Simpson also professed their desire to have Peterson's bagmen Conrad and Gregg join them on the commission.

Mr. Peterson, his foundation and the collaborators he has picked up along the way know what ails us and they are going to use what should properly be called The Peterson Commission as the delivery vector for their cure. The problem of course is that our cure is coming from the same crowd that intentionally infected us with their mortal canker in the first place.

What kind of crowd Peterson been running with? His career highlights include:

  • an early stint as CEO of the later to be infamous Lehman Brothers,
  • an appointment to the Independent Commission on International Development Issues headed by Socialist Internationale president Willy Brandt,
  • chairman of the New York Fed, chairman and chairman emeritus titles at The Council of Foreign Relations, and
  • co-founder of the the Blackstone Group the outfit charged with funneling federal bailout money through AIG to Goldman Sachs and other undisclosed parties.

Among the options being put on the table for The Peterson Commission, the most novel is the Peterson Foundation's recommendation that American wage earners should be forced into participating in mandatory savings accounts.

These worker saving accounts would be like what Social Security was originally sold to be -- retirement savings accounts mandated by the federal government that workers (and their employers) would pay into during their working years so that they could have something to support themselves with in retirement. The twist on this version of the scam would be that this time there really would be individual accounts with a workers name on them. And a special bonus; rather than being managed by the federal government, they would be managed by private investment firms...like the Blackstone Group that Peter Peterson just happens to operate.

Now voluntary savings would be one thing, but the adjective "mandatory" has been used. Peterson himself used the word during the live discussion that took place immediately following the premier showing of IOUSA in select theaters around the country. That interview is the copyrighted material of the Peterson Foundation. For now, all we have to titillate video fans is the short clip of Peterson using the word "provocative" as he lead into his explanation of why mandatory savings are required.

We do have the Peterson Foundation down in writing though using the word "mandatory." The day after the premier of IOUSA, Peterson's hired gun, David Walker, former Arthur Anderson board member GAO director gave a presentation at a town hall meeting hosted by Virginia Congressman Jim Moran. On slide number 27 of Walker's presentation we read:

"Consider mandatory supplemental individual savings accounts on a payroll deduction basis (e.g., a minimum 2 percent payroll contribution and a program designed much like the Federal Thrift Savings Plan with a real trust fund and real investments)"

Mandatory is not the only red flag in Walker's presentation. That the Peterson Foundation plan for all wage earners might be patterned on the Federal Thrift Savings Plan (TSP) is also provocative.

The TSP, available for federal employees like congressional staff workers, has over $200 billion of assets (on paper anyway). About half these assets are in special non-negotiable US Treasury notes issued especially for the TSP scheme. The other half are invested in stocks, bonds and other securities.

The US Treasury manages its IOU's in the plan. The nearly $100 billion in the other half of the plan is managed by Blackrock Financial. And, yes, shock, Blackrock Financial is a creation of Mr. Peterson's Blackstone Group. In fact, the TSP and Blackstone were birthed almost as a matched set. It's tough to fail when you form an investment management company at the same time you can gain the contract that directs a percentage of the Federal government payroll into your hands. Putting in the federal law that created the TSP the stipulation that the fund management company will have all voting rights for the shares held was a nice touch too.

Mr. Peterson and his friends have demonstrated that they know well how to play the system. It is not hard to imagine that the Obama's bipartisan Peterson Commission will be used to develop a done deal, must pass piece of legislation to be introduced in the coming lame duck session of Congress.

Using the Peterson TSP scheme as a guide, we should expect then that among the many austerity measures to be initiated by this legislation will likely be a program that, under the guise of funding a retirement savings account, a percentage of every American worker's paycheck will be siphoned off into the control of Mr. Peterson and his fellow banking syndicate cronies. It is also likely that a significant portion of this mandatory retirement savings money will be earmarked for purchasing the ultimate supposed safe haven investment: U.S. Treasuries. That is, as the smart money begins to bail en masse from Treasury auctions, plans are already in the works to have Americans to buy their own toxic debt.

Americans will thus be forced into a new scheme under which they will be required to hold IOU's from the federal government. Mandatory savings accounts will be used as both a stealth social security tax increase and a guaranteed income stream for the likes of Goldman Sachs, Merrill Lynch and Morgan Stanley and of course Mr. Peterson's Blackstone Group.

Bottom line: Mr. Peterson is not concerned about solving the nation's budget crisis as much as he is making sure that he doesn't miss a chance to line his own pockets at our expense. If we are smart we will kill The Peterson Commission before it gets off the ground. The best way to do this is to convince Republican minority leaders in the Congress that they should refuse to appoint Republican members to the commission.

