Saturday, November 8, 2008

Reports of 401(k) Demise Have Been Greatly Exaggerated

If you google for "Ghilarducci 401k," you will find a lot of outrage over Professor Ghilarducci's proposal to change 401(k)s. I heard about this back in October from one of my finance blogs (although now I can't find the original post...). Read the google results for details of her proposal itself.

Her plan sounded to me like a pretty bad overreaction to the current financial situation. Representative McDermott was mentioned in the blog posts and news articles as being in charge of the hearing where Ghilarducci spoke, so I sent him an email telling him my opinion.

"He" (by which I mean his staff) sent back a form letter saying it's all blown out of proportion and not likely to actually happen. His response says bloggers have got things wrong, but in my Google alerts I haven't seen anything but "the sky is falling" about Ghilarducci and 401(k)s. So here's the reply he sent me, so it's at least out there somewhere on the internet:

Thank you for contacting me with your concerns over testimony by University of Notre Dame economics professor Teresa Ghilarducci regarding her proposal for eliminating preferential tax treatment of 401(k) plans. I welcome your interest in this matter.

A number of bloggers have incorrectly characterized my intentions and actions concerning this tax issue. I did not convene the hearing on this issue, though Professor Ghilarducci did testify before the Education and Labor Committee as a member of a panel discussing retirement savings. I am not a member of this committee and was not present and therefore did not attend the hearing.

Please be assured that I have no plans to eliminate the tax incentives for 401(k) plans. Rather, I am actively exploring ways to provide more incentives for families to save and to prepare for retirement. I regret that some blogs have misinterpreted my intentions. I share your concerns about Ms. Ghilarducci's proposal; at the same time, we must continue to encourage discussion of thoughtful proposals that can help to improve income security for retirees. While Ms. Ghilarducci's plan is not one I support, I am willing to listen to new and innovative ideas from many sources; certainly, careful scrutiny of new suggestions is always appropriate as we attempt to effectively address issues of retirement security.

Again, thank you for sharing your views and concerns. I appreciate hearing from you.


Jim McDermott
Member of Congress

Sure, it's generic politispeak, but I couldn't find this response (or really any page saying anything other than "oh noes, the Democrats be stealin' your 401(k)!" (What's a financial post without a lolrus link?)

Update, November 10th: I'm finally seeing calmer posts about this in my google alerts. Blogger John Clinton writes, "All in all, it looks to me like a case of someone in the media going after the big attention-grabbing angle of the story — Congress wants to kill off 401(k) plans! — and ignoring the other four sides of the issue."

Update, November 20th: And now weighs in!