U.S. fed-state govts eliminating private pensions & retirement accounts

In a post nearly a year ago, I sounded this warning:

The governments of five European countries — Hungary, Poland, Bulgaria, Ireland and France – have taken over their citizens’ private pension money to make up deficits and budget shortfalls. Given the American Left’s oft-stated admiration for Europeans, who are further down the ruinous road of socialism than the United States, this should sound the alarm for all Americans who want to hang onto our private pensions and savings.

That was not paranoia speaking because a year before, in January 2010, Bloomberg’s Business Week had reported that the Obama administration wanted to convert all 401(k) savings and Individual Retirement Accounts (IRAs) into annuities or other steady payment streams.

Business Week also reported that the Treasury and Labor Departments was planning to solicit the public’s reaction, although a report by the Investment Company Institute had already found that Americans oppose any government initiatives that would force us to give up control over our 401(k) accounts. Seven in 10 U.S. households indicated they wanted to preserve their present retirement account features and flexibility, and objected to the idea of the government requiring retirees to convert part of their savings into annuities that supposedly guarantee a steady payment for life.

Now, it appears the Obama administration and state governments indeed are moving to get rid of private pensions and retirement plans.

Linda Stern reports for Reuters, Feb. 29, 2012, that baby boomers may be the last generation to retire with 401(k) plans. A week before, a hearing on the future of pensions and retirement was held in the U.S. Senate, attended by representatives of unions, employers, financial services providers, government agencies and consumer groups. The only thing they all seemed to agree on was that the 401(k) plan has been sort of a failure, which is a most curious consensus, given the fact that current and future retirees have successfully amassed some $4.3 trillion in 401(k) and other defined contribution accounts.

Stern reports that “policymakers are now looking beyond the once-vaunted 401(k) because it has two significant shortcomings: (1) It’s not powerful enough to secure the retirements of low-income workers who can’t afford to stash away enough money; and (2) It leaves each accountholder alone to manage risks.” Without being able to pool risk, participants have to settle for lower returns and lower withdrawals. That, in turn, reduces the amount that they can spend in retirement, and reduces the likelihood that their money will last until they die.

Blah, blah, blah.

In other words, there is a rising crescendo of voices calling for the conversion of privately-managed 401(k) and IRAs in favor of Government Retirement Accounts (GRAs) — government-managed retirement instruments like annuities that “promise” to “guarantee” retirees a “steady stream of retirement income” that’ll last until they die.

Sounds just like Social Security, doesn’t it? The government takes money out of our monthly paychecks and puts it into our separate Social Security accounts. In return, when we retire, we’ll get a Social Security check every month until we die.

And we all know how well that turns out.

Stern concludes her report for Reuters by warning that policy changes down the road could change the shape of our retirement savings significantly because “everything from a curtailing of 401(k) tax breaks to new state-run programs is under consideration somewhere, by somebody.”

A NewsMax report describes the latest move towards replacing private pensions and retirement plans with Government-run Retirement Accounts (GRAs):

The Latest move can be found in the Obama Administration`s, 256 page- FY 2013 Budget Proposal.  The revival of his 2008 presidential run, the “Automatic IRA” which has now “Evolved” into two proposals:

Secure Choice Pension & Government Retirement Accounts (GRA’s), both of which automatically “Mandate” 5%-6% contributions into Government Run Pension funds.

One feature of GRAs  is once a participant dies, the uncollected equity belongs to the government.  It’s no wonder the Retirement age for GRAs will be 67, and one proposal calls for 69 years of age.  They’re “off the hook” as soon as you’re dead.

Another change to the retirement account laws, the Tax Benefit.  The current Tax Deduction will be replaced with a “Credit”, which is only redeemable after retirement. To be Eligible for the Tax Credit, you will be given the “Option” to place Your Equity into Annuities composed of U.S Treasury Bonds, that will payout an estimated 3% annually.

Yes, you`ll be Investing/Buying what China No longer wants, U.S. Debt (Treasury-Bonds). [...]

No matter who wins [the 2012 presidential eleciton], our government is Neck-Deep in Debt. When faced with the Reality of a Complete government Collapse… a Politician will do, what a Politician, needs to do!   The $4.6 Trillion in IRA’s and the $4.3 Trillion in 401(k)s … are all too tempting!

Some legislators already have introduced bills toward transforming Americans’ private pensions and retirement accounts into Government Retirement Accounts (GRAs):

  • S. 1020: Saving Enhancement by Alleviating Leakage in 401k Savings Act of 2011A U.S. Senate bill introduced on May 18, 2011, by senators Herb Kohl (D-WI) and Mike Enzi (R-WY). If approved, S. 1020 would “amend the Internal Revenue Code of 1986 to modify the rules relating to loans made from a qualified employer plan, and for other purposes.” In other words, S. 1020 (or the federal government) would impose restrictions on how 401(k) owners can access the money accumulated in their accounts. You wouldn’t even be able to borrow from your own 401(k) account!
  • California state bill, SB 1234: Golden State Retirement Trust – A bill introduced on February 23, 2012, by California congressman Kevin De Leon, to replace private pensions and retirement accounts with GRAs. Here’s a quote from SB 1234: “Existing federal law provides for tax-qualified retirement plans and individual retirement accounts or individual retirement annuities by which private citizens may save money for retirement. This bill would establish the Golden State Retirement Savings Trust Act, which would create the Golden State Retirement Savings Trust that would be administered by the Golden State Retirement Savings Investment Board, which would also be established by the bill. The bill would require eligible employers, as defined, and would authorize other employers to enroll eligible employees, as defined, into an employer-sponsored retirement plan or pension plan, as specified, offered by the trust, or a personal pension in the case of a nonparticipating employer, as specified. The bill would require a specified percentage of the annual salary of an eligible employee participating in the retirement or pension plan to be deposited in the Golden State Retirement Savings Trust, which would be segregated into a program fund and an administrative fund, both of which would be continuously appropriated to the board for purposes of the act. The bill would limit expenditures from the administrative fund, as specified.”
  • Connecticut state bill HB 5337: An act “to create a task force to study the need for a public retirement plan,” introduced on May 6, 2012, by Lauren Schmitz, a research analyst at the Bernard L Schwartz Center for Economic Analysis, the very same institution that had originated the GRA concept.
  • Other states such as, Massachusetts, Florida and Ohio have made or are actively conducting moves such as GRAs.

