4 ms·

Say what you will about government incompetence, but the idea of tying things like my retirement and healthcare to my employer just sounds terrible. Also, auto

by vinhboy 10y ago

Say what you will about government incompetence, but the idea of tying things like my retirement and healthcare to my employer just sounds terrible. Also, auto-enrolling people into 401K sounds kinda like... ya know... social security.

chimeracoder 10y ago
> Also, auto-enrolling people into 401K sounds kinda like... ya know... social security. Except that you have control over how your 401(k) gets allocated, along with additional ways to access those funds early (with a penalty) in case of emergencies. Furthermore, 401(k)s are explicitly not comingled, whereas the entire premise of Social Security is that the funds are comingled.
- vinhboy 10y ago
  Yea, but it also says a lot of people auto invest in target date funds. So essentially it's saying it works better when people just leave it alone. But yes, I understand your point.
tcoppi 10y ago
401(k) plans are set up by your employer but any money you put into it and gains are legally yours.
koolba 10y ago
> Also, auto-enrolling people into 401K sounds kinda like... ya know... social security. Companies auto enroll people into 401(k) programs because of participation requirements. For "highly paid employees" (i.e. executives) to be allowed to contribute to a 401(k), there requires a minimum level of participation from the rest of the workforce at the company. The easiest way to do so is to auto enroll people on day one.
- vinhboy 10y ago
  Oh.. thanks for that tidbit. I didn't know there was an incentive for them.
- chimeracoder 10y ago
  > For "highly paid employees" (i.e. executives) Highly Compensated Employees are not just executives. Anybody who makes more than $115,000/year qualifies, which applies to a lot of engineers. Also, anybody who controls more than 5% of the business qualifies, whether or not they are an executive, and regardless of their salary.
  - koolba 10y ago
    They'd qualify but I'm pretty sure when the law was first written it didn't have them in mind. It was specifically to prevent top level executives or business owners (>=5% of company) from creating 401k plans for only themselves.
    - chimeracoder 10y ago
      > They'd qualify but I'm pretty sure when the law was first written it didn't have them in mind. It was specifically to prevent top level executives or business owners (>=5% of company) from creating 401k plans for only themselves. Even if that was the rhetoric used when creating the rule, I'd be very skeptical of assuming that was the case, rather than it being motivated by a desire to increase tax revenue, as a lot of these tax rules are designed to do. $115,000 is a really low threshold to use to define "executive" - many blue-collar workers make far more than that. (And furthermore, the rule still does not prohibit highly-compensated employees from contributing; it just requires them to pay taxes on the excess of the permitted amount.)
      - actuallyalys 10y ago
        I'd challenge you on many. According to Wikipedia, only seven percent of workers make more than 100,000, never mind "far more than 115k": https://en.wikipedia.org/wiki/Household_income_in_the_United_States#Distribution_of_household_income https://en.wikipedia.org/wiki/Household_income_in_the_United.... Also, wouldn't this rule lower revenue because more workers end up contributing? (Assuming that executives would adjust their plans rather than pay extra taxes.)
      - deleted 10y ago
- roymurdock 10y ago
  Just learned about this the other day, Safe Harbor 401Ks: The Problem Safe Harbor 401(k)s Are Designed to Solve Before you try to understand what a safe harbor 401(k) is, you should know why someone would want one. Most 401(k) plans face an annual non-discrimination test. The IRS checks to see if a highly compensated employee or business owner is maxing out 401(k) contributions for the year, while the rest of the employees lag in their savings. The IRS wants to see that all employees are taking advantage of the retirement plan, not just those with the high paying jobs. So it tests the plan to find out if the average contributions of highly compensated employees (those who earned at least $120,000 in 2016 or own more than a 5 percent stake in the business) do not exceed the average contributions of everyone else by more than 2 percent. If you're a business owner and your 401(k) has low adoption rates or saving rates among rank-and-file employees, it may raise a flag for the IRS. According to Plan Sponsor Council of America (a lobbying business for the retirement planning industry), most businesses pass the test, but around 40 percent claim to have reported refunding or restricting plan contributions to do so. That's right, refunding contributions! The IRS can actually reject a retirement plan contribution that it feels is excessive. https://www.thebalance.com/what-is-a-safe-harbor-401-k-2894205 https://www.thebalance.com/what-is-a-safe-harbor-401-k-28942...
- ghaff 10y ago
  It may be true that companies have self-interested reasons to auto enroll people. However, as was being discussed the other day in a different context, defaults can also be a pretty powerful lever for encouraging people to make the "right" choice, where right = some policy outcome that is generally considered positive. Default 401-K enrollment at some level has been advocated by some economists like Richard Thaler as a way of improving the overall savings rate. The argument boils down to that you're going to have a default anyway, even if it's zero. So why not make the default a value that's is at least closer to the optimum.
douche 10y ago
If your employer offers a matching program for some percentage of your contribution, hey, it's free money. Personally, I've also got some outside IRAs and mutual funds as well; better to not have all the eggs in one basket, I figure.
humanrebar 10y ago
> Say what you will about government incompetence, but the idea of tying things like my retirement and healthcare to my employer just sounds terrible. It's government rules that create that reality.