Contact Senate GOP Leader Mitch McConnell of Kentucky and House GOP Leader John Boehner of Ohio, immediately. Tell them that Republicans should not participate in a scheme designed to take advantage of a lame duck session of Congress. If what the Peterson Commission is planning is sincerely in the best interests of the American people, its recommendations should be made public either well BEFORE Congress adjourns for the November election, or AFTER the 112th Congress is seated in 2011. Anything done in between is sure to be devious.

Take action now, or you may soon be forcibly drafted into paying for dodgy US Treasuries out of your weekly paycheck — while handing some shady investment banker a transaction fee on top of it.

Government Prepares to Seize Private Pensions

October 12, 2010

The government is preparing to seize the private 401(k) pensions of millions of Americans while enforcing an additional 5 percent payroll tax as part of a new bailout program that will empower the Social Security Administration to redistribute pension funds in a frightening example of big government gone wild.

Public pension plans have been so aggressively looted already by the government that cities and counties face a $574 billion funding gap, according to a CNBC report.

That black hole is set to be filled by a new proposal that will “fairly” distribute taxpayer-funded pensions to everyone, by confiscating the private wealth of millions of Americans. Its proponents express staggering arrogance in thinking that they can just steal money people have worked for decades to accrue as if it’s their own.

Not only would the government confiscate 401(k) pensions, it would also impose a mandatory 5 percent payroll tax payable by everyone, according to a hearing chaired last week by Sen. Tom Harkin (D-Iowa), Chairman of the Health, Education, Labor and Pensions (HELP) Committee.

“This would, of course, be a sister government ponzi scheme working in tandem with Social Security, the primary purpose being to give big government politicians additional taxpayer funds to raid to pay for their out-of-control spending,” writes Connie Hair.

The hearing was a platform for advocates of Guaranteed Retirement Accounts (GRAs), a program authored by Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York. Back in October 2008, Ghilarducci testified to Congress [audio of hearing here] that 401(k)s and IRAs should be confiscated and converted into universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

“You don’t hold hearings on something you don’t intend to do,” points out the Market Ticker blog. “I hate it when I’m right. I hate it even more when tens of millions of Americans are going to get reamed to pay for the crimes of the handful on Wall Street, and their crony enablers in Washington DC.”

The GRAs would be enforced by means of a mandatory savings tax equating to 5 percent of an individual’s annual paycheck deposited to the GRA. Social Security and Medicare taxes would still be payable, employers would no longer would be able to write off their contributions and capital gains would be taxable year-on-year. In addition, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts.

During a Seattle radio interview in October 2008, Ghilarducci explained the motive behind the plan, stating,

“I’m just rearranging the tax breaks that are available now for 401(k)s and spreading — spreading the wealth.

However, as we painfully learned in the immediate aftermath of the original $700 million dollar bailout, which was originally sold on the basis that it would be used to pay off bad debt, governments that propose “spreading the wealth” under socialist-style financial reforms almost always collect the wealth under the pretext of being the saviors before greedily hoarding it all for themselves.

The GRA program is being pushed by the Economic Policy Institute, an organization housed on the third floor of the building occupied by the George Soros-funded Center for American Progress. The Center for American Progress is a think tank headed by Bill Clinton’s former chief of staff John D. Podesta, who was also head of Barack Obama’s presidential transition team after the 2008 election.

In preparing to seize private pensions, the United States is going the same way as Argentinean government, which in 2008 nationalized the country’s private pension plans, known as AFJPs, confiscating the wealth of millions.

“We have no doubt that here the right to private property is being violated. Not just for us but for society and the world, this is a clear confiscation,” said opposition Radical Party’s Ernesto Sanz at the time.

How will Americans react to having not only their wealth but their nest egg for future generations brazenly confiscated by the government in one fell swoop? If this doesn’t prompt widespread rioting and civil disobedience in America on behalf of the besieged middle class, then nothing will.

Don’t be under any illusions, if you don’t have a private pension and think this won’t affect you — think again. Once the pretext has been created that the state can simply confiscate privately earned wealth, they can then come after anything, your gold, your home, your kids and eventually your very freedom. Once the vampire of big government gets a taste for blood, the teeth will only sink in further, and America’s resemblance to third world tyrannies will rapidly accelerate.

Will the United States Government Seize Your Retirement Accounts?

Bonds Market
July 25, 2010

There is growing buzz on the internet and around office water coolers all over the country regarding the subject of the government confiscating the retirement account of its American citizens for the purpose of satisfying our national debts. One of my clients sent me an email from a gold broker who even went as far as recommending that he liquidate all of his retirement assets and put the money into physical non-confiscatable gold, better known as pre-33 coins and this way his money will both increase in value and be safe from all government confiscation.