And what will happen to all those Government Retirement Accounts? Why, like that mythic Social Security “trust fund,” the money in those GRAs will simply be dumped into the government’s ever-dwindling general funds to pay for the government’s ever-increasing expenses, of course!

Don’t believe me?

In May 2011, with little media publicity, the Obama administration began dipping “temporarily” into raiding the pensions of federal government employees to keep funding government operations. (Read more, here.)

~Eowyn

19 responses to “U.S. fed-state govts eliminating private pensions & retirement accounts

  1. To me, that amounts to nothing less than larceny.

  2. Thank you Dr. Eowyn for this amazing post! What next! I agree with racefish, that this amounts to nothing less than larceny. God help us!

  3. And under the obama administration, more of yours and my personal liberties bite the dust. And this is only the beginning of obama’s plan to destroy America. It will take a long time for the Liberals to realize this as they have nothing to loose and everything to gain right now. But obama’s style of government is unsustainable. You can’t have over 50% of the people living off of less than 50% of the pepole’s efforts for long. Goodbye America!
    It was a good run while it lasted. But the “have nots” and those that claim they are “have nots” have discovered they can vote themselves a pay check.
    If you don’t understand my drift, then you are part of the problem.

  4. About ten years ago, when I first heard Neal Boortz saying the dems were kicking this idea around behind closed doors, I thought to myself that there is no way the American people would be stoopid enough to allow this to ever happen.

    After what happened back on Nov. 6, I am now convinced that they are precisely that stoopid.

    This is nothing short of outright theft.

    If you haven’t already, this might be a really good time to start making your escape plans, as we have all but lost the America left to us by our founders.

    And to be bluntly honest, I have been looking at our predicament from every angle possible since the election, and I can see no way out of it – at least not as far as the ballot box goes, anyway.

    -Dave

    • If you haven’t already, this might be a really good time to start making your escape plans, as we have all but lost the America left to us by our founders.

      And to be bluntly honest, I have been looking at our predicament from every angle possible since the election, and I can see no way out of it – at least not as far as the ballot box goes, anyway.

      I’ll have more on this in a post I am putting together.

      -Dave

      • Look forward to it!

      • Where to go, Dave? I’ll be interested to read your post. If the prime minister of Uganda, a devout Christian, is publicly confessing his nations sins, just like Josiah (2 Kings) that makes our situation here in America tenuous. At best.

        Even Kanada’s Prime Minister is more conservative than our king is.

  5. Wonder if when this admin comes after our money if the sheeple will finally wake up? Doubt it. Some believe that this admin hasn’t accumulated any debt in the past four years.

  6. In 1933, they stole our parents gold by making it illegal for private citizens to own gold by imposing a 10 year prison sentence if caught in the possession of gold. They gave us federal reserve fiat money in place of gold backed us treasury notes which are now barely worth 2 cents. Dollars are not a very good store of value if it now takes 1800 of them to worth what 20 were worth in 1933. Now they want to confiscate our fiat money that we saved for our retirements and make it last our lifetimes. My plan was to spend it all on whiskey and hookers and go on the dole like everyone else. You mean that voting for change means my plan is going to be laid to waste. I feel like I wasted my youth.

  7. If the wonderboy in the oval office, or President Jarret, cannot get this through congress, they will just fire up yet another Executive Order and get it going all by themselves. Poof! No more deficit! Praise be to Obummer … not!

  8. After the Fed set interest rates at “0″ so savings accounts earn NOTHING, they now want to go after IRAs and 401Ks?????????? What about non-government union pension funds? Are they included in this evisceration?

  9. lowtechgrannie, it sounds like you are a government employee and that you are hoping they keep their hands off of your government pension. Is that right? If so, your attitude explains why so many are upset with union pensions.

    Just so long as your pension is in tact, screw the rest, eh!? Well you will be as affected by this take over as anyone else even if you do keep your pension. You will have to drive by those begging on the streets and the world won’t be any prettier for you because of the poverty and crime this will surround us all with.

    We are all affected! Better to get busy and try to stop this than sit back and hope you are safe.

    • M,

      You’re presuming. I can assure you LTG is no government employee. If she were, she wouldn’t find herself jobless since the Second Gt Depression began in 2008.

  10. Attempts to confiscate MY IRAs will lead to civil war .. I will have nothing to live on but whatever the government decides I get in welfare. that means no reason not to shoot as many of the scum as possible before they get me.

  11. Yup, like Thatcher said, running out of other people’s money…

  12. What are the confiscatory plans for stock accounts? I have cashed in my IRA & 401K and purchased stocks. I wanted nothing named IRA or 401K on my private accounts. I’m starting to think it would be better not to invest until this Communist Central Bureau is long gone.

  13. cashing in my 401k’s and buying AMMO,gold,silver and other essential survival gear…./food/water/fuel/..etc

  14. Gov took over both of my pensions over 2 years ago. I didn’t even know it until it was done….

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