nest eggDo you have retirement savings accounts like IRA or 401k?

Did you get an alarming email from Townhall Spotlight proclaiming that:

President Obama’s FY2014 Budget–Nationalized Retirement Accounts!

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I did.

When I clicked “Click Here to LEARN More” in the email, I was taken to a web page of Goldworth Financial with the alarming title of “Obama & BIG Government Are Planning To Seize Retirement Accounts!” Here are Goldworth Financial’s claims:

  1. Obama’s FY2014 Budget Plan brings us one large step closer to de-privatizing IRA’s & 401k’s.
  2. Much like Obamacare, Obama’s “Automatic IRA” will force employers with 10 employees or more, to “automatically” enroll their workers in the new Government run accounts that will be managed by the Social Security Administration(SSA).
  3. A report from the Labor Department and the IRS on The Government Accountability Office (GAO)-”Improve the rollover process for participants“ – establishes a path for participants to rollover their private retirement accounts into Obama’s Automatic IRA.
  4. To assist in the process, the U.S. Treasury Department will rollout a program called ” Treasury Direct” that will allow citizens “to purchase, manage, and redeem…savings bonds” electronically, as well as offering an “option” to purchase such bonds “automatically” through payroll savings .
  5. This coincides with a program being pushed by the Service Employees International Union (SEIU) called “Retirement USA” which would create a government-forced retirement program with assets being directed into special Treasury Retirement Bonds, or R-Bonds. “Retirement USA” is promoting the idea that all workers have a “right” to a government retirement account, in addition to Social Security.

So I went on the net to find the POS’s actual FY2014 Budget. Here it is online in PDF format. I’ve also saved it to FOTM’s media library (click here). I typed in the word “retirement” and –

This is what Fiscal Year 2014 Budget of the U.S. Government actually says about retirement accounts:

1. Automatic Individual Retirement Accounts:

Employers who don’t have retirement plans for their employees will be required to enroll their workers in direct-deposit Individual Retirement Accounts (IRA), but employees can opt out. Below are direct quotes from FY 2014 Budget:

Encourage Retirement Savings with Automatic Individual Retirement Accounts and Support for Small Employers Who Offer Retirement Plans. About half of American workers have no workplace retirement plan. Yet fewer than 1 out of 10 workers who are eligible to make tax-favored contributions to an Individual Retirement Account (IRA) actually do so, while nearly 9 out of 10 workers automatically enrolled in a 401(k) plan continue to make contributions. The Budget would automatically enroll workers without employer-based retirement plans in IRAs through payroll deposit contributions at their workplace. The contributions would be voluntary—employees would be free to opt out—and matched by the Saver’s Tax Credit for eligible families. Small employers would be eligible for tax credits to defray the administrative costs of setting up these savings plans. The Budget would also double the existing tax credit for small employers that start up new qualifying employer plans. (p. 18, FY 2014 Budget)

Establishes Automatic Workplace Pensions and Expands the Small Employer Pension Plan Startup Credit. Currently, 78 million working Americans—roughly half the workforce—lack employer-based retirement plans. The Budget proposes a system of automatic workplace pensions that will expand access to tens of millions of workers who currently lack pensions. Under the proposal, employers who do not currently offer a retirement plan will be required to enroll their employees in a direct-deposit Individual Retirement Account (IRA) that is compatible with existing direct-deposit payroll systems.Employees may opt out if they choose. To minimize burdens on small businesses, those with 10 or fewer employees would be exempt. Employers would also be entitled to a tax credit of $25 per participating employee—up to a total of $250 per year—for six years. To make it easier for small employers to offer pensions to their workers in connection with the automatic IRA proposal, the Budget will increase the maximum tax credit available for small employers establishing or administering a new retirement plan from $500 to $1,000 per year. This credit would be available for four years. (p. 127, FY 2014 Budget)

2. “Wealthy” Americans will be limited to no more than $3 million in tax-deferred retirement accounts:

Prohibit Individuals from Accumulating Over $3 Million in Tax-Preferred Retirement Accounts. Individual Retirement Accounts and other tax-preferred savings vehicles are intended to help middle class families save for retirement. But under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving. The Budget would limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million for someone retiring in 2013.This proposal would raise $9 billion over 10 years. (p. 18, FY 2014 Budget)

3. “Wealthy” Americans can’t claim their retirement contributions in itemized tax deductions beyond 28%:

Reduce the Value of Itemized Deductions and Other Tax Preferences to 28 Percent for Families with Incomes in the Highest Tax Brackets. Currently, a millionaire who contributes to charity or deducts a dollar of mortgage interest enjoys a deduction that is more than twice as generous as that for a middle class family. The Budget would limit the tax rate at which high-income taxpayers can reduce their tax liability to a maximum of 28 percent, a limitation that would affect only the top three percent of families in 2014. This limit would apply to: all itemized deductions; foreign excluded income; tax-exempt interest; employer sponsored health insurance; retirement contributions; and selected above-the-line deductions. The proposed limitation would return the deduction rate to the level it was at the end of the Reagan Administration. (p. 36, FY 2014 Budget)

4. Federal civilian workers’ contributions to their retirement will increase from the present 0.8% to 1.2%-3.1% of their pay:

Reform Federal Civilian Worker Retirement. The President’s 2011 Plan for Economic Growth and Deficit Reduction proposed to increase the Federal employees’ contributions toward their accruing retirement costs, from 0.8 percent to 2.0 percent of pay, over three years, beginning in 2013. In response, the Congress created the Revised Annuity Employee retirement plan for Federal employees hired after 2012, through which those employees contribute 3.1 percent of their pay toward their pensions. In order to make reasonable adjustments to contributions made by those who joined the workforce prior to 2013, the Budget again proposes to increase contributions of those employees by 1.2 percent of pay, over three years, beginning in 2014. While Federal agency contributions for currently accruing costs of employee pensions would decline, these Federal employers would pay an additional amount toward unfunded liabilities of the retirement system that would leave total agency contributions unchanged. Under the proposed plan, the amount of the employee pension would remain unchanged.This proposal is estimated to save $20 billion over 10 years. In addition, the Budget again proposes to eliminate the FERS Annuity Supplement for new employees. These changes are expected to neither negatively impact on the Administration’s ability to manage its human resources, nor inhibit the Government’s ability to serve the American people. (p. 42, FY 2014 Budget)

To conclude:

The Townhall/Goldworth Financial email is somewhat deceptive. While I don’t doubt the federal government is desperate for more revenue (to stanch the various bleeding entitlement programs, especially Social Security Disability that is due to go bankrupt in 3 years, by 2016) and is lusting after the American people’s private pensions and retirement accounts, the government at present is not “nationalizing” those accounts.

Having said that, to “require” all private-sector employers to set up pensions or retirement plans for their employees is to increase even more the power of the already too big, too bloated, and too tyrannical Big Government, while commensurately decreasing our freedom.

As currently proposed in FY 2014 Budget, our participation in “automatic” payroll-deduction “Individual Retirement Accounts” is VOLUNTARY. Employees can opt out.

But I have no doubt that the proposal is a step toward the government eventually getting its filthy hands on our retirement savings (think Parable of the Frog in Slowly Boiling Water). Given that, I recommend that we oppose and resist Obama’s idea of “automatic Individual Retirement Accounts.”

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Dr. Eowyn is the Editor of Fellowship of the Minds.