While I do believe that gold is a good investment right now, due to the fact that the stock market is so weak and volatile, I would not suggest liquidating your retirement accounts to purchase gold; I would simply recommend setting up self directed retirement account, strictly for the purpose of holding physical gold (not gold stocks). This would avoid the tax penalties of withdrawal, because you are basically rolling over your money from your existing retirement accounts, into what is known as a gold IRA or precious metals IRA. The IRS basically says that as long as the gold is stored with a third party storage facility then you are ok to invest in gold and other precious metals and hold them within your self directed IRA.

There is no grand government scheme or plot to seize your retirement accounts. These rumors all stem from a committee hearing held on October 7, 2008. At this meeting, one house member suggested that it may be a good idea to create a new type of retirement account, called a guaranteed retirement account (GRA). This “GRA” would perhaps allow individuals to rollover their existing 401k’s or IRA’s into a “GRA” and receive a secure-government guaranteed return of 3%.
Audio of the Hearing
(Her words can be heard starting at 33 minutes and 23 seconds into the video of the hearing.)

After this meeting the conservative John Locke Fountain, of Raleigh, N.C., released a publication with the following headline, “Dems Target Private Retirement Accounts: Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs.” The report is wrong. There’s been no such suggestion by the government.

The House Education and Labor Committee held hearings On October 7th 2008 where Teresa Ghilarducci a professor at the New School for Social Research in New York City, suggested the following:

Ghilarducci, Oct. 7: I propose … that the Congress allow workers to swap out their 401k assets, perhaps at August levels, for a Guaranteed Retirement Account. Just a one-time swap, trading your 401(k) for a Guaranteed Retirement Account that will be composed of the equivalent of government bonds that pay a 3% real return.
Ghilarducci went further to suggest that a $600 tax credit should be given to those who make contributions into these government retirement accounts. These proposals are very big ideas and very controversial, but they in no way suggest any seizure of American citizens retirement accounts.

While we are on the subject of big ideas, I have one of my own for the members of congress to consider, maybe the government should give bigger tax breaks for those who use their self directed retirement account to purchase real estate, particularly bank owned real estate that the bank has seized through foreclosure. This would immediately have a positive impact on the economy. In a recession, real estate has historically been a leading indicator as to the direction of the major markets. When the real estate market falls, stocks follow, when real estate rises stock do the same. This seems to be the traditional ebb and flow of our markets. If more Americans knew that they could use their existing retirement account to buy property instead of stocks, then we could be on our way to economic recover very quickly. What better way to enlighten Americans than to offer a tax incentive for making such purchases.

Currently there are two trillion dollars sitting in American retirement accounts and only 2% of them are “self directed retirement accounts” — which simply allow you to use your IRA, 401k and various other retirement accounts to purchase real estate, businesses and other no traditional investments.

American citizens could individually leverage their retirement accounts and purchase ALL the foreclosed real estate in our country. Everybody would win. The banks would get these none performing assets off their books and start loaning out money again, this would stimulate the economy, the retirement account holders would own the best asset that the country has to offer (land) and the rents would build the retirement accounts month after month. The real estate market would rebound and stocks would follow suit. It may sound nuts, but it’s better than another trillion dollar bail out. The “Bail Out” days are over. Americans need to wake up and begin anew; think smartly and act more boldly than we have in the past.

Government's Plan for Your 401(k) and IRA

February 1, 2010

Here they come.

Zero Hedge has this post:

The Treasury Is Soliciting Your Feedback Regarding The Proposed Annuitization Of 401(k) (2/1/2010)

Yes, slowly but surely it is happening. In a federal notice filed earlier, the DOL and Treasury are soliciting a response on what has been on many investors' mind, namely the process of converting 401(k)s into annuity-like products. To wit:

The Department of Labor and the Department of the Treasury (the "Agencies") are currently reviewing the rules under the Employee Retirement Income Security Act (ERISA) and the plan qualification rules under the Internal Revenue Code (Code) to determine whether, and, if so, how, the Agencies could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement. The purpose of this request for information is to solicit views, suggestions and comments from plan participants, employers and other plan sponsors, plan service providers, and members of the financial community, as well as the general public, on this important issue.
A cursory read of the document does not seem to ask about a flat out regulatory requirement for annuitization. We point your attention to item 13:
13. Should some form of lifetime income distribution option be required for defined contribution plans (in addition to money purchase pension plans)? If so, should that option be the default distribution option, and should it apply to the entire account balance? To what extent would such a requirement encourage or discourage plan sponsorship?
For readers who feel compelled to respond to this increasignly socialistic and ludicrous development, we suggest you voice your anger at the following address:

e-ORI@dol.gov. Include RIN 1210-AB33 in the subject line of the message.

