Bush's pension proposal

[Tom Poje]

Larry:

Careful! Bush is lining up soldiers for another purpose. If you do a good job on this one he might want to put you in charge! Or are Pandas a protected species?

[Guest larryqpc]

Tom,

I'm WAAAAY below the top ranks, so it's unlikely he'd tap me for "foreign" duty. And yes, we ARE a protected species!

Larry.

[AndyH]

And let's thank Mr. Pomeroy:

http://www.house.gov/pomeroy/prworkersnocover.html

[mbozek]

As a member of the minority party in ways and means Pomeroy needs the assent of the republican majority to have any amendments to the chairman's bill reviewed by the committee. The changes will have to come from the republican side of the committee.

[mbozek]

As a member of the minority party in ways and means Pomeroy needs the assent of the republican majority to have any amendments to the chairman's bill reviewed by the committee. The changes will have to come from the republican side of the committee.

[goldtpa]

I have spent my life explaining to business owners the complicated pension laws. I agree with the pension attorney and others. Any time they tried to "simplify" the pension laws, it always created more work for us. The mere fact that in 2004 -2005 my entire career may end is scary. And what will I have to show for it? A list of clients who saved thousands of dollars in taxes thanks to me.....who then told me that my prices were to high, that I should stop nickel and dimeing them, they wanted a freebie, they cant pay now becuase business isn't what it used to be, etc.

Thanks Mr. Bush!!

I hope that ASPA and other orgs can defeat this or seriously modify it. I think that ASPA will need all of the help it can get.

Has anyone heard from Mr Stephen Krass. His 450 page Pension Answer Book will make a very nice log for my fireplace.

[Gilmore]

My partner, who has been in the pension industry a lot longer than myself, says she recalls the same gloomy outlook when Safe Harbor 401(k) plans and Simple plans came along.

Can the code be made so simple that pension professionals will be out of work? Or will the simplification lead to more complicated rules?

[Earl]

reminds me of when top heavy regs came along.

didn't anyone tell Bush that Roth 401(k)s were already slated to be created.

God save Cross Testing!

[Gilmore]

That is exactly what she said, Earl. And she also remembers when they did away with excess only plans.

[Guest jgroves]

Not being aligned with either political party, but leaning a little left, this sounds like most policy sent out by Rep. administrations. Sounds great, looks great on paper, but is just not realistic. I have to say that I am at the point in my life where I really hope this passes because it will benefit me personally. As for the rest of the world, I don't see how this could possible help someone who does not make a lot of money. When I first saw the release, I noted that is said something to the point that it would help lower wage earners save because they could now put money away and have access to it, whereas now, low wage families don't save because they need the money instantly available and if they put in an IRA they could not touch it. (sorry for the run on). Oh! That's why people who don't make a lot money don't save. Silly me, I always thought it was because they did not have any money to save. Here's the deal, this will help people who are rich (at least moderately) save more. When they save more, they have more money to spend, and then that money trickles down to the lower wage earners. President Reagan (Happy Birthday Ron - your 92 incase you forgot (haha)), er, I mean, President Bush might have something here....not.

The unfortunate reality is that this will help rich people save more, not help poor people in the least, make life easier for us pension professionals and increase the deficit.

Hey thats my .012232 cents. Used to be 2 cents but I had it in stocks.

Jim

[four01kman]

Jgroves has it partly right. Low income wage earners can't afford to save, because they need the money to live. Without incentives to save from their employer, they don't save.

If you go back to the original studies showing who put money in IRAs, you will find it was not the low income group. These new proposals are designed to assist individuals who can put away $15,000 per year away for themselves, an additional $15,000 for their spouse (working or not), an additional $15,000 per year for each child, and perhaps $15,000 per year for each grandchild.

This does not sound like a program to help the regular working person. Oh yes! I forget all of us, mostly part of the working persons' group. How many of us would give up our qualified dc plan tilted towards us on a tax-favored basis for these new deals?

