Demanding that Uncle Sam Stay Away from Executive Pay Regulation

The Wall Street Journal's weekend journal devotes its front page to an article and large graphic on keeping the federal government out of executive compensation regulation.

What are your responses to the argument that executive compensation should not be a priority for regulation and that executive compensation is generally rational and effective? See below.

"Executive compensation ranks far down the list of our society's economic challenges, which include unemployment, scarce credit and protectionism. Reform proposals from Congress, the White House and the Federal Reserve are unworkable and, in some key areas, conflict with one another.

People have lost all sense of perspective. In most companies executive pay works rationally and effectively. No evidence whatsoever indicates that errant executive compensation "caused" the financial crisis of 2008, or that its reduction would prevent similar events in the future."

The end of the 401(k)?

This week's Time magazine has a cover story on "retiring the 401(k)." Inside, you find an article on the failures of the 401(k) as a retirement savings tool.

"The tax-deferred 401(k) plan, and others like it, such as the 403(b) and the IRA, have become our nation's go-to retirement piggy bank. Invented nearly 30 years ago as an executive perk — one more way to dodge Uncle Sam — the 401(k) was never meant to replace the employer-guaranteed pension fund, supplemented by Social Security, as the cornerstone of our nation's retirement system. But propelled by a combination of companies looking to cut costs and consumers who wanted control of their retirement destiny, that's exactly what happened.

The ugly truth, though, is that the 401(k) is a lousy idea, a financial flop, a rotten repository for our retirement reserves. In the past two years, that has become all too clear. From the end of 2007 to the end of March 2009, the average 401(k) balance fell 31%, according to Fidelity."

See also, an article encouraging people to maintain a 401(k) as one of their retirement savings tools, with some pragmatic advice on how to save more.

Freelancers' Union 401(k)

The Freelancers' Union has set up a new 401 (k) plan for independent workers. You can download their 25 page summary plan description on the website.

From the website,
"There’s a calculator available on our website to help you decide how much money to start contributing. Here are other important features of our 401(k) that you may want to take into consideration:

Regular savings with irregular income
You’ll be able to increase, decrease, or stop your contribution each month based on your immediate finances and comfort level. You can play it safe when work is slow and make bigger contributions when you’re feeling flush.

Two kinds of tax advantage
When you invest pre-tax, you’re not paying taxes on the income that goes into the 401(k). Splendid! But you will pay taxes on the money ("payouts") you later take out from the plan—like when you retire.
If you make Roth after-tax contributions, you pay taxes on your full income as usual, but your 401(k)'s earnings won’t be taxed, and you won’t have to pay taxes on the money ("payouts") you take from the plan later.
Share the wealth . . . with yourself
A 401(k) has higher contribution limits than your SEP or IRA option, so you can sock away even more for retirement. And if you’re a business owner you may also be able to make profit-sharing contributions to the Retirement Savings Plan in addition to contributions of your income.

Baby, rollover!
Do you have a neglected savings plan from your past employer, languishing like the bamboo plant you kept in your cubicle? Roll that money into a new 401(k) to simplify your finances. You may be paying lower fees if you roll over, too.

Send money by snail mail or bank debits
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Staying involved with your money
In addition to using our planning calculators, you’ll be able to change how much you’re contributing, and to which specific funds. And of course, you can view your balance and request loans or withdrawals. (All the IRS rules, process details, and fees for loans and withdrawals are in the Summary Plan Description"

Retirement Planning Advice for Laymen

Kiplinger's devotes a section of its website and print magazine to retirement planning.
This week's stories cover Social Security, Roth rollovers, and required minimum distributions (RMDs)for individual retirement accounts(IRAs).

If you are unfamiliar with RMDs, Gregory Kolojeski's article provides a summary of RMDs for traditional and Roth IRAs.

Higher Costs of Dependant Health Coverage

Kiplinger's discusses employee options to reduce health inusrance costs for dependants.

The article advises that employees review their open enrollemnt packets with care.

"What you can do.
If your employer gives you several health-plan options, compare the out-of-pocket costs for the types of doctor visits and drugs you typically pay for as well as the premiums -- the plan with the lowest premium could actually cost you more, especially if you take expensive brand-name drugs that have no generic alternative (some employers have calculators on their intranet Web sites to help with the math). Also compare the bottom line -- your maximum out-of-pocket expenses. No matter how many medications you take or doctor visits you make, this is the most you will have to pay for the year. The ceiling is typically $2,000 to $5,000, says Sam Gibbs, senior vice-president of eHealthInsurance.com.

Also keep your ultimate liability in mind when calculating how much money to set aside in a flexible spending account for 2010. Because your FSA contributions avoid income and Social Security taxes, you can save 35% or more compared with spending after-tax money on these medical expenses."

State Run Health Plans

Today's Wall Street Journal has an article on the growing Senate support for health insurance plans run by the states. An option under consideration would involve states opening their workers' employee benefit plans to the general public.

In the opinion editorials, Peter Suderman, reviews state government health care schemes and asserts that they have been failures. Suderman discusses satte run plans in New York, Massachusetts, and Tennessee.

Health Bills Curbed Insurance Executive Pay

The Senate Finance Committee responded to allegations that expanding health coverage would further enrich insurance companies by voting to limit insurance executives' compensation. An executive pay amendment to the health bill would limit the tax deductibility of compensation for insurance exceutives to $500,000 a year.

Read more in a Wall Street Journal article.