This blog has reported on this issue since June last year, most recently in this post in January 2010. As I said in my previous posts on the matter, this idea has been put into words by non-governmental entities -- Brooking Institution (Mark Iwry) and Heritage Foundation (David John).

After virtually running around on the Internet trying to locate the document that Zero Hedge is citing (Department of Labor has such a hostile site for people looking for information), I've finally found it. Here it is:
DEPARTMENT of LABOR Employee Benefits Security Administration
What I'm wondering is this: Is this a regulation that would require Congressional approval, or could it be signed into law by an executive order signed by the president?

If it is the latter, then we could wake up one day and find out that we would be required to liquidate at least portion of 401K/IRA and buy some special Treasury securities that we would have to keep for 10, 20, 30, 40 years.

Again, should you wish to protest (or support, I guess, if you are hard-core socialist), the email address is: e-ORI@dol.gov, and include RIN 1210-AB33 in the subject line. Sphere: Related Content

Employee Benefits Security Administration (Department of Labor)

# of Employees: 941
2011 Budget:

The EBSA protects the pensions, health and other benefits for more than 15 million Americans covered by more than 708,000 private retirement plans, 2.8 million health plans, and similar numbers of welfare benefit plans with $5 trillion in assets.

The agency is charged with administering and enforcing the Employee Retirement Income Security Act (ERISA) of 1974, which sets minimum standards so that private sector benefit plans are operated with sound financial practices, appropriate disclosures and security for the funds.

Enforcement operations protect workers by acting to eliminate fraud, abuse and mismanagement of benefit funds.

EBSA also has oversight duties of COBRA — the law covering health-care continuation after termination of employment — and HIPAA healthcare portability.

EBSA and its senior staff could also have a major role in implanting the March 2010 health-care reform overhaul as it regulates so many health plans that will be affected.

Fact Sheet: Lifetime Income Options for Retirement Plans (February 26, 2010)
U.S. Department of Labor
Employee Benefits Security Administration
February 26, 2010

The Department of Labor’s Employee Benefits Security Administration, in conjunction with the Department of the Treasury, has published a Request for Information asking for ideas on how to help reduce the chances that workers will run out of funds during their retirement years.

What is a Request for Information?

A Request for Information (RFI) is not a rule or regulation. It is a pre-rulemaking act by an agency, or in this case two agencies, to collect information and data on a specific topic. This RFI is the starting point for a discussion of whether, or to what extent, the agencies might take some action to address identified problems facing today’s retirees.

What is the Focus of the RFI?

An ever increasing number of workers are looking to their defined contribution plans for their retirement security, but at the same time many workers are receiving their retirement benefits in lump sum distributions. This could increase their risk of not having an adequate income during retirement. Recent reports by the Government Accountability Office and the Department of Labor’s ERISA Advisory Council, a 15-member council representing employees, employers, the general public, and industry, have documented this risk.

The RFI is merely a vehicle to engage interested persons in exploring ways that the Agencies and the private sector can work together to ensure that workers have the tools they need to help ensure their retirement savings last a lifetime.

How Does the RFI Address this Problem?

The RFI asks a number of questions on a broad range of topics designed to build a public record that will help both of the Agencies assess the magnitude of the problem and then determine what, if any, actions might be appropriate to address the problem. The Agencies do not have any pre-determined outcomes or goals, other than to engage interested persons in an open, broad, and objective dialogue of issues and solutions.


  • Traditionally, retirement security was provided to many workers through defined benefit pension plans sponsored by their employers; such plans are typically required to make annuities available to participants at retirement. Department of Labor data, however, show a trend away from employer sponsorship of defined benefit plans, toward sponsorship of defined contribution plans, e.g., 401(k) plans, in which benefits are typically distributed in a lump sum.

  • The number of active participants in defined benefit plans fell from about 27 million in 1975 to approximately 20 million in 2006. By contrast, the number of active participants in defined contribution plans increased from about 11 million in 1975 to 66 million in 2006.

  • The result of these trends is that employees rather than employers are increasingly responsible for assuring the adequacy of their retirement savings. In addition, because defined contribution plans typically distribute retirement savings in a lump sum payment, employees are also responsible for ensuring that their savings last throughout their retirement.

Overview of the Request for Information

  • On February 2, 2010, the Department, in conjunction with the Department of the Treasury, published an RFI as a first step towards exploring what steps might be taken to enhance retirement security.

  • The RFI explores whether and how to enhance retirement security for employees in defined contribution plans by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement.

  • The RFI asks 39 specific questions designed to obtain focused commentary to help the Department determine what, if anything, the next steps should be.