[Gilmore]

I, for one, would not mind a little simplification. Have you tried to run a Top Heavy test under the new "simpler" EGTRRA provisions?

[Bill Berke]

As we now can see from the various reports on Benefits Link, the Pres's proposals reflect his philosophy of taking care of his contributors and moneyed suporters (like all politicians), and to neglect the rest of us (until election day - and why do we re-elect anyone?). The financial companies are all in favor of this. The org's that have small businesses and individuals as constituents are opposed. Another form of class warfare. The insurance/stock selling/money managing companies won't lose much in existing accounts (note the grandfather provisions for account maintainance) and they get out of the admin business (more profit), eliminate some liability and get more money under management on an INDIVIDUAL basis where the ripping off, er profitable, business will continue and grow. I sure would like to know the resume of Pam Olsen who is Bush's political appointee who wrote this. IMHO, this is the most obvious example of Bush's deep philosophical disdain for anyone not rich or not a large corporate executive (and I do generally support him - no jeers, please). Exactly how many people can afford $15,000 after tax?

I think some major form of this will pass unless it is used as a sacrificial lamb in the negotiations to get the tax package passed.

The only part of the proposal that really bothers me is the elimination of cross-testing and integration. As most of us on this message board know, these two features, especially cross-testing, has been, in my experience, a great motivator for small employers to install and maintain plans. But, unless you work with small plans (Bushies have no clue), these two allocation methods seem stupid/wasteful because few large companies take advantage this.

The overall issue is that everyone has underestimated Bush and what he can get from Congress. If he really wants this (and that depends upon how hard he is pushed by his supporting financial firms) my suspicion is that it will get passed pretty much in tact because the financial firms see the windfall it is to them (again, see the headlines on today's Benefits Link to see who is pro and who is con). These firms will now be dealing with, almost exclusively, individuals, not the pension committees that, collectively, usually ask questions the financial firms do not want to answer.

[Guest RBeck]

My two cents:

This is a bit more threatening than top-heavy regs or SIMPLE or safe harbor plans, or eliminating excess only plans. ...

This is the way the world ends

This is the way the world ends

This is the way the world ends

Not with a bang but a whimper.

[Guest DBguy]

Whats so bad about this proposal? Bush's proposal will return retirement plans back to being retirement plans - not credit unions like they are now. With standardization in the Defined Contribution area (removing loans and lump sums) the employees will finally have a chance to understand their plan, and employers can move to a traditional or cash balance plan (DB) to prepare for retirement.

[RTK]

Bill, I think you nailed it. The proposal is consistent with Bush's philosophy, and the financial firms must be ecstatic. Also, I am amazed about how much Bush and his buddies have managed to push through DC.

[AndyH]

DBguy,

How many small business owners or HCEs are currently allowed to take lump sum distributions from their DB or cash balance plans when they attain retirement age?

How many plans are 110% funded on current liability basis after their distributions?

We should not forget the substantial problems that need to be fixed in the DB world. And these problems aren't going away soon.

Remember, we're in the middle of the perfect storm.

[Guest DF@APC]

Okay. Most contributors to this thread agree that the Bush proposal will be bad for small business (especially ours). How about some specific constructive ideas on things we can do to help defeat this.

[Guest DBguy]

AndyH,

What substantial problems are you referring to? The 40% drop in participants account over the last three years?

How many employees get a substantial benefit (or at least something close to the principals)?

I don't agree with everything in the proposal, but you have to admit - simplification would help!

[AndyH]

How about 412(l), FAS#87 additional/minimum liability, 417(e), 1.401(a)(4)-(5)(B), PBGC Form 1 Schedule A for starters?

[Appleby]

Responding to Dbguy…

With this message board being one of the most popular and productive (for retirement plans), I am surprised we do not have some medium through which we may contact congress directly- for example, some organizations design preformatted letters, which members and visitors may submit to their congressperson directly- from the website. Lacking that, how about we (who oppose this proposal or at least its current format) draft a letter which visitors to this site can send to their congressperson- via fax and/or email- telling our congressperson to oppose this proposal- should it get to that point. Of course, this would mean obtaining the contact information for all current congresspersons. We could include a list or reasons why we oppose this proposal, and have submitters check-off their reason for sending the letter.

