Principles to Preserve and Strengthen 401(k)s in the 111th Congress
On Friday, a Wall Street Journal editorial further perpetuated an active campaign that is blatantly misrepresenting Democratic efforts to preserve and strengthen Americans' retirement security. In light of these ongoing distortions, Chairman George Miller reiterated the committee's legislative priorities in preparation for the next Congress' efforts to help Americans enjoy a secure retirement.
The Wall Street Journal is needlessly creating fear among Americans rightly worried about their retirement security by misrepresenting my efforts to strengthen workers' retirement savings - attacks that have no basis in fact. I do not support 'abolishing' 401(k)s, moving these plans, or changing their tax status, plain and simple. The truth is that Democrats in Congress are working to preserve and strengthen 401(k)s.
Last year, our Committee worked with the employer and investment community to pass legislation to increase transparency and protect workers' hard-earned retirement savings from excessive and hidden fees that could cut deeply into their accounts. In addition to providing workers with better information about the fees they're paying, we know other steps must be taken to make sure our retirement system is as strong as it can be for our nation's workers and retirees. These principles will help guide the next Congress as we work to ensure that every American can enjoy a safe and secure retirement.
Recent hearings held by the committee have shown the devastating toll the economic downturn has leveled on Americans' retirement savings, including the loss of over $4 trillion in pension benefits.
To help preserve and strengthen 401(k)-style and other retirement plans, the committee will work to:
• Expose excess fees that Wall Street middle men take from workers accounts. Currently, millions of Americans are paying excessive 401(k) fees at the hands of Wall Street middle men who refuse to fully disclose and detail extra fees and charges paid by employees. This is wrong, especially in light of the dramatic losses faced by millions of Americans in their 401(k) plans this year. According to the GAO, even a difference of just 1 percentage point in hidden fees can drastically eat into a worker's 401(k) account balance - by as much as 20 percent or more over a career. This 1 percentage point difference could cost a worker with a $20,000 account balance more than $12,000 in reduced savings over this time period.
• Bring young and low-wage workers into the system at a higher rate through automatic enrollment for employers already offering 401(k)s. Unless employers more quickly automatically enroll new workers, nearly 40 percent of workers born in 1990 will have no 401(k)-style savings at all when they retire, according to the GAO. Current law allows employers to automatically enroll their workers in their companies' 401(k)s but employers have been slow to enroll employees. Studies show that automatic enrollment can increase participation by as much as 35 percentage points. And even after 3-4 years, the vast majority of those automatically enrolled are still participating.
• Ensure that retirement accounts have diversified investment options with low fees. Many 401(k) plans have inadequate, and all too often, expensive investment options. Workers should have access to simple investment options, including low-cost index funds.
• Ensure workers have access to reliable independent investment advice. Too often, workers are given self-interested advice from financial advisors or money managers - advice that may not always lead to the best retirement investment. All plan participants should have access to objective advice and investment information to help them better manage their savings.
• Reduce vesting periods and improve portability of 401(k) accounts. Workers are leaving millions of dollars on the table because of employers' rules that take away their savings when they change jobs. In many cases workers are required to work at a firm for three years or more before they can fully access their retirement savings. In addition, the GAO says that by automatically rolling over accounts into a new retirement plan when workers leave a job, Americans' retirement savings would increase by a projected 11 percent on average, with the biggest percentage increases for low-income workers.
In April, the committee passed the 401(k) Fair Disclosure for Retirement Security Act (H.R. 3185), which would help workers shop around for the best retirement investment options by providing complete information on how much in fees is taken from their retirement accounts. The legislation was supported by the AFL-CIO, the AARP, the American Society of Pension Professionals and Actuaries, the Council of Independent 401(k) Recordkeepers, and the Pension Rights Center.
Follow Rep. George Miller on Twitter: www.twitter.com/askgeorge
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I'm sure your heart is in the right place Mr. Miller, but your lack of understanding of the workplace environment shows in some of your ideas.
1. Auto-enrollments:
Many workers choose to not contribute to a 401k for a variety of reasons. If you auto enroll workers and require a min of 1% contribution, that takes the freedom out of choosing what to do with the money you earn.
2. Immediate vesting:
This will cause many employers to not do 401k plans at all. Vesting schedules are designed to ensure that workers don't come in, contribute the max that the employer will match over 6 mos, and then leave with double their money. Think businesses with high turnover (like retail) will ever expose themselves to that risk?
I am amazed that the ENTIRE USA has bought into Wall Street's lies about "the best place to save for retirement is the stock market"...