  • Responses to the RFI are available for public inspection at http://www.dol.gov/ebsa.

This fact sheet has been developed by the U.S. Department of Labor, Employee Benefits Security Administration, Washington, DC 20210. It will be made available in alternate formats upon request: Voice phone: 202.693.8664; TTY: 202.501.3911. In addition, the information in this fact sheet constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.

Private sector defined benefit (DB) plans, private sector defined contribution (DC) plans, and state and local pension plans have all suffered declines of over 25 percent of their 2007 values, but that is simply another way of stating that the three types of plans (in aggregate) had basically the same portfolio composition at the end of 2007. The one exception is the federal government's civilian retirement plan, which (for the DB portion) is similar to Social Security insofar as the investments are completely in non-marketable government debt issues... To date, the most immediate effects of the stock market crash have been on DC participants planning to retire in the next few years. However, all DC participants observe, when reading their quarterly statements or checking on-line balances, that they have incurred dramatic losses... The extent to which the 2008 stock market crash affected pension participants obviously depends on the extent to which those participants were invested in the stock market before the crash. We use data from the Federal Reserve Board's Flow of Funds Accounts to measure the aggregate change in pension assets across the four broad categories of plans: private sector DB, private sector DC, state and local, and federal civilian. Of these, all but the federal civilian employee plan were greatly exposed to the drop in equity prices. This distinction is reflected in the approach to funding pensions before 2008; all but the federal civilian plan relied on equity exposure to achieve funding targets, which allowed lower contribution rates. - How will the stock market crash affect the choice of pension plans?, National Tax Journal, September 1, 2009

Department of Labor/Department of the Treasury, Joint Hearing on Lifetime Income Options (September 15, 2010)

Testimony of Phyllis C. Borzi, Assistant Secretary of Labor, Employee Benefits Security Administration Before the US Senate Committee on Health, Education, Labor and Pensions (October 7, 2010)

Draft: Testimony of Phyllis C. Borzi, Assistant Secretary of Labor, Employee Benefits Security Administration Before the US Senate Committee on Health, Education, Labor and Pensions (October 7, 2010)

Lifetime Income Options for Participants and Beneficiaries in Retirement Plans (RIN: 1210-AB33, Publication ID: Spring 2010)

Lifetime Income Options for Participants and Beneficiaries in Retirement Plans (RIN: 1210-AB33, Publication ID: Fall 2010)

Office of Regulations and Interpretations Employee Benefits Security Administration Room N-5669 U.S. Department of Labor 200 Constitution Ave., NW Washington DC 20210 RE: Lifetime Income Solutions Request for Information/RIN 1210 – AB33 Ladies and Gentlemen: On behalf of T.

Office of Regulations and Interpretations Employee Benefits Security Administration Room N-5655 U.S. Department of Labor 200 Constitution Avenue, NW Washington, DC 20210 Attention: Lifetime Income RFI (RIN 1210-AB33) Ladies and Gentlemen: Prudential Financial, Inc.

Thank you for giving us the opportunity to offer our insights on what steps could be taken to enhance the retirement security of participants in employer-sponsored retirement plans and IRAs.

Government Seizure of 401(k) / Pensions to “Fix” Social Security?

20s Money
August 18, 2009

I listened to a long explanation by Neal Boortz on his radio show today on why he thinks that in the name of saving Social Security, politicians could easily seize outstanding pension funds including money in IRAs and 401(k) plans. Interestingly, I also had a spike in my search traffic for my previous article: Should Government Take Over Your 401(k) [October 28, 2008].

Whatever your political stance, it is a fact that there are some politicians with some level of power in Washington that want to either tax these funds (that are supposed to be off limits from government officials) or potentially even seize them in the name of the “public good.”

Obama has made it known that, after tackling health care, he wants to “fix” Social Security. The push back from the public on his health care reform agenda may delay or even prevent Obama from moving forward with plans to shore up Social Security. If seizing retirement funds and accounts is in any way a part of a future plan to shore up Social Security, well, I sure hope that his plan never sees the light of day.

Remember, the Social Security trust fund is not a trust fund. It has no money in it. It’s merely IOUs from the government. Why? Because the government spends the money collected by social security taxes in order to fund government programs and buy votes. Make no mistake about it, if anybody in the government proposes seizing private retirement funds, it’s not to shore up Social Security; rather, it is to find money that government previously cannot touch and use it to buy more votes.

A good article over at WSJ discussing scary death panel scenarios with government health care has a great quote:
Free people can treat each other justly, but they can’t make life fair. To get rid of the unfairness among individuals, you have to exercise power over them. The more fairness you want, the more power you need. Thus, all dreams of fairness become dreams of tyranny in the end.