Of course- it would be only fair – if a similar letter, supporting the proposal is drafted… or would this be a wash?? hmm

In the meantime- maybe Dave could work on adding such feature to this website- Dave???

[stephen]

DF@APC

See Larry Starr's comments from earlier in this thread. I am certain the ASPA GAC will welcome a contribution via personal check or credit card.

Also, check the ASPA website I imagine they will have something soon so you can contact your congressman and senators regarding this proposal.

[Appleby]

Correction- I mean responding to DF@APC…

[Guest DBguy]

I didn't say the world was rosey, just that from the particpants side (which is our primary concern), DB does come with some proctection towards retirement (free from market movements). Not saying dump DC, DC plans offer valuable retirement savings, but I don't see all the hoopla over some simplification.

[Guest jim401k]

What if this passes as is? I believe that the ERSA's will still be a viable option and won't kill our industry. An ERSA will be the only method for someone to save on a PRE-TAX basis and that will still be significant to many employees and small businesses. If a company incurs low participation due to employees saving in an LSA or RSA, then they can still implement a safe-harbor plan and not be limited to what the NHCE's put in.

A good balance between pre-tax dollars today and tax-free dollars tomorrow would be a well rounded addition to people's portfolio.

As for the repeal of permitted disparity, won't that increase opportunities for our DB provider friends out there?

Also, don't play class warfare by stating that only the rich will get to save the maximum. So What! Do you punish the wealthy because some people aren't able to put money away for retirement? Remember, most of the people that post messages on this forum are considered wealthy in our tax code. I say, if you can take advantage of savings, good for you! Period.

The compensation limit being dropped to $150K way back didn't help our industry either, but who lost their jobs because of it?

Yes, this will change our industry, but it won't be destroyed unless we refuse to move with change.

Jim

[Guest SPollock]

If President Bush wants to increase Retirement Benefits for Lower Income Employees, shouldn't there be more incentives for Businesses to establish and increase employer funding to the company Plan?

I think the Small Business Tax Credits have done some good as an minor incentive for small businesses. I know some of my new clients have used the credit.

I also think the Saver's Credit has some benefit for the lower income folks to contribute. But if they DON"T HAVE THE MONEY THEY ARE NOT GOING TO CONTRIBUTE - PERIOD!!

Why not provide incentives to businesses to make larger employer contributions to lower compensated employees?? For example, if a company makes a 5% profit sharing contribution to all eligible non-highly compensated employees they would receive a tax credit of X%. If they make a 6% p/s contribution, they would receive a slightly higher tax credit and so on.

Instead of the government recommending Plan options that will (most likely) reduce the amount of contributions made by an employer to non-HCEs, why not design tax credits that make employers want to make larger employer contributions?

It seems with the Social Security issues, the government would be looking for ways to get "employers" to fund more of the retirement burden for non-HCEs.

Am I missing something here????:confused:

[Gilmore]

Jim401k

That is kinda what I've been trying to say, although you've said it much better Jim.

However, speaking as a small business owner, and one of the many who used his own retirement savings to get the business started, I would like to see permitted disparity and new comparability allocations stay intact.

[jevd]

"Who moved my cheese?"

We all should read it or re-read as the case may be.

[Guest jim401k]

"Who Moved My Cheese?"

That's the second time I've been told that today! The other time was not related to this issue. Maybe I'd better read that book.

Just for the record, I think there are definitely many things in this I'd like not to make it to the final part of this bill, but there are still a great number of companies that don't sponsor any retirement plan so what do those employee's do?

Jim

[Guest jamestgordon]

hidden agenda

a little scary

make our work disappear?

All silly paranoid comments.

I make $ consulting & the more complex the subject, the more “potential”, however the better good is more important to our Republic & it’s citizens and I will find another way to supplement my income. Change always presents opportunity, if approached correctly.

