Saturday, April 11, 2009
Oxford University Press Blog: President Obama Embraces the Defined Contribution Paradigm, by Edward A. Zelinsky (Cardozo):
Many important decisions are embedded in the federal budget proposed by President Obama. Among these are the President’s embrace of the defined contribution paradigm. That paradigm promotes retirement savings through individual accounts such as IRAs and 401(k) accounts. ...
This decision puts President Obama in potential conflict with his allies in the union movement. Today, the last bastions of the traditional defined benefit plan are the unionized work forces of state and local governments. Taxpayers thus find themselves paying taxes for lucrative defined benefit plans for unionized state and local employees. And now the Obama budget makes clear to these taxpayers that their retirement savings future is financing their own 401(k) accounts — even as these taxpayers fund often rich defined benefit pensions for government employees.