Dew, I would assume that starting next year you'll see many companies changing their dividend's into buybacks because of the new tax structure. Dividends won't make sense unless the stock is in an tax deferred account.
Maybe soon we won't even have tax deferred accounts:
Republican lawmakers in the U.S. House of Representatives on Tuesday warned the Obama administration not to adopt any policies that could modify tax breaks generally provided to 401(k)-type plans.
The Treasury and Labor departments, in February, issued a "request for information," seeking input on "arrangements designed to provide a lifetime stream of income after retirement." That phrasing has been interpreted by some observers to mean a conversion to "guaranteed retirement accounts" from defined-contribution plans, such as 401(k)s.
Republican lawmakers are concerned that implementation of some sort of guaranteed retirement accounts could mean that tax breaks on 401(k)-type plans would be eliminated, and those funds would in turn be used to offset costs associated with the creation of GRAs.
In order for the administration to employ such policies, legislation would need to be drafted. House Education and Labor Committee spokesman Aaron Albright said panel Chairman George Miller (D., Calif.) wasn't working on any such legislation. The tax-writing Ways and Means Committee also said it wasn't working on legislation.
Tuesday's outcry from Republican lawmakers was prompted by the Obama administration taking the next step toward reviewing suggestions involving GRAs. The deadline to submit comments ended Monday and officials are likely to begin reviewing comments soon.
House Minority Leader John Boehner (R., Ohio) and other Republican lawmakers sent letters late Monday to Labor Secretary Hilda Solis and Treasury Secretary Timothy Geithner, urging the administration to "keep its hands off of the retirement savings of Americans."
Mr. Boehner's letter also advised administration officials to "reject proposals that would dismantle or nationalize the private 401(k) system in favor of a government-run retirement security regime."
In response to the Republican criticism, Mr. Albright said there was "nothing new about Republicans purposefully misrepresenting the facts for political gain on behalf of Wall Street interests," Mr. Albright said. "These Republican hysterical antics do nothing to ensure that families have more choices on how best to plan for their own retirement, as the department is considering."
Treasury and Labor officials weren't immediately available for comment. The agencies solicited suggestions and comments from plan participants, employers and plan service providers along with members of the financial community and general public.
Rep. John Kline (R., Minn.), the senior Republican on the House Education and Labor Committee, also issued a statement Tuesday denouncing explorations of the policy. "Proposals to make 401(k) savings plans less valuable for workers and more cumbersome for employers would take us in exactly the wrong direction," he said.
A recent report by Spectrem Group showed assets in defined-contribution plans such as 401(k) plans climbed 19% in 2009 to $4.5 trillion from $3.8 trillion. Almost 75% of plan participants said their balances were still below where they had been before the market tanked in 2008.
The American Council of Life Insurers, an industry association in Washington, said the "retirement income dilemma" is real and needs to be addressed. ACLI gave an approving nod to the administration and submitted comments to the agencies.
ACLI President Frank Keating said his group suggested that "workers should have an option to annuitize at least a portion of their retirement savings."
ACLI spokesman Jack Dolan rejected GOP criticism and said annuity opponents are incorrectly characterizing the proposal as some sort of "government takeover."
Just as life insurance helps protect families from premature death risks, offering annuities through the workplace plays a vital role in curbing the risk of workers outliving their savings, Mr. Keating said.
"Too often, retirees look at their savings and see a lump sum instead of a source of income that needs to last 30 years or more," he added.
The U.S. Chamber of Commerce also weighed in. Randel Johnson, the chamber's senior vice president of labor policy, said group members "would like to see greater education surrounding lifetime income options and incentives for offering and taking lifetime income options."
Still, the chamber believes mandates involving GRAs will not be effective or helpful, and could lead to increased liabilities.
Despite the flurry of discussion that has taken place, the Obama administration has not officially endorsed any specific policies.
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