Worry When Gov't Pushes Their Retirement Plan

A new bill — the “Retirement Savings for Americans Act of 2022” — aims to create a new government-managed retirement fund for workers that do not have access to a workplace-based retirement plan. The legislation may seem to have laudable aims, but don’t let it fool you. It is nothing more than the government’s latest push to nationalize Americans’ retirement accounts.

Retirement plans are a headache for most consumers. It takes time and energy to understand their specifics.

Employees get to make choices about their plans through profit sharing or stock bonus plans — a system that gives workers in the United States more options and choices than most other countries. This system puts more responsibility on the individual to make choices for their retirement, especially for those who do not have an employer-set plan, such as gig workers.

This new bill would create the American Worker Retirement Fund, which, unlike existing 401(k) plans, would not be subject to many of the laws and regulations of the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code.

By offering a government match tax credit, the “money grows on trees” fund would be more generous than private sector plans This appears to be intentional by design in an attempt to steer the American public away from using private accounts altogether.

Workers already have access to affordable retirement plans, many of which are incentivized by federal government programs, such as multiple employer plans (MEPs). The federal government also offers strong tax credits for small companies that adopt new plans.

For example, gig workers can already open individual retirement accounts (IRAs), allowing them to, at low fees, save for their retirement and migrate existing plans from previous employers. Nearly 29% of U.S. households have traditional IRAs, making it (still) the most common type of retirement account in the country. There is absolutely no marketplace need for the government here.

Not only is a government option unnecessary, but it would also be costly, inefficient, and counterproductive.

Governments don’t exactly have good track records in this space. Everyone knows that Social Security’s bankruptcy is right around the corner, but many have already forgotten about the “myRA” program under the Obama administration retired soon after the U.S. Treasury adopted it because of its high price point for and low sign-up rate.

Ultimately, however, both history and recent events have made clear that the public is likely to reject this type of approach.

From the unsustainable nature of the German pension fund, which is expected to collapse under the weight of an aging population, to the violent protests over raising the retirement age in France, it is clear that government bodies are uniquely unqualified to provide retirement services to the people they serve.

They are expensive, inefficient, and lead to politicization, and this new bill would provide no exception to this rule of thumb.