Re-Envisioning Retirement Security: Retirement-USA Plus Plan

The following proposal was presented by Nancy J. Altman at the Re-Envisioning Retirement Security Conference on October 21, 2009.

Retirement-USA Plus Plan

The Retirement-USA Plus Plan proposes a new universal, mandatory defined benefit plan.  The Plan would provide benefits to all the same workers covered by Social Security, as well as add-on benefits to dependents of those workers.  Moreover, every individual currently receiving Social Security benefits would immediately receive the new benefit, as well.  The Plan would be administered by the Social Security Administration and follow much of Social Security’s structure including nationwide pooling of assets, complete portability, and annual increases to keep pace fully with inflation.

The Plan benefits would be equal to 20 percent of currently scheduled Social Security benefits, providing a medium-income worker and spouse benefits which, together with Social Security, replace 74.5 percent of pre-retirement income.  The Plan offers two alternative methods of funding its benefits.  The first, more progressive alternative includes (1) mandatory employer contributions of 6.2 percent of the portion of payroll in excess of Social Security’s maximum taxable earnings base, (2) a very modest contribution by higher paid employees who have earnings above the wage base, (3) the federal estate tax, frozen at its current level and dedicated solely to funding the Plan, (4) revenue from requiring that employee contributions to nonretirement salary reduction plans be subjected to FICA, just as contributions to 401(k) and other salary reduction plans for retirement are, and (5) investment income on Plan reserves.

Employees could continue to save voluntarily through employer sponsored plans and other personal savings.  Participants would have the option to convert their personal savings and accumulations in employer sponsored plans into a supplemental annuity purchased through the Social Security Administration.  The Plan would prohibit pre-retirement distributions, but would provide life insurance and disability insurance, in addition to the retirement benefits.  Plan benefits would be paid monthly as joint and survivor annuities to retirees and their spouses.  In addition, the Plan would provide monthly benefits to nonspouse dependents, including divorced spouses and divorced widows, under the same rules as Social Security.