Now that it’s essentially down to Joe Biden vs. Bernie Sanders for the Democratic presidential nomination, it gets easier to make direct comparisons between the two candidates’ positions on key issues.
Big surprise, we’re interested in their ideas about how they would help Americans save more for retirement.
While in future posts we’ll tackle their proposals for shoring up Social Security and compare their ideas for tax policy and reigning in the wealth gap (Bernie really hates Billionaires!), today we’ll look at what they’ve put out there to this point on the subject of workplace retirement plans.
The Biden approach
Joe Biden’s official campaign website features a section titled, “The Biden Plan for Older Americans,” where his proposals for strengthening Social Security, increasing access to affordable health care, protecting and strengthening Medicare and Medicaid, and how he would “ensure that middle-class families get a leg up as they grow their nest egg.”
From the Biden website:
Under current law, the tax code affords workers over $200 billion each year for various retirement benefits—including saving in 401k-type plans or IRAs. While these benefits help workers reach their retirement goals, many are poorly designed to help low- and middle-income savers—about two-thirds of the benefit goes to the wealthiest 20% of families. The Biden Plan will make these savings more equal so that middle class families can enter retirement with enough savings to support a healthy and secure retirement. President Biden will do so by:
- Equalizing the tax benefits of defined contribution plans. The current tax benefits for retirement savings are based on the concept of deferral, whereby savers get to exclude their retirement contributions from tax, see their savings grow tax free, and then pay taxes when they withdraw money from their account. This system provides upper-income families with a much stronger tax break for saving and a limited benefit for middle-class and other workers with lower earnings. The Biden Plan will equalize benefits across the income scale, so that low- and middle-income workers will also get a tax break when they put money away for retirement.
- Removing penalties for caregivers who want to save for retirement. Under current law, people who work as caregivers without receiving wages are ineligible to get tax breaks for retirement saving. The Biden Plan will allow caregivers to make “catch-up” contributions to retirement accounts, even if they’re not earning income in the formal labor market, as has been proposed in bipartisan legislation by Representatives Jackie Walorski and Harley Rouda.
- Giving small businesses a tax break for starting a retirement plan and giving workers the chance to save at work. As proposed by the Obama-Biden Administration, the Biden Plan will call for widespread adoption of workplace savings plans and offer tax credits to small businesses to offset much of the costs. Under Biden’s plan, almost all workers without a pension or 401k-type plan will have access to an “automatic 401k,” which provides the opportunity to easily save for retirement at work—putting millions of middle-class families in the path to a secure retirement.
“The Biden Plan for Older Americans” does not go into additional detail about the “automatic 401k,” but it’s easy to surmise it involves requiring businesses that don’t offer an employer-sponsored retirement plan to automatically enroll in a government-sponsored 401k or IRA, which would automatically rollover as account holders change jobs.
The Sanders approach
Bernie Sanders has proposed plenty of ideas about how he would as president work to restore and preserve pension benefits, expand Social Security, impose an “extreme wealth tax” and boost estate taxes in an overarching effort to take on the “billionaire class” and substantially reduce wealth inequality in America.
Yet he has been surprisingly quiet on the topic of employer-sponsored retirement plans.
You won’t find any mention of 401ks in his official campaign website’s “Bernie Sanders on the issues” section, which includes details about his New Green Deal, Medicare for All, College for All, Income Inequality Tax Plan, Tax Increases for the Rich, and Real Wall Street Reform, among many other proposals.
Likewise, his “21st Century Economic Bill of Rights,” where the sixth and final section is devoted to “The right to a secure retirement,” makes mention only of expanding Social Security while workplace retirement plans are absent.
On the rare occasions where Sanders has broached the subject of 401ks during the 2020 campaign, 401k Specialist has covered it:
Sanders has proposed a financial transaction tax on Wall Street to support his plan to make college free and pay off all outstanding student debt, drawing groans from Wall Street with many saying the FTT would hurt savers as anyone invested in the stock market (including 401k plans, 529 plans and pension funds) would pay the tax.
Back in July 2019, Markets Insider noted that a study by MMI showed that if Sanders’ FTT had existed in 2015, the California Public Employees’ Retirement System (CalPERS) would have paid more than half a billion dollars in taxes.
“When you break down the actual impact of the financial-transaction tax proposal, the real burden gets placed on the savings community,” Kirsten Wegner, CEO of Modern Markets Initiative (MMI), told Markets Insider in an interview. “It’s ironic. It’s actually the teachers’ pension funds, university endowments and 529 plans that would be helping pay for free college and student loan debt relief.”
Sanders also recently proposed legislation in the Senate along with Chris Van Hollen (D-MD) that would end tax advantages that allow CEOs to contribute unlimited amounts to special executive retirement plans.
Their bill, the CEO and Worker Pension Fairness Act, would use the estimated $15 billion in federal tax revenue recovered from eliminating these tax breaks to help secure ordinary workers’ pensions that are at risk in multiemployer plans.
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Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