Withdrawing from IRA to Avoid Potential for Federal Seizure?

ObjectivismOnline.net Forum
June 6, 2010

I have read repeated claims that as the government becomes more and more broke, they might tap into the trillions of dollars in retirement accounts to keep the money flowing, under the guise of offering a mandatory retirement account (Joe Biden called it a "Guaranteed Retirement Account"). This would probably just become an unsustainable Ponzi scheme like Social Security.

Granted, this could just be a scare tactic by the Republicans, but is there any precedent of retirement seizure occurring? I guess with FDR's seizure of gold from bank safe deposit boxes, anything is possible.

Could it be a good idea to withdraw early from an IRA program, take the 10% penalty and income tax hit, and keep the money in a safe, or better yet convert it to a non-fiat commodity?

(Obviously this depends on how close to retirement you are.)

On October 21, 2008, Argentina's government, led by Peronist President Cristina Fernández de Kirchner and her predecessor, Néstor Kirchner, announced their intention to expropriate $30 billion held by Argentine citizens in private pension funds [similar to 401(k) retirement savings accounts]. The Kirchners need the money to refinance old bad debts so that they can borrow yet more money to keep the country afloat. - Kirchner's Make a Grab for Private Pensions to Bail Out Argentina, Heritage Foundation, November 7, 2008

The last time the government sought to tap workers' savings to help finance debt payments was in 2001, just before it stopped servicing $95 billion of obligations. - Argentina Default Looms, Pension Fund Seized, Free Republic, October 22, 2009

Question of Gold Seizure Hits Radar Screen
Retirement Accounts Are Not Protected from IRS Collection Actions
All the Things the IRS Can Take…Even Retirement Accounts!
Asset Forfeiture: Federal Appeal Upholds Seizure of Cash Despite Lack of Drugs
Internal Revenue Manual: International Seizures and Forfeitures
Toward an American Police State: U.S. Government Seizures

Fed to Steal State Pension Funds: It’s Not a New Idea

American Daughter
Originally Published on August 24, 2009

... From the Friday, January 29, 1993, issue of the Washington Post we have this article (archived by the Seattle Times) — Budget Cuts Vs. Social Security — Tap Pension Funds Worth $4 Trillion, Panel Tells Clinton — Employers Sense Danger ‘Once They Get Taste Of This’:

A bipartisan government commission yesterday recommended to the Clinton administration that it launch an aggressive effort to tap the retirement funds of millions of Americans to help pay for rebuilding the nation’s roads, bridges and highways and give the economy a lift.

President Clinton has indicated past support for the concept, which would represent an unprecedented effort by the federal government to deal with its budget woes by turning to the more than $4 trillion in cash, stocks and other investments held by pension funds.

Some opponents in the pension industry, who worry about protecting retirees, said they fear Congress might revoke the generous tax treatment afforded pensions if they actively oppose the initiative.

The recommendations by the Congressionally-chartered Infrastructure Investment Commission, which has had the strong support of Senate Finance Committee Chairman Daniel Patrick Moynihan, D-N.Y., include establishing the National Infrastructure Corp. It would be a new government-sponsored corporation that would encourage at least $30 billion in investment by pension funds. Several billion dollars in seed money for the new corporation would come from a new energy tax now under consideration.

Energy tax. Sound familiar?

And two people who watched the Democratic convention in 1996 said:

I was absolutely horrified to hear the Democrats propose at their convention that the government should take money out of private pension funds to sink into yet more federal programs.

The Democrats have already raided the Social Security fund to pay for their unending government spending. We do not need them ruining our pension funds the same way!

This is another Democrat scheme to take even more of our money without having to face public opposition to tax increases. We already have to work over four months a year just to pay the taxes on our wages — we should not have to sacrifice our pensions, too!

Vote against the Democrats and Clinton while you still have money in your pension fund, or you may not have any pension fund left when you retire.

The Argentine government seized control of the private pension funds in that country last fall. At that time the Telegraph considered the possibility that other countries would follow suit — Argentina seizes pension funds to pay debts. Who’s next?, October 21st, 2008:

Here is a warning to us all. The Argentine state is taking control of the country’s privately-managed pension funds in a drastic move to raise cash.

Should we worry about our pensions?

It is a foretaste of what may happen across the world as governments discover that tax revenue, and discover that the bond markets are unwilling to plug the gap. The G7 states are already acquiring an unhealthy taste for the arbitrary seizure of private property….

Obama Retirement Trap

Right Wings News
January 25, 2010

As noted earlier, it's only a matter of time until our insatiably greedy socialist rulers seize our retirement accounts. Another ominous warning:

Washington is in a desperate search for more revenue and a solution to the future financing of the trillions in national debt obligations currently held by foreign central banks and investors. Economists, politicians and smart investors know the dollar's days as the world reserve currency are numbered as is our ability to finance the national debt.

