There’s talk in Congress now about basically confiscating your private 401(k) or IRA plan and rolling it into Social Security to strengthen Social Security.
Your tax-deferred retirement savings are in danger of being seized by the federal government warns William Howell, speaker of Virginia’s House of Delegates. "There’s talk in Congress now about basically confiscating your private 401(k) or IRA plan and rolling it into Social Security to strengthen Social Security," Howell, R-Stafford, said during a Nov. 13 interview on Freedom & Prosperity Radio, a conservative weekly show broadcast in much of Virginia. Howell made the statement to bolster his pet cause: Passage of a U.S. constitutional amendment that would give states the collective right to repeal any law or regulation approved by the U.S. Congress. Under the proposed amendment, which Howell will ask the Virginia General Assembly to endorse this winter, a federal act would be nullified if two-thirds of the states passed resolutions demanding so. Howell brought up the confiscation of IRAs and 401(k)s, then added: "Well, if Congress were ever to pass a law like that, I would think two-thirds of the states would rear up and say, `I want to repeal that law,’ and this (amendment) would give them the right to do that." When we asked Howell for the basis of his confiscation claim, he said, "That idea has been floating around from Democrats for years." That was news to the AARP, a powerful lobby for Americans for seniors that watches legislation affecting retirement accounts and Social Security. "Haven’t heard anything like that at all," said Ginger McDaniel, communications director of AARP Virginia, when read Howell’s confiscation comment. "I’m sure we would know if anything like that was being considered." It was also a surprise to Roberton Williams, an economist and senior fellow at the Tax Policy Center in Washington who specializes in pensions and retirement accounts. "I’ve heard absolutely nothing about that," he said. "If that was a serious suggestion, it would be all over the place in this town." Howell’s office later sent us a variety of sources to back his claim. They all seem to stem from an Oct 7, 2008 hearing by the House Committee on Education and Labor probing the recession’s impact on retirement security. The values of 401(k)s and IRAs were plummeting. The panel discussed whether the federal government should promote alternative plans that would shield retirement savings from economic turmoil. One of the speakers was Teresa Ghilarducci, an economics professor at the New School for Social Research, a New York City think tank. She urged creation of a new savings plan that she called a Guaranteed Retirement Account. It would require workers to save 5 percent of their annual pay. The accounts, unlike IRAs and 401Ks, would not be controlled by workers but instead deposited with the federal government, which would kick in $600 a year in the form of a tax credit. Upon a worker’s retirement, the government would guarantee an annual return three percent above inflation. Ghilarducci also proposed that Congress "allow" workers to convert their IRAs and 401Ks into a Guaranteed Retirement Account, according to a video of the hearing. There was no talk about coercion or government seizure of existing accounts. A story on the hearing in the next day’s Washington Post made no reference to a confiscation plan and waited until the 12th paragraph to make its only mention of Ghilarducci. There was no coverage in The New York Times. Almost a month later, on Nov. 4, 2008, the conservative Carolina Journal Online used Ghilarducci’s testimony to write, "Democrats in the U.S. House have been conducting hearings on proposals to confiscate worker’s personal retirement accounts, including 401(k)s and IRAs and convert them into accounts managed by the Social Security Administration." Howell’s office sent us a copy of the story. The web has been replete with unfounded rumors of retirement account confiscation ever since. They usually cite Ghilarducci’s testimony. Another rumor -- although Howell doesn’t mention it -- puts Vice President Joe Biden behind the seizure effort. The source is said to be a report Biden released in February on the state of the middle class. We read the section on retirement security and found proposals to encourage savings, but nothing that remotely suggested confiscation of retirement assets. Howell, despite his radio comments, said the public shouldn’t lose sleep worrying about the seizure of retirement plans. He said the November 2 elections, which put Republicans back in control of the House of Representatives, have eased his mind. "I know its not going to happen now that the Republicans have the House," he said. "But I use it as the kind of thing that could happen in Congress if its powers are unchecked." Howell’s radio comments, sounding the confiscation alert, came 11 days after the election. So let’s review: Howell says there’s "talk in Congress about basically confiscating your private 401(k) or IRA," which suggests there is serious consideration of such a proposal. He cites two-year-old testimony by a think-tank economist that makes no mention of seizing tax-deferred saving plans. We can’t find a single story in a national newspaper that warns of confiscation. AARP, the nation’s largest lobby for seniors with a reported 40 million members, says it "hasn’t heard anything about it at all." The web sites reporting government seizure efforts cite statements and reports that, in fact, make no such suggestion. And it gets even more ridiculous when Howell, himself, says he knows it’s not going to happen. We rate his claim Pants on Fire.
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