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Friday, November 14, 2008

Rethinking Retirement Plan Approaches

In October, the House Committee on Education and Labor held two hearings on 401(k) plans and retirement security. In addition to hearing testimony about the effect of current financial problems on retirement plans, they also heard ideas on ways to restructure plans, particularly 401(k) plans to possibly provide more security to workers.

The shift over the past two decades to having a defined benefit plan to instead having a defined contribution plan (or perhaps no plan offered at work), requires a widescale discussion on what role we want the government to play in protecting worker's retirmenet plans and in encouraging such plans to exist. Should Congress be paternalistic and create a variety of more safeguards to better ensure that the owner of a defined contribution plan has sufficient savings at retirement? Or should they take a more moderate role and perhaps just use tax incentives to encourage employers to create plans and for employees to make contributions to them?

I have a short article - 401(k) Concerns and Ideas, that summarizes the hearings and notes some of the concerns some people have regarding 401(k) plans.

What do you think Congress should do regarding 401(k) plans?

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