For the first time, high-ranking elements of the
Administration have endorsed Prof.
's controversial plan to create a new hybrid retirement savings
vehicle offering workers a guaranteed return on investment. A
recently released report by the White House Task Force on the
Middle Class, headed by Vice President
favorably describes the advantages of Ghilarducci's "Guaranteed
Retirement Accounts" approach and recommends that GRAs get
"further study." Ghilarducci herself proposed that the cost of
guaranteeing all the covered employees' investments should be
paid for by terminating 401(k) tax incentives, but the
administration task force is silent on how the GRA guarantees
might be financed. A call to the White House press office was not
Any move by the Obama Administration toward the GRA retirement
saving model would be a major initiative, dwarfing all its other
policy proposals in the retirement sector. "The point is cost,"
. "There is no data on what it would be." The annual Treasury
revenue loss resulting from 401(k) is in excess of $120 billion,
which Ghilarducci, director of the
Schwartz Center for Economic Policy Analysis
in New York, says is subsidizing the savings of the rich rather
than the poor. House Ways and Means Committee Democrats have
asked the Government Accountability Office to find out who does
benefit from the 401(k) shelter.
Outsiders in close touch with the internal Obama
Administration discussion about the problems impeding workers'
retirement saving contended last week that the more conservative
policy makers on the president's team have little enthusiasm for
GRAs. It was also noted that if GRAs got to head the
administration's agenda, they would be at cross purposes with
previous Obama plans rooted in the status quo, like auto-IRA and
a refundable savers credit. It would be illogical for Congress to
enact legislation going in both directions.
But among the many views contending for the president's ear there
is a strong concern in some quarters not only about how little
money is saved for old age, but how it can be swept away in
events like the 2008 financial crisis. In the words of the task
force, "these [GRAs] would allow workers to be sure that the
funds invested in them will grow steadily without the risk of a
market collapse." Investment risk was also on the mind of Labor
, in public comments he made about searching for a hybrid to
replace the all-but-defunct DB pension. He said he worried about
shifting investment risk to the worker (as 401(k) does) and said
it was a "very delicate balancing act, where to assign risk." The
remarks in the task force report could not have been issued
without the concurrence of Obama's own staff.
Ghilarducci was travelling last week and could not be reached. A
press aide for DOL said it deferred to the White House in
commenting on these matters.