Legislation
The newest presidential candidate for the Democratic party has outlined plans for Social Security, a “public option” 401(k), and a new (old) fiduciary rule.
Claiming that “most of the benefits of tax breaks for retirement savings go to wealthier saver,”[i] Mike Bloomberg’s “Retirement Security Policy” promises to “create a public-option retirement savings plan, with automatic employer and employee contributions for all income earners who do not participate in a defined contribution or benefit plan at work.”
‘Break’ Brake?
‘Break’ Brake?
The proposal goes on to state that it will “provide a government match for lower-income workers” – and that this would be “paid for by a reduction in the tax break for high-income retirement-plan contributions,” presumably through some kind of cap on the current contribution limits.
The public option plan would “automatically invest savings in an appropriate target-date fund and provide savers with prudent alternatives, modeled on the Thrift Savings Plan for government workers, automatically enroll savers in a low-cost, inflation-indexed annuity at retirement age, and designate a small part of the accounts as an emergency fund, which savers can tap without penalty to meet short-term needs.”
The proposal also indicates that this public option would “allow savers to consolidate all of their retirement savings in one public-option account,” suggesting that it would accept rollovers from existing 401(k)s and perhaps even IRAs.
He’s not the first candidate to tout a so-called public option retirement proposal this election cycle; last fall “Mayor Pete” Buttigieg offered a different version.
Fiduciary
Bloomberg also has plans to resurrect the Labor Department’s fiduciary rule, noting that while “the Trump administration has reversed the rule, Mike will protect elderly investors from conflicted financial advice and improve the financial position of retirees.”
The proposal also includes a number of provisions to shore up and expand Social Security, including:
- Introduce a more effective minimum benefit to prevent low-income seniors from falling into poverty (the proposal says it would help roughly 10% of current recipients).
- Raise future benefits by adjusting cost-of-living allowances to account for higher inflation for seniors.
- Examine options for addressing other weaknesses in the benefits system – family caregivers and surviving spouses are specifically cited, though the solutions aren’t.
The proposal also says it will “Enhance Medicare and Medicaid” by:
- Limiting out-of-pocket drug costs (capping Medicare beneficiaries’ out-of-pocket drug spending at $2,000 annually, and redesigning benefits so insurers and drug companies have more liability above the “catastrophic threshold”).
- Extending coverage to dental and other services (including access to preventive dental, vision and hearing care for older Americans via an additional supplemental Medicare benefit, similar to the drug benefit, to cover those services).
- Developing a new federal safety net to insure against catastrophic costs of long-term care.
Footnote
[i] To support this claim, the Bloomberg proposal cites 2014 data regarding the number of individuals in various income brackets that contribute to a 401(k). However, another key measure of fairness finds that, courtesy of the various contribution and nondiscrimination limits, there is actually a very consistent ratio between compensation and account balance.
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