Cover image for The origins of the ownership society : how the defined contribution paradigm changed America
Title:
The origins of the ownership society : how the defined contribution paradigm changed America
Personal Author:
Publication Information:
New York, NY : OUP USA, 2007
Physical Description:
xix, 171 p. ; 24 cm.
ISBN:
9780195339352

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30000010201225 KF3649 Z45 2007 Open Access Book Book
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Summary

Summary

As Baby Boomers plan for their retirements, finance their children's educations, and provide for their families' medical expenses, they confront a fundamental reality: America today is a defined contribution society. We save for retirement, health care and educational savings through IRAs, 401(k) accounts, 529 programs, FSAs, HRAs, HSAs and other individual accounts which did not exist a generation ago. In its own way, the emergence of these accounts has been a revolution which has, step-by-step, without fanfare, cumulatively transformed tax and social policy in fundamental ways. The Origins of the Ownership Society describes the defined contribution revolution, its causes, and implications. For lawyers, the book provides useful insights into the network of individual accounts which are now central features of the U.S. income tax for retirement, medical, and health savings. For those concerned about public policy, the book provides useful guidance regarding our options in providing for the retirement of the mass numbers of Baby Boomers, and in preparing young Americans for the medical costs of their older years. The defined contribution format will, for good or for ill, be the framework governing the Baby Boomers' choices. For everyone else, including the Baby Boomers themselves, the book explains where we are, how and why we got there, and what our options are for the future.


Author Notes

Edward A. Zelinsky, The Morris and Annie Trachman Professor of Law, Benjamin N. Cordozo School of Law, Yeshiva University


Table of Contents

Forewordp. xi
Introductionp. xiii
Chapter 1 How Are They Different? The Defined Benefit and Defined Contribution Formats Contrasted As A Matter of Plan Designp. 1
Chapter 2 Why Does It Matter? Allocating Risk and Reward Between Employer and Employeep. 5
A Investment Riskp. 6
B Funding Riskp. 14
C Longevity Riskp. 15
D Qualificationsp. 23
E Summaryp. 28
Chapter 3 How Did It Happen?p. 31
A The Underlying Decline of the Defined Benefit Plan: Economic and Demographic Factorsp. 33
B The Role of ERISAp. 38
i The Creation of the Individual Retirement Accountp. 39
ii ERISA's Regulatory Burdens on Defined Benefit Plansp. 42
iii ERISA's Fiduciary Rules and Participant-Directed Accountsp. 45
iv The Ten Percent Limit on Employer Stockp. 47
C Section 401(k)p. 49
D ERTA and TRA86: Expanded Availability of IRAs and the Financial Services Industryp. 52
E Extending the Defined Contribution Paradigm: FSAs, MSAs, Educational Savings Accounts, Section 529, and Roth IRAsp. 58
F Cash Balance, New Comparability, and Age Weighted Plansp. 71
G Public Employee Pensions and Section 457 Plansp. 78
H Health Reimbursement Arrangementsp. 81
I Health Savings Accountsp. 83
J The Saver's Tax Creditp. 84
K Proposalsp. 86
L Conclusion: The Significance of Enronp. 91
Chapter 4 Why Did It Happen? And Why Social Security Accounts Didn'tp. 93
A The Adoption of ERISA and Section 401(k): Unintended Consequences and Path Dependencyp. 95
B Cultural Receptivityp. 97
C International Comparisonsp. 101
D Individual Accounts and Family Diversityp. 105
E The Recent Politicization of the Defined Contribution Paradigmp. 108
F Social Security and the Limits of Dominant Paradigmsp. 112
Chapter 5 What Does It Mean? Consumption Taxation, Tax Expenditures, and the Future of the Internal Revenue Codep. 119
A Cash Flow Taxation and Individual Accountsp. 119
B Tax Expenditures and Individual Accountsp. 126
C Individual Accounts and the Likely Futures of the Codep. 127
D Individual Accounts and Fundamental Reformp. 129
i The Engler "Hybrid" Consumption Taxp. 130
ii The Graetz Proposal: A High Income Tax Coupled with a Value Added Tax (VAT)p. 132
iii Accretionist Taxationp. 134
iv A National Value Added Tax (VAT)p. 135
E Conclusion: Individual Accounts and Tax Complexityp. 135
Chapter 6 What Is the Future of the Defined Contribution Paradigm?p. 137
A The Defined Contribution Paradigm and the Private Sectorp. 137
B The Defined Contribution Paradigm and the Public Sectorp. 139
C The Partisan Divide: Promoting HSAsp. 140
D The Future (or Lack Thereof) of Money Purchase Pensionsp. 142
E The Paradoxical Future of Pension-Based Redistributionp. 143
F Conclusion: The Permanent Eclipse of the Defined Benefit Pension Planp. 145
Chapter 7 What Should We Do?p. 147
A Clarifying Premisesp. 147
B The Programp. 152
i Do No Harmp. 152
ii Amend Section 401(k) to Require Elections Outp. 155
iii Reduce Scheduled Social Security Benefit Levelsp. 157
iv Expand the Coverage of the Section 25B Credit and Make the Credit Refundablep. 159
v Apply the Ten Percent Limit on Employer Stock to Defined Contribution Plansp. 160
C Conclusionp. 161
Indexp. 165