(04-01-2018 08:38 PM)JerseyDevil Wrote: How do you propose this be enforced? Is there oversight? What about people that are not physically able to work at all. How do they get by after they hit 70? How do they get by at all?
It would be enforced through the same avenues as compliance that employer-sponsored plans are now by the Deprtment of Labor. You also have the added layer of a company’s own employees being able to see the payments going into their retirement accounts in essentially real time, so any issues would be the same as an issue with a traditional paycheck - the HR department deals with it, and if it can’t be resolved internally, or if something illegal is going on, it goes to the state or US Department of Labor.
For those who are not able to work, those programs administered by the Social Security Administration (SSDI and Supplemental Security) would remain.
Given we can’t go back in time and eliminate FDR, there ultimately will be some transition with both systems in place. Older workers would likely want to stay the course. Younger workers could essentially ask for their contributions back and then invest them at their discretion, and likely enjoy a much higher return than they would enjoy with Social Security, which is typically around zero. There are a ton of disparities invloving race, marital status, and whether both spouses work that affect one’s rate of return from Social Security; some of these are caused by the program (like spousal benefits) and some are the result of demographic differences.
Quote:WHo enforces a company match and what happens if you are sick and out of work for a few months. Is that same amount still required and does the employer still match disability?
It would work the same way as the matching portion of Social Security tax - if you don’t work, you don’t get the match. It normally is invisible to you (unless if you are self-employed or do payroll), but an employer pays Social Security tax equal to the amount it withholds from its employees. In this system your retirement account gets both sets of funds, the 6.2% of your current gross pay, and a matching amount equal to 6.2% of your gross pay that your employer remits directly to Uncle Sam.
This may make disability insurance more attractive, given there is now a direct correlation to how much you earn and how much is available to you at retirement.
The IRS would modify Form 941, a quarterly return filed by employers, to breakout the matching contribution and employee withholding, and like the current return, it would be subject to audit.
Quote:How about those that are self-employed and have no one to match what they put in?
The self-employed are currently paying both the employer’s half and employee’s half of Social Security and Medicare. It is called Self Employment Tax, and the 15.3% rate is the same amount as it would be if one were not self-employed; 7.65% is withheld from an employee’s gross pay, and the employer pays in another 7.65%. The only difference is that the employer and employee are the same person. Since one only pays SE tax on profits, they would just need to fund their retirement instead and be able to demonstrate it on their tax return. The final rule would probably resemble IRA contributions in that one would have until the following April 15 to make the contribution, although this would encourage estimated payments during the year since the taxpayer will see it as “my money” instead of “Uncle Sam’s money”. Any excess could be treated as an IRA contribution, and if someone blows through the IRA limit then it is just a post-tax retirement contribution.
Obviously since Medicare is a separate program, SE tax still exists, it just goes down to 2.9%.