by vinhboy 10y ago

chimeracoder 10y ago

> Also, auto-enrolling people into 401K sounds kinda like... ya know... social security. Except that you have control over how your 401(k) gets allocated, along with additional ways to access those funds early (with a penalty) in case of emergencies. Furthermore, 401(k)s are explicitly not comingled, whereas the entire premise of Social Security is that the funds are comingled.

vinhboy 10y ago
Yea, but it also says a lot of people auto invest in target date funds. So essentially it's saying it works better when people just leave it alone. But yes, I understand your point.

tcoppi 10y ago

401(k) plans are set up by your employer but any money you put into it and gains are legally yours.

koolba 10y ago

> Also, auto-enrolling people into 401K sounds kinda like... ya know... social security. Companies auto enroll people into 401(k) programs because of participation requirements. For "highly paid employees" (i.e. executives) to be allowed to contribute to a 401(k), there requires a minimum level of participation from the rest of the workforce at the company. The easiest way to do so is to auto enroll people on day one.

vinhboy 10y ago
Oh.. thanks for that tidbit. I didn't know there was an incentive for them.
chimeracoder 10y ago
> For "highly paid employees" (i.e. executives) Highly Compensated Employees are not just executives. Anybody who makes more than $115,000/year qualifies, which applies to a lot of engineers. Also, anybody who controls more than 5% of the business qualifies, whether or not they are an executive, and regardless of their salary.
- koolba 10y ago
  They'd qualify but I'm pretty sure when the law was first written it didn't have them in mind. It was specifically to prevent top level executives or business owners (>=5% of company) from creating 401k plans for only themselves.
  - chimeracoder 10y ago
    > They'd qualify but I'm pretty sure when the law was first written it didn't have them in mind. It was specifically to prevent top level executives or business owners (>=5% of company) from creating 401k plans for only themselves. Even if that was the rhetoric used when creating the rule, I'd be very skeptical of assuming that was the case, rather than it being motivated by a desire to increase tax revenue, as a lot of these tax rules are designed to do. $115,000 is a really low threshold to use to define "executive" - many blue-collar workers make far more than that. (And furthermore, the rule still does not prohibit highly-compensated employees from contributing; it just requires them to pay taxes on the excess of the permitted amount.)
    - actuallyalys 10y ago
      I'd challenge you on many. According to Wikipedia, only seven percent of workers make more than 100,000, never mind "far more than 115k": https://en.wikipedia.org/wiki/Household_income_in_the_United_States#Distribution_of_household_income https://en.wikipedia.org/wiki/Household_income_in_the_United.... Also, wouldn't this rule lower revenue because more workers end up contributing? (Assuming that executives would adjust their plans rather than pay extra taxes.)
    - deleted 10y ago
roymurdock 10y ago
Just learned about this the other day, Safe Harbor 401Ks: The Problem Safe Harbor 401(k)s Are Designed to Solve Before you try to understand what a safe harbor 401(k) is, you should know why someone would want one. Most 401(k) plans face an annual non-discrimination test. The IRS checks to see if a highly compensated employee or business owner is maxing out 401(k) contributions for the year, while the rest of the employees lag in their savings. The IRS wants to see that all employees are taking advantage of the retirement plan, not just those with the high paying jobs. So it tests the plan to find out if the average contributions of highly compensated employees (those who earned at least $120,000 in 2016 or own more than a 5 percent stake in the business) do not exceed the average contributions of everyone else by more than 2 percent. If you're a business owner and your 401(k) has low adoption rates or saving rates among rank-and-file employees, it may raise a flag for the IRS. According to Plan Sponsor Council of America (a lobbying business for the retirement planning industry), most businesses pass the test, but around 40 percent claim to have reported refunding or restricting plan contributions to do so. That's right, refunding contributions! The IRS can actually reject a retirement plan contribution that it feels is excessive. https://www.thebalance.com/what-is-a-safe-harbor-401-k-2894205 https://www.thebalance.com/what-is-a-safe-harbor-401-k-28942...
ghaff 10y ago
It may be true that companies have self-interested reasons to auto enroll people. However, as was being discussed the other day in a different context, defaults can also be a pretty powerful lever for encouraging people to make the "right" choice, where right = some policy outcome that is generally considered positive. Default 401-K enrollment at some level has been advocated by some economists like Richard Thaler as a way of improving the overall savings rate. The argument boils down to that you're going to have a default anyway, even if it's zero. So why not make the default a value that's is at least closer to the optimum.

douche 10y ago

If your employer offers a matching program for some percentage of your contribution, hey, it's free money. Personally, I've also got some outside IRAs and mutual funds as well; better to not have all the eggs in one basket, I figure.

humanrebar 10y ago

> Say what you will about government incompetence, but the idea of tying things like my retirement and healthcare to my employer just sounds terrible. It's government rules that create that reality.