Spurred by Americans' investment losses this year, Rep. George Miller (D-Calif.) is calling for a re-examination of 401(k) plans that could lead to a radical overhaul of the popular tax-deferred savings vehicles, Pensions & Investments magazine reported last week.
One proposal under consideration would eliminate tax deferral for contributions to 401(k) plans and individual retirement accounts. Workers would instead receive a $600 tax credit for contributions to a new government-run mandatory guaranteed retirement plan. Another proposal would extend 401(k) plans to all workers.
Miller said 401(k) plans and IRAs collectively had lost $2 trillion from equities alone in the year ended Oct. 9, and defined benefit plans had lost $1.9 trillion, according to new paper by Alicia Munnell, director of the Center for Retirement Research at Boston College. "Maybe we are at a time where fiddling at the margins is not going to serve the American people," he said.
Earlier this year, Miller promoted legislation that would have required more stringent disclosure of 401(k) fees. He put the measure after the mutual fund industry and employer groups opposed it.
"More than ever, there is an urgent need to help Americans strengthen their retirement savings," the lawmaker said. "We can't allow the promise of a secure retirement for workers to become a casualty of the financial crisis."