Although the historical government solution to unsustainable government debt loads has always been the destruction of the debts by currency depreciation and eventual hyperinflation, there is always an intermediate step used to buy more time for the politicians in power. This action … is wealth confiscation …

The largest source of liquid private wealth remaining in the United States [is] the $15 trillion in private retirement funds and the ultimate ownership, control and future of these funds have already been compromised and exchanged for the favorable tax treatment of private retirement plans. Congress writes the laws, so they can tax, penalize, hold your funds hostage and, although they'd never use the word, "confiscate" your assets at their discretion.
This confiscation will take the form of compelling participation in a Social Security-style Ponzi scheme that will pay a 3% return (instead of the ~10% you'd make on the stock market in the long term). When you die, Big Government will keep half of what's left in the account.

Despite the full-throated support this multi-$trillion heist can count on from the statist media, many would resist having their life savings stolen by ignominious blackguards. That's why governments create crises, which as Rahm Emanuel observes, should never be allowed to go to waste. Likely crises that might precipitate seizure of retirement accounts include:
• Loss of Triple-A Status for U.S. Treasury Bonds
• Terrorist Attack or Military Disaster
• Another Economic Meltdown
All three crises are not only possible under our current leadership, they appear to be policy objectives. How else could you explain Comrade Obama's pro-terrorist policies, economy-crushing initiatives (Cap & Trade, ObamaCare), and obviously unsustainable spending?

We are heading straight for an iceberg because our rulers are steering for it deliberately. When we hit, one of the first things to go overboard will be private ownership of pension accounts.

On a tip from Funkendunkel. Cross-posted at Moonbattery.

Meltdown: Retirement Funds, Financial Assets Vulnerable to Government Seizure

February 4, 2010

As the Obama administration assures Americans that 'there are signs of hope' in the economy, the facts say the opposite. The forecast is so dire, in fact, that the retirement funds and financial assets of all Americans are vulnerable to government seizure.

Economists and market analysts who predicted the last meltdown are joining in a united chorus to warn that yet another is on the way for 2010, and this one will be much worse than the last.

In an alarming piece at WRSA the assertion is made by several respected authorities on economics that the U.S. Treasury Department will attempt to seize retirement accounts and other private assets in order to address the growing probability that a financial meltdown is on the way for the United States.

Karl Denninger at Market Watch put it this way:

Now this is a guaranteed rape job.

In a short conversation this noontime that CNBC apparently has omitted from their archives (Why's that folks?) Rick Santelli was talking about a potential to effectively force money into the Treasury market.

Where would they get this?

From your 401k and IRA accounts!

From Businessweek:

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

Let me tell you what this is — it is an attempt to prevent the collapse of the Treasury market!

The upshot? This is tantamount to outright theft, courtesy of the federal government. And your life's savings are at stake.

Further, Denninger blows the whistle on the supposed 'option' that gives Americans a 'choice' of whether or not to put their funds into short-duration Treasuries:

I have no quarrel with the government mandating that you have a choice in your IRA or 401k account to buy short-duration Treasuries much like the "G" fund that government and civil-service workers have.

But "choices" have a funny way of turning into mandates, and this looks to me like a raw admission that Treasury knows it will not be able to sell its debt in the open market so they will effectively tax you by forcing your "retirement" money to buy them!

In other words, the U.S. Government sees a massive financial storm on the horizon that is moving in fast. The Feds know that under current conditions with our 13 trillion-dollar debt there is no way we can weather that storm. And they are fully aware that at least 3 trillion dollars are sitting there in the private sector in IRAs, retirement accounts, and 401K plans.

By effectively seizing those accounts through the back-door method, carefully avoiding referring to the plan as a 'seizure,' the Feds can get their hands on funds that they can convert to Treasuries, which will in turn help the government weather the coming storm.

But the losers are you and me. Be prudent. Protect yourself.

For commentary on a variety of issues, visit my blog at The Liberty Sphere.

Ireland to Tax Private Pensions to Keep Government Jobs Spending from Adding to the National Debt

Economic Policy Journal
May 10, 2011

The Irish government plans to institute a tax on private pensions to drive jobs growth, according to its new jobs program strategy, announced today, reports BI.

Problem 1 with this is that by taxing one group, you eliminate jobs that would have been created by that group. Instead what happens is that the money is put through the government meat grinder and jobs are created in a central planning style that have little to do with what is really required in an economy based on the wishes of consumers.

