As the new year begins we will brave the old warning: Be careful what you wish for, you might get it.
Herewith is Pensions & Investments' New Year wish list:
First and foremost, we wish the Clinton administration and the new Congress would end the all-too-common practice of raiding the private pension system every time they need additional revenue.
The long-term retirement income security of American workers has been harmed far more by decisions driven by desperate scrabbling for additional revenue to meet near-term shortfalls than by conscious efforts to modify the retirement system.
The dramatic shift to defined contribution plans, especially 401(k) plans, dates from the tax reforms of 1987 - clear evidence that the changes in the tax treatment of pensions made that year had unintended consequences.
Few would argue the shift to 401(k) plans was (a) planned by anyone in the administration, the Congress or the congressional staff; (b) made the retirement income of American workers more secure than it had been under defined benefit plans; or (c) has made the accumulation of assets backing retirement income more efficient.
The shift to 401(k) plans was an unintended consequence that, in all probability, no one anticipated.
Enough of this kind of irresponsibility. The retirement income security of 100 million U.S. workers is too important a matter to be treated as an afterthought in the quest for additional revenue to be squandered immediately.
The administration (the past several, not just the current one), especially the Treasury, and the Congress, have been acting with the short-term viewpoint of which they often accuse institutional investors.
The second wish is related to the first: That Congress would pass true pension simplification. Onerous red tape has been a contributing factor in the shift to defined contribution from defined benefit plans.
Lay out simple rules for pension plan sponsors to meet. Assume good intentions on the part of most plan sponsors, and go after the truly egregious efforts to rip off the system for the benefit of the top few.
Our third wish is that companies would do more to encourage employees, especially lower-paid employees, to participate in their 401(k) plans and accumulate a useful retirement nest-egg by offering a more generous match.
The 401(k) might not provide as much protection for long-term employees as a defined benefit plan, but it is all many employees have.
Too many employers have looked upon the 401(k) as a way to put the full responsibility for retirement savings on to the shoulders of the employees by offering no or low matching contributions. The employers have saved themselves the costs associated with a defined benefit plan - both the annual contributions and the administrative costs. They should share the savings.
Some employees - perhaps the top 25% in terms of income - can shoulder more of the responsibility. The others - especially the lowest-paid 25% - find it extremely difficult.
The lowest paid employees need a decent match - at least 50 cents on the dollar, and possibly dollar-for-dollar from the employer - if they are to be able to accumulate enough for a reasonable standard of living for retirement.
Our fourth wish is that all of our readers enjoy a happy and prosperous new year.