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GOP Savings Solutions Group Warns Against Plan to Federalize Workers’ 401(k)s
WASHINGTON, D.C. – As part of continued efforts to safeguard Americans’ retirement savings, members of the House GOP Savings Recovery Solutions Group wrote to Labor Secretary Hilda Solis and Treasury Secretary Timothy Geithner to oppose proposals that would jeopardize workers’ hard-earned retirement savings by undermining or nationalizing individual 401(k) retirement savings plans.
“At a time when Democrats’ thirst for control over Americans’ lives seems to know no bounds, retirement savings are poised to be the next victim of federal overreach,” said Rep. John Kline (R-MN), the top Republican on the House Education and Labor Committee and a member of the Savings Solutions Group. “Proposals to make 401(k) savings plans less valuable for workers and more cumbersome for employers would take us in exactly the wrong direction.”
The concerns expressed by members of the Savings Solutions Group come in response to indications that the administration is considering radical changes to workers’ individual savings plans, including the creation of so-called “Guaranteed Retirement Accounts” or the “annuitization” of 401(k) accounts. Proposals to undermine individual retirement savings plans could make it more difficult and costly for employers to offer these voluntary plans, ultimately resulting in fewer Americans being able to save for retirement.
“Once again, the administration appears to be contemplating dramatic changes to the American way of life, replacing individual ownership and personal responsibility with a Washington-knows-best regime of mandates and red tape,” said Kline. “More government control over Americans’ retirement plans will be bad for workers, bad for retirees, and bad for taxpayers.”
NOTE: The House GOP Savings Recovery Solutions Group developed the Savings Recovery Act to help Americans rebuild retirement and other personal savings. For more information, click here. A copy of the full letter to Sec. Solis and Sec. Geithner is included below and available online.
May 3, 2010
The Honorable Hilda L. Solis
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210
The Honorable Timothy Geithner
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20210
Dear Secretaries Solis and Geithner:
As members of the Republican Savings Solutions Group, we write today to express our strong opposition to any proposal to eliminate or federalize private-sector defined contribution pension plans, such as 401(k)s, or impose burdensome new requirements upon the businesses, large and small, who choose to offer these plans to their employees.
In the Annual Report of the White House Task Force on the Middle Class, Vice President Biden discussed at length the creation of so-called “Guaranteed Retirement Accounts, (GRAs)” which would provide for protection from “inflation and market risk” and potentially “guarantee a specified real return above the rate of inflation” – presumably at taxpayer expense. In the Report, the Vice President recommended “further study of these issues.”
The Vice President’s comments are troubling, insofar as they come on the heels of testimony before Congress from supporters of GRAs proposing to eliminate the favorable tax treatment currently afforded to 401(k) plans, and instead use those dollars to fund government-invested GRAs into which all employees would be required to contribute a portion of their salary – again, with a government subsidy. These advocates would, essentially, dismantle the present private-sector 401(k) system, replacing it instead with a government-run investment plan, the size and scope of which remain to be seen. This despite data showing that 90 percent of households have a favorable opinion of the existing 401(k)/IRA system.
In light of these facts, we write today to express our opposition in the strongest terms to any effort to “nationalize” the private 401(k) system, or any proposal that would dismantle or disfavor the private 401(k) system in favor of a government-run retirement security regime.
Similarly, and more recently, the Departments of Labor and Treasury have jointly issued a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options.” While we appreciate the Departments’ seeking guidance and information from all parties and stakeholders in advance of regulatory activity, we strongly urge that the Departments not proceed with any regulation in this area before they have carefully and thoroughly considered all of the information received.
More specifically, we urge that the Departments take no action to mandate that plan sponsors – often, small businesses – include a “lifetime income” or “annuitization” option if they choose to offer a 401(k) plan to their employees, or that beneficiaries take some or all of their retirement savings in such an option. Data shows that 70 percent of Americans oppose the concept of a mandated annuity or government payout of their 401(k) plan. On a more fundamental level, Congress should not be in the business of choosing “winners” and “losers” among retirement security stakeholders. Instead, we urge the Departments to make it easier for employers to include retirement income solutions in their savings plans and to help workers learn more about the value of their retirement savings as a source of retirement income. Finally, to the extent new mandates and bureaucratic red tape from Washington push small employers out of the business of offering these plans to their employees, we would submit such an effort weakens, rather than strengthens retirement security.
We appreciate your consideration of our views in these important matters and stand ready to work with you and the Administration to promote secure and adequate retirement savings for all Americans.
House Republican Leader John Boehner (R-OH)
Rep. John Kline (R-MN)
Rep. Dave Camp (R-MI)
Rep. Sam Johnson (R-TX)
Rep. Dean Heller (R-NV)
Rep. Brett Guthrie (R-KY)
Rep. Michele Bachmann (R-MN)
Rep. Pat Tiberi (R-OH)
Rep. Bob Latta (R-OH)
Rep. Erik Paulsen (R-MN)
Rep. Lynn Jenkins (R-KS)
Rep. Ed Royce (R-CA)
Rep. Buck McKeon (R-CA)
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