Are you taking into account the dividend payments, as well as all the shares purchased during periods of reduced prices (bear markets)? How about the company matching?
The Wall Street Journal is the mouthpiece for the swindlers and looters on Wall Street. The only interest they have in the American middle class is for Wall Street to get their greedy hands on middle America's money. Look, Wall Street is all about making HUGE money for oneself. They couldn't care less whether your "investment" does anything for you. The commissions are huge, and the management fees are ridiculous. These scoundrels have written the laws for years (or have seen to it that laws to protect middle class investments are NEVER written and passed into law) and they only care about the vile, greasy money hoarding wheeler-dealers on Wall Street. The Wall Street Journal has never in its entire history taken a position that favors workers/middle class families over the greedy Gordon Gekko's on Wall Street. Never. And their method of trying to con the American people is constant distraction, distortion and out right lies.
for those of us who do not have an employer sponsored plan and take care of ourselves through ROTH or Sep-IRAs the biggest thing I am feeling right now is just flat out swindled. I do not believe the stock market/mutual fund scenario is anything but a scam for people in those companies and tied to them to make money. Why does my stock go down and I have nothing to show for it but the CEO who cashes out his stock options pockets 10 mil? Because he took my money and millions of others!
To buy into the scenario that the stock market is the best place to put your money has become a brainwashed concept by "financial experts". Read Liar's Poker. Oh, my gosh, you will get a wake up like never before. And Congress covers for them by making us "safe." baloney!
As soon as I get a decent bounce, I'm out of the market. I think it is outrageous we have to "gamble" with our future by buying into the alleged long term philosophy that all will work out to be at minimun that ludicrous assumption of 8% return when we retire. Well, I have got news for you, millions retired this year to bupkis.
I agree with you entirely, most of us baby boomers will see a better return from our Social Security investments than from the 401k.s I am firmly of the belief that 90% of the stock market gains are going to insiders..
T bills is what my 401k is in right now, I am afraid of loosing even more money besides the money I have already lost on my house... 401k were so that the employers could get out of the Pension business and so that the CEOs could take more home in EXCESSIVE COMPENSATI
The 401(k) is dead. Please DNR.
All these ideas have nothing to do with how real people deal with 401(k)s. How about increasing Social Security Income for boomers instead ? The 401 (k) is not a pension and there cannot be enough safeguards to make it one. People who have frozen in fear and watched their 401(k)s go up in smoke, instead of getting out, will never see that money again.
Where are you going to get this extra income for SS? The pols killed SS by raiding it all these years. Sorry, I will take my chances with my 401k. At least I have control over it, I can will it to my progeny, I get to direct its investments. I have none of this discreation in SS. And yes, the market will recover and so will my 401k.
Where do you think the hundreds of billions, if not trillions according to CNBC, are coming from to save the finance industry---and by extension your 401(k)? No money for Social Security; no money for healthcare; no money for subsidized education. Clearly, though, there is all the money in our world when the finance industry is in trouble. So much for having control over your 401(k). I guess you missed the Intro to Capitalism 101: there are guaranteed, structurally necessary losers all the time. Why do you feel entitled to a profitable 401(k)? How about you get my government out of your investments. Your entitlement rationale is way out of line with your boot-strap individualism.
Social Security is an investment in The People, in the working people most of all. It is the only legitimate, responsible, ethical way to secure retirement for The People. Discretion, as you bring it into the conversation, is a red-herring. Rejecting Social Security because "pols killed SS by raiding it all these years" is an apology for incompetence, for the Ray Romano logic of "I'll screw it up so bad, she won't make me do it again." For all the responsibility rhetoric that gets farted around, shitting on Social Security in the way you describe is deeply irresponsible.
401Ks have not went up in smoke. The current bear market may hurt some that need the money right now, but for others with a longer time horizon it is a good time to accumulate cheap shares. Bear markets happen and they aren't necessarily a bad thing.
Wall Street needs 401(k) plans. Working people everywhere need Social Security.
Why does the Congress want to "help workers shop around for the best retirement investment options" when they won't do the same for health care.
Rep. Miller: I suggest you re-read the WSJ material. Their concern is focused on liberal congresspeople's desire to eliminate the $80B tax deferral afforded to today's workers who are smart enough to use defined contribution plans properly.
Provide Federal protection that would make all types of retirement accounts, 401Ks, IRAs, etc., immune from being seized to satisfy legal judgments. Regular pensions, which these instruments are replacing, provide such protection.
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