US - The Democrats have proposed a retirement plan along the lines of the Australian government's co-contribution superannuation scheme to improve retirement security for middle-class families.
Some 100m people would be eligible for Amerisave: A Democratic Plan for Retirement Security, which matches dollar for dollar the first US$1000 contributed to an IRA, 401(k) or similar retirement plan.
“The AmeriSave Match will not involve creating a new type of account; instead it builds on a successful model of 401(k)s and IRAs by increasing incentives to participate,” the Democrats said in a statement. “Individuals would receive their AmeriSave Match after they had filed a tax return, at which time the funds would be directed to their 401(k) or other plan.”
Under the Australian co-contribution scheme, the government contributes AUS$1.50 for every AUS$1 in personal contributions up to a ceiling of AUS$1500 annually for people earning up to AUS$28,000.
The Democrats claim the plan would strengthen retirement security without adding to the current deficit and increase national savings but give no details on how the plan would be funded.
Representative George Miller (pictured) praised the proposal, which he said would establish strong safeguards to protect private pension benefits.
But the plan has been criticised by think-tank The Heritage Foundation as a re-hash of “good ideas that avoid the main problem.”
David John, research fellow in social security and financial institutions at The Heritage Foundation, said: “The proposal completely avoids addressing social security and is equally silent about how House Democrats would pay for their plan. Given these lapses, the Democrats’ plan would inevitably increase the deficit, raise the public debt, or raise taxes.”
He added: “Any improvements in retirement income under the plan almost certainly would be consumed by the coming 30% cut in social security benefits that AmeriSave does nothing to prevent”. The Democrats claim the AmeriSave plan will reform bankruptcy and pension laws in an attempt to prevent companies from dumping pension plans; provide a tax credit to employers who encourage access to independent advice for eligible employees and to small businesses to set up retirement accounts for employees; force companies to release financial information on significantly under-funded pension plans and treat corporate CEOs and employees equally in terms of benefit cuts under pension and tax laws.
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