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Monday, May 2, 2016

Harkin shares pension proposal

Friday, August 31, 2012

Sen. Tom Harkin lays out his plan for a new pension system Thursday morning at the Spencer Area Activity Center. About 50 people, including high school government students, attended the event.
(Photo by Gabe Licht) [Order this photo]
Sen. Tom Harkin is concerned about the United States' current retirement structure, calling it "the most under-reported crisis" on Thursday, while visiting the Spencer Area Activity Center.

Half of all Americans had a pension plan in 1980, compared to just 20 percent today, he said. Forty percent of Americans have 401k plans, with an average of $70,000. Another 40 percent have less than $10,000 in savings without a pension or 401k plan.

"We need to have a better savings retirement system for the future and we need to make it easier for businesses to have some form of system," said Harkin, the chairman of the Senate Health, Education, Labor and Pensions Committee. "It's tough for businesses to set up pension plans because employees move. That's why the nation moved to 401k plans."

The longtime Iowa Democrat called the committee's proposal "somewhere between what we know as a pension and a 401k."

Employees would be automatically enrolled unless they opted out, and the money would be invested by retirement firms.

"The only thing the business would have to do is make sure a portion of your check was sent in, just as they do withholding now with Social Security," Harkin said.

Employers may be required to match a certain percentage of contribution. For example, if employees contribute 4 percent of their income, employers would contribute a half percent. Employers could also use a higher matching percentage to attract employees.

In contrast to a 401k, an employee would not be able to withdraw the funds in a lump sum, but would receive a monthly annuity instead.

Contributions would be designated before the deduction of federal taxes.

He clarified that the program would be privately run and most likely overseen by a board including government officials.

Harkin was joined by Karl Nolin, Bill Ziegler and Les Hicks to discuss the proposal.

Nolin, of Nolin Milling in Dickens, shared how his family business contributes 15 percent of its employees' salaries to a Simplified Employee Pension program instead of paying into Social Security. While Nolin said the program has worked well for his business, it does not work for everyone.

Ziegler relayed his experiences as a union employee whose pension plan was replaced with a 401k in 1978. He prefers the guarantee of an ongoing payment.

Hicks said medical insurance and other costs eat into the Social Security and pension payments he and his wife receive. He advised several high school students in the audience to get a pre-tax pension plan, if possible, when they enter the workforce.

One of those students asked Harkin about the longevity of Social Security.

"Do you believe the United States of America will exist when you retire?" Harkin responded. "If the U.S. exists, you will get Social Security because it is backed by the full faith and credit of the U.S."

For that reason, Harkin believes attempts to privatize Social Security would weaken it. He has proposed a plan that would eliminate the cap that prevents individuals from paying Social Security on more than $110,000 per year. He said his plan would extend the life of fully-funded Social Security from 2032 to 2050.

If no changes are made to Social Security, he said it would continue to a lesser degree.

"From 2033 on, for the next 75 years if we don't do anything, Social Security will be paying 75 percent of what they thought they would be paying," Harkin said.

He said part of his reason for holding town hall meetings to talk about pensions and retirement is to promote a national conversation about the issue.

"I think this would be a good issue for our candidates to be discussing."

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Harkin is right. Our candidates should be discussing this, but no they'd rather resort to name calling. Then there's Paul Ryan who wanted to do away with SS. Our government has become a joke.

-- Posted by joev on Fri, Aug 31, 2012, at 12:46 PM

First of all Harkin is clueless. Companies didn't move from pensions to 401k's because people moved jobs. It's because a pension is a defined benefit and a 401k is a defined contribution.

With a 401k the company matches a certain amount and they're done. With a pension they guaranteed a specific amount. When it came time to pay the piper many companies didn't have the money.

The government then required companies to fund their pensions based on actuarial assumptions. If the stock market didn't perform they had to put more in.

They moved away from pensions because it was cheaper to do a 401k and they have a defined risk.

-- Posted by financeman on Fri, Aug 31, 2012, at 3:34 PM

I don't think people really understand how scary of an article this is.

The key words are the employee can't take the money out as a lump sum, rather it will be an annuity.

This is another 4% tax for employers on top of social security and another tax on employees. The money is then put in a plan watched over by the government.

They did a tremendous job watching our social security money didn't they?!

The frightening thing about this plan and other plans is what it leads to:

The confiscation of private 401k & IRAs. Some would love nothing more to confiscate these moneys and add them to the social security pot in exchange for a guaranteed annuity.

However I'm sure if you had "too much" money you would get less. This would be their answer to saving social security.

Many will think I'm crazy but I guarantee there are a lot of people that would have no problem with this as the average person is in debt and saves nothing. No skin off their back.

Mark my words this isn't the last of these types of proposals you will hear over the next several years.

Be afraid.

-- Posted by financeman on Fri, Aug 31, 2012, at 3:41 PM

Maybe Harkin should talk with Obama about what should be discussed. Huh Tom??

-- Posted by clayfarmer on Sat, Sep 1, 2012, at 1:29 PM

I completely agree with financeman. This is just a ploy by Wall Street to get more of your money. What happens when the retirement firms that the government picks decide to pay themselves huge bonuses and then declare bankruptcy? Will our broke government bail them out? What is wrong with the 401K and IRA programs we have now? At least with these we have control on how our money is invested and when we want to use it. I thought companies were no longer allowed to use the opt out scam and bill you for something you do not agree to. If implemented it should be opt in.

-- Posted by Henry Blake on Sun, Sep 2, 2012, at 5:14 PM

Finace man did a great job on this subject IMHO. Always good to hear from an informed source.

-- Posted by cow man on Mon, Sep 3, 2012, at 8:18 AM

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