I’m feeling quite negative at the moment. It’s a strange and unsettling feeling for me. One thing I am feeling especially negative about is the unaffordability of health insurance, health care and retirement, and the government’s Band-Aid approach to addressing these issues. So far this week I’ve read a series of articles that provide examples of how bad things are and how unlikely they are of getting better. These articles spotlight how the private health insurance, health care and retirement saving systems continue to shut the door on any hope of reform.
- the gap between hospital costs and prices widening
- increasingly unaffordable health insurance premiums and vanishing plans and networks
- the Securities Industry Financial Market Association (SIFMA) coming out against state run retirement plans because there are enough private sector options
- Accountable Care Organizations (ACOs)
- Automatic IRA
- Retirement Savings Contributions Credit (SAVER’s Credit)
- State IRA programs
Rethinking Employment-Based Health And Retirement Plan Tax Incentives
Most workers don't understand the link between the workplace benefits they participate in and the federal tax code. Their employee benefit plan information is littered with terms like pretax, tax-free, tax-deferred and tax-favored, but they would be hard pressed to explain what these terms mean. However, if the link between health and retirement benefits and the tax code was severed, they would immediately figure out that something terrible happened. Their paychecks would be smaller. And they would insist on getting their government tax subsidies back.
Of course workers don't view tax-favored employee benefits as federal government subsidies. They think they are entitled to keep as much of their hard earned money as possible and who cares that only employer-sponsored health and retirement plans receive the subsidy. It's not their fault that not everyone gets it. The tax code is full of provisions that benefit some and not others. Continue Reading...
It’s On. Financial Services Firms Won’t Give Up Their Control Over Retirement Plans Without A Fight.
It is fair to say that before federal and state lawmakers started focusing on individual access to health insurance and retirement plans, the private sector was okay with maintaining the status quo. A system where if you worked for a large employer and were continuously employed, you could receive subsidized health insurance and have access to a convenient workplace retirement plan. And, the higher your income the more you benefitted from the tax-favored design of these plans.
Then along came the Affordable Care Act (aka Obamacare), bringing the lack of access to affordable health insurance for tens of millions to the top of the public policy agenda. Sensing an inevitable shift in the status quo, private sector health insurance companies and big pharmaceutical companies mobilized to protect their interest. Change to the status quo was fine with them as long as the status quo did not change. Additions to the status quo that left the existing system intact are okay. They lobbied hard to get everything they wanted and little or none of what they did not, and they succeeded.
Soon after, the federal and many state and local governments turned their focus to individual access to retirement savings plans. They found similar problems as with access to health insurance. The lower an individual’s income, the less hours they worked, and the smaller the company they worked for, the less likely they were to have access to a workplace retirement plan. To address the issue, lawmakers proposed their own plans. Some wanted to allow workers without workplace retirement plan access to federal or state retirement plans. But most elected to design new plans that had some but not all of the features of 401(k) style defined contribution plans. Now who would have a problem with this approach? The current system showed little or no interest in these workers. Surely, the financial services sector would not object to everyone having access to a workplace retirement plan. Well, some of them kinda do object.
We Don’t Need No New Plans
Large financial institutions were not completely supportive of the idea of adding “new” retirement plans. They felt like they already had products to meet everyone’s needs even if they did not market these products to the individuals policymakers were trying to help. When President Obama announced the creation of the MyRA (My Retirement Account), many financial service providers scoffed. They called and small potatoes and redundant.
Some suggested that the states might be able to do a better job at addressing the retirement plan access problem. Continue Reading...