The tax on private pensions comes about because of the poor way the Irish government has run its finances to date. It has lost its ability to increase revenue in any other way, even by borrowing. It can't sell debt due to soaring interest rates, and the EU-IMF has instituted severe spending rules as part of its bailout, yet, the desperate Irish government has still figured out a way to tax and spend.

The tax on private pensions will be 0.6%, and, supposedly last for only four years. Somehow, I doubt the termination date, think more in terms of a higher "emergency" higher rate.

Bottom line: The nature of modern day governments is to tax and spend. Ireland is a little further down the road than the United States, but not much. Politicians of every stripe will go after every pool of money they see.

Unless there is a fundamental change in attitudes about who deserves to be elected (very, very unlikely) what is going on in Ireland now is just a preview of what will eventually go on here in the United Sates.

Be prepared.

Irish Bombshell: Government Raids Private Pensions to Pay for Spending

Business Insider
May 10, 2011

The Irish government plans to institute a tax on private pensions to drive jobs growth, according to its jobs program strategy, delivered today.

Without the ability sell debt due to soaring interest rates, and with severe spending rules in place due to its EU-IMF bailout, Ireland has few ways of spending to stimulate the economy. Today's jobs program includes specific tax increases, including the tax on pensions, aimed at keeping government jobs spending from adding to the national debt.

The tax on private pensions will be 0.6%, and last for four years, according to the report.

From the jobs initiative release:
The various tax reduction and additional expenditure measures which I am announcing today will be funded by way of a temporary levy on funded pension schemes and personal pension plans. I propose that the levy will apply at a rate of 0.6% to the capital value of assets under management in pension funds established in the State.
It will apply for a period of 4 years commencing this year and is intended to raise about €470 million in each of those years. The levy will not apply to pension funds established here and providing services and benefits solely to non-resident employers and members. Further details regarding the proposed application of the levy are set out in the Summary of Initiative Measures.
Ireland's ability to levy further taxes on other parts of the economy is restricted because its economic growth has been inhibited in the wake of a financial crisis that crippled its banking sector and decimated its public finances.

Unwilling to budge on the country's low corporate tax rate, Enda Kenny's Irish government has chosen to target pensioners for funds to grow the economy. Whether it turns out to be an example to other countries seeking alternative ways to raise revenues with aging populations is yet unknown.

European Nations Begin Seizing Private Pensions to Make Up Government Budget Shortfalls

Hungary, Poland, and three other nations take over citizens' pension money to make up government budget shortfalls. Hungarian lawmakers rolled back a 1997 pension reform, allowing the government to effectively seize up to $14 billion in private pension assets to reduce the budget gap while avoiding painful austerity measures.

Christian Science Monitor
January 2, 2011

People’s retirement savings are a convenient source of revenue for governments that don’t want to reduce spending or make privatizations. As most pension schemes in Europe are organised by the state, European ministers of finance have a facilitated access to the savings accumulated there, and it is only logical that they try to get a hold of this money for their own ends.

In recent weeks I have noted five such attempts: Three situations concern private personal savings; two others refer to national funds.

The most striking example is Hungary, where last month the government made the citizens an offer they could not refuse. They could either remit their individual retirement savings to the state, or lose the right to the basic state pension (but still have an obligation to pay contributions for it). In this extortionate way, the government wants to gain control over $14bn of individual retirement savings.

The Bulgarian government has come up with a similar idea. $300m of private early retirement savings was supposed to be transferred to the state pension scheme. The government gave way after trade unions protested and finally only about 20% of the original plans were implemented.

A slightly less drastic situation is developing in Poland. The government wants to transfer of 1/3 of future contributions from individual retirement accounts to the state-run social security system. Since this system does not back its liabilities with stocks or even bonds, the money taken away from the savers will go directly to the state treasury and savers will lose about $2.3bn a year. The Polish government is more generous than the Hungarian one, but only because it wants to seize just 1/3 of the future savings and also allows the citizens to keep the money accumulated so far.

The fourth example is Ireland. In 2001, the National Pension Reserve Fund was brought into existence for the purpose of supporting pensions of the Irish people in the years 2025-2050. The scheme was also supposed to provide for the pensions of some public sector employees (mainly university staff). However, in March 2009, the Irish government earmarked €4bn from this fund for rescuing banks. In November 2010, the remaining savings of €2.5bn was seized to support the bailout of the rest of the country.

The final example is France. In November, the French parliament decided to earmark €33bn from the national reserve pension fund FRR to reduce the short-term pension scheme deficit. In this way, the retirement savings intended for the years 2020-2040 will be used earlier, that is in the years 2011-2024, and the government will spend the saved up resources on other purposes.

It looks like although the governments are able to enforce general participation in pension schemes, they do not seem to be the best guardians of the money accumulated there.

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