Small business groups opposing automatic IRA plan
Posted on 09 March 2009
Permanent URL of this article: http://retirementrevised.com/money/small-business-groups-opposing-automatic-ira-plan
Small business organizations are gearing up to oppose–or at least water down–the Obama Administration’s proposal to mandate enrollment for all workers in new bare-bones IRA programs–the so-called Automatic IRA.
The Wall Street Journal reported over the weekend that the National Federation of Independent Business and other small business groups are gearing up to fight the plan, which is contained in the administration’s budget and stems from the work of the non-partisan Retirement Security Project.
The aim of Automatic IRAs is to keep millions of Americans out of poverty in old age. It gets at one of the toughest challenges to retirement saving–the simple fact that half of the country’s working population doesn’t have access to a workplace retirement savings plan. Companies that are not willing to sponsor any retirement plan, have been in business for more than two years and have more than 10 employees would be mandated to offer a payroll-deduction saving option to their employees–no different from the way employers deduct for taxes. Employees would be enrolled automatically when they are hired, unless they chose to opt out.
According to the Journal, business groups are concerned about potential administrative headaches and legal liability:
One of the biggest problems, critics said, is that small businesses don’t normally do this kind of thing. A Gallup Organization poll three years ago of 754 small businesses found that only 26% of those surveyed offered their workers the option to deposit their paychecks directly into a checking or savings account.
Businesses are worried they could get sued if they mishandle individual retirement savings, said Todd McCracken, president of the National Small Business Association in Washington. “What happens if I ask you to put in 10% of my pay, and you put in 5% by mistake, and now the market’s gone up? Where’s my money? Are you going to be liable for that?”
The Retirement Security project originally was led by Peter Orszag, now President Obama’s budget director.
March 10th, 2009 at 6:57 am
I have learned some very unsettling realities when it comes to all government sponsored retirement vehicles. First of all let me say I have invested heavily in such personal retirement accounts. Now let me say, if I could do it all over again, I wouldn’t invest one dime in such accounts. I have managed my accounts well and have not lost even one penny’s worth of value with the meltdown. But what I have learned during this process is that, thanks to my employer, I came close to losing greater than 55 percent of my investments. My employer is a state university and they gambled with my retirement. When I discovered their little secret, I wanted to get total control of my money since there were no real safe harbors for my investments given the underhandedness of the office of the treasurer. Here is what I learned. If I wanted to liquidate my investments to cash, just to protect my money, I was going to pay dearly. Listen closely to this and give it much thought before you put any money into a government sponsored personal retirement account. I was told by the funds manager that if I liquidated my 403b I would immediately have to pay a 20% minimum tax (I understand that). Then I was told I have to pay the federal government a 10% early withdrawl penalty (for what?) on top of that, I would have to pay the state an additional 10% early withdrawl penalty (again for what?). And the kicker is, I would have to pay the additional taxes on the total amount liquidated, including the 20% that was taken by the governments. So here is how it really works out. Let’s say I wanted to liquidate $200,000.00 to protect my money. By the time the government is done with me, I will be lucky if I get $100,000.00. All of this to protect my money from the same government agencies that are mis-managing the money. Listen America, any time you put your money into an account that punishes you dearly if you want your money back, even if it is because your money is being mismanaged, you are screwed. I quit putting any money into retirement accounts and have learned to save my money and keep it away from the federal and state governments. If I have learned anything, it is they are the greatest threat to your money. The less they know about the location and amount of money you have saved the safer your money is. Never fall for the sales pitches they throw at you to put your money into accounts they, in fact, control. They are the greatest threat to your money. They give you peanuts in tax deferral and charge you an arm and a leg if you want to get your money back. Learn to save your own money. At least you will have it, tax free if you need it. Now they are trying to make you auto enroll in a personal retirement account. Yes, you can opt out (now). But I can almost guarantee that at some time in the future, you will not be able to opt out once they change the law. Then they will dictate how much you must contribute to your accounts and they will manage your money and if you want it back, they will financially rape you without as much as a kiss. You see, they money goes into their coffers one way or another. Once they have it, it is there’s and they are not going to give it back to you. The biggest risk to your money is letting Uncle Sam know where it is and he can do whatever he wants with it at his will. Learn to save on your own and keep control over your own savings. The government is the greatest risk to your financial health and future.