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Retirement Planning > Social Security

Social Security Proposal Concerns Industry

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The life insurance industry is expressing concerns over one of the three options being considered by a Presidential panel aimed at shoring up the nations Social Security system.

The option at issue would give workers the choice of investing 1% of their wages above their current Social Security taxes in private accounts within the Social Security system.

The government would also give workers who decide to make that investment a 2.45% match from payroll taxes up to $1,000.

Terri Sorota, senior counsel with the American Council of Life Insurers, Washington, says the concern is that this option could interfere with existing private retirement programs, such as individual retirement accounts and 401(k) plans.

The 1% of wages at issue, she notes, would not come out of the Social Security system. Rather, she says, it is a voluntary contribution that could otherwise go to existing private vehicles.

The accounts established by this option, Sorota says, would be managed by Social Security.

“This is money we think should be available for existing retirement accounts,” Sorota says.

She notes that the other two options that likely will be presented to President Bush would not interfere with the private retirement security system.

These options, she says, would take funds out of the Social Security System and provide for private investments

One option would allow workers to place up to 2% of their Social Security taxes in private investment accounts.

The other option would allow workers to invest 4% of their Social Security taxes up to $1,000 in private accounts.

All the options would involved commensurate reductions in guaranteed benefits.

The commission, which is co-chaired by former Senator Daniel Patrick Moynihan, D-N.Y., and AOL Time Warner Cos-Chairman Richard D. Parsons, is scheduled to issue its final report on Dec. 11.

The commission is expected to outline the three options in its report and leave it to President Bush and Congress to select one.

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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