Bottom line:

The Bush proposals are GREAT (including his brilliant R. Glenn Hubbard developed dividend strategy)

Jim

[goldtpa]

I THINK THAT SOME SORT OF MEDIUM WHICH WE COULD ALL SIGN AND SEND TO CONGRESS IS A GREAT IDEA. INSTEAD OF HAVING DB GUYS FIGHTING WITH DC GUYS, WE SHOULD JOIN TOGETHER AND HELP ASPA AND OTHER INDUSTRY ORGS DEFEAT THIS THING.

I SHUTTER TO THINK THAT I WILL BE FORCED TO GO FIND A JOB AT A TIME IN OUR ECONOMY WHEN UNEMPLOYEMENT IS AT SOME OF ITS HIGHEST LEVELS.

[jane123]

Yeah- I like Appleby's suggestion too...I would volunteer to write the letter but I am a poor writer

[Guest simbarat]

We must support this plan. I see nothing but an advantage to the average saver based on its simplicity and tax advantages.

Read this link.

http://moneycentral.msn.com/content/Taxes/P40611.asp

Things will change in the plan i'm sure and 'loopholes' will be closed, but still its foundation will be beneficial. Stay tuned people to how it progresses. It could mean a big change for us all, and IMO a change for the better.

Any thoughts?

[jevd]

Check This Link

http://www.washingtonpost.com/wp-dyn/artic...6-2003Feb6.html

[Fredman]

You must be one of the few lucky ones that can afford to save as Bush is proposing. I like to think of it as the "Class Separatation Act of 2004".

IMO, most of the small business retirement plans will be history, gonzo and in the toliet if this gets through. This means the rest of us can continue saving at the current rate and we will no longer receive any additional contributions from our employers.

I'd also like to know where the lost tax revenue will come from once everyone converts over their taxable accounts to non-taxable accounts. It'll really pad his numbers for the next four years, but what about 20 years from now?

[AndyH]

Thanks, jevd.

Is it April 2? Joking aside, I for one will never vote for Bush again. We should all let him know that. Talk about wacko. Who is running that show? How much confidence does this fiasco inspire? IRAQ? I just changed my mind. We need a regime change, all right. That ought to be OUR policy.

[four01kman]

GOOD NEWS!

The republicans seem not to be supporting the proposal. Here's an extract:

A key element of President Bush's ambitious tax-cutting agenda ... has virtually no chance of passing and should be replaced with a bipartisan proposal to expand existing retirement programs, House Republican leaders have told the White House.... [A]dministration officials ... are laying the blame on Paul H. O'Neill, the recently ousted Treasury secretary. They said he developed the idea in secret and froze key lawmakers ... out of the decision-making process." (Washington Post)

Reported in today's newsletter. There is a link there.

[jevd]

The Link is in my last post.

[Earl]

Regime change begins at home.

[Gilmore]

Congress will get the message that the code needs some simplification, they will start tinkering with things and goldtpa will have to get his Pension Answer Book out of the fireplace and Sal Tripodi will have to add three more volumes to his outline.

[jevd]

Here is a site with a number of links on the subject.

http://www.lifetimesavingsaccount.com/

[Guest rmeigs]

I would not discount the possibility of the Bush proposals moving forward in some form.

In a Dow Jones news item dated February 7th, they reported that "The Securities Industry Association said more than 12,000 letters and e-mails have been sent through its Web site to Congress supporting the plan.... "As more firms link to the SIA's site, we expect to see these numbers continue to climb," said Marc Lackritz, SIA's president.

Although Senate Finance Chairman Charles Grassley, R- Iowa, said he has questions about the President's proposals, he also indicated that he would proposed an alternative approach. In Washington speak, this means modification of the proposals so they are more acceptable.

[AndyH]

Again, Bush's email address:

president@whitehouse.gov

[Fredman]

ASPA has a nice form on their site that will email all of your congressional reps, including GW, in one shot. You can find it here:

ASPA's Legislative Action Center