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Norman Stein
The Pensions 2000 Proposal

The Pensions 2000 proposal calls for the creation of a number of competitive federally-chartered and federally-regulated financial institutions (similar to TIAA-CREF, the portable defined contribution pension and savings plan for colleges and universities). Employers would be able to choose to make contributions to one of these institutions on behalf of their employees each year. Contributions would have to be the same percentage of pay for all employees meeting specified age and service requirements. Those employees who could afford to do so would then be permitted to match their employers' contributions on a 2:1 basis. The combined limits for employer and employee contributions would be the same as those for 401(k) plans. Payments after retirement would be made in the form of annuities that could be indexed for inflation, and would be insured once in pay status. Although employers would select the institution initially, once the money has been contributed, workers would have the option of transferring their accounts to another institution.

The Pensions 2000 model is designed to combine the best features of both traditional defined-benefit pensions and popular new 401(k) savings plans. Unlike traditional pensions, but like 401(k)s, the Pensions 2000 model offers simplicity and portability. At the same time, like traditional pensions and unlike 401(k)s, it assures employer contributions for workers at all income levels and locks up their savings until retirement age.

The model is similar to both pensions and 401(k)s in leaving the initial choice of institution up to the employer. It differs from both types of plans in permitting employees to switch to other institutions while still working for the employer.

The Pensions 2000 concept was developed by a bipartisan group of twenty of the nation's leading policy experts.

 

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