By Judy Morris
The alternate media and blogosphere are buzzing with very disturbing stories about how the government intends to steal/seize private retirement accounts.
A new effort by the Obama administration, Congress, the Treasury Department and labor unions aims to fundamentally alter how Americans plan and save for retirement.
Warnings have been popping up over the last several years about the possibility of re-appropriating the $3.5 Trillion sitting in private retirement and spreading those funds around to Americans who are deemed less fortunate.
This couldn’t possibly happen in America, right? At one time, most Americans also believed heath care mandates that force Americans at the barrel of a gun to surrender portions of their earnings into a universal system for all would never happen. Well, it did.
And now, those who would control and regulate every aspect of our lives are making a new push; one whose efforts will ultimately end in the seizure and redistribution the personal retirement savings of every American who has ever put money into a 401(k) or IRA.
This is no longer in the realm of conspiracy, but rather, public record.
The articles goes on to document what is currently happening, including “A recent hearing sponsored by the Treasury and Labor Departments marked the beginning of the Obama Administration’s effort to nationalize the nation’s pension system and to eliminate private retirement accounts including IRA’s and 401k plans, NSC is warning.”. If this is true, it’s an outright expropriation and theft of all private pensions.
Another view of the situation involves the government erasing the tax deductability of private retirement savings.
Currently, taxpayers can set aside up to $17,000 in a retirement account without paying taxes on it until it is withdrawn during retirement.
This provision allows workers and small business owners to defer taxes on money they save for retirement until they are older, and more likely to be in a lower tax bracket. It also is becoming an important leg of future generation’s retirement planning as defined benefit pensions become more and more rare.
However, with more than nine trillion dollars invested in tax deferred retirement accounts, these retirement savings have become to some in Congress an almost irresistible pot of money with proposals floated in the past couple of years to replace the savings with government annuities among other things.
Alarming and disturbing as these facts are, there is a whole lot more to the story. Public pensions are massively underfunded and private pensions are also underfunded and becoming the liabilities of the federal government.
Public pension funds across the country are severely underfunded, threatening the retirement security of government workers and the wallets of taxpayers.
State Budget Solutions, a non-partisan fiscal watchdog, says the underfunding is more than $4 trillion.
The federal agency that insures pensions for 43 million Americans saw its deficit swell to $34 billion in the past year, the largest in its 38-year history.
In its annual report released Friday, the Pension Benefit Guaranty Corp. blamed the growing shortfall on its inability to charge private employers adequate premiums for insuring pensions.
Companies are notorious for shortchanging pension contributions and even dumping pension liabilities on the taxpayers. This is a very problematic trend that will vastly accelerate.
Defined-benefit pensions at S&P 500 companies reached a record underfunding level of $354.7 billion at the end of 2011, an increase of more than $100 billion from 2010 and surpassing the $308.4 billion prior record underfunding level set in 2008, according to a new study by S&P Dow Jones Indices. Underfunding for other post-employment benefits, or OPEBs, increased to $223.4 billion in 2011 from $210.1 billion in 2010.
“Companies are continuing the trend of moving away from pension obligations and into 401 types of investments as they shift the responsibility of retirement away from the corporation and over to the individual,” says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
Combined, the amount of assets that S&P 500 companies set aside to fund pensions and OPEB amounted to $1.38 trillion, covering $1.96 trillion in obligations with the resulting underfunding equating to $578 billion, or a 70.5% overall funding rate.
The rush to seize private pensions is also driven by the fact that Social Security is no longer the cash cow for the government that it once was and its ability to continue to pay benefits now require dipping into general revenues. In other words, the Social Security taxes collected no longer cover the benefits paid.
The Social Security nightmare is substantially the result of the government plundering the Social Security Trust Fund and leaving a worthless pile of IOU’s that total at least $2.5 trillion.
Fast forward to 2012 and the outright theft of the Social Security Trust Fund is now estimated at $2.5 trillion.
And that’s the bitter truth folks. The Social Security Trust Fund has been nothing but a slush fund for Congress Critters since its inception. Congress stole the money, left a big pile of worthless IOU’s and spent the money on wars, pork, corporate welfare and other slop. It was a relatively easy heist to accomplish because for decades the SS tax far exceeded the cash outlays to SS recipients. Now, Congress is in an absolute panic because the SS Trust Fund is fully plundered and the SS taxes collected are not sufficient to pay the benefits. In recent years the government has been using general revenues to cover annual shortfalls in the $30-70 billion range and that number will only explode as the Baby Boomers retire.
The idea of the government seizing private retirement accounts is nothing new and Congress held formal meetings on the issue back in 2010.
Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more “fairly” distribute taxpayer-funded pensions to everyone.
Initially, the scheme to seize private pensions was based on a wealth transfer to bailout public sector pensions. But now that the public sector pension mess ($4 trillion shortfall in funding) has mushroomed into an even bigger financial catastrophe and a plundered SS Trust Fund combined with a bankrupt federal Pension Benefit Guaranty Corp that insures private pensions have entered the picture, I predict that the government will accelerate its scheme to plunder private sector pensions.