From: Mike Tian [mailto:mikotian@yahoo.com] 

Sent: Monday, February 01, 2010 11:22 PM 

To: EBSA, E-ORI - EBSA 

Subject: Feedback: RIN 1210-AB33

Re: RIN 1210-AB33 

Attn: Secretary of Labor 

Having read your proposal, I have to say, I am not impressed. 

The gist of your proposal is to sweep all/part of a person's IRA or 401(K) balance into a 

government sponsored annuity. While your intention is noble, the idea is terrible and 

should be scrapped immediately. 

The most obvious question is: why is the government even involved? The private sector 

has offered annuities for many years, and the regulators closely monitor the capital levels 

of the insurers to make sure policy holders don't get screwed. This system works well, but 

people aren't really cashing out their 401(K)s and rolling them into annuities. 

Why is this? Perhaps the market is telling you that people don't actually want annuities. 

Or, even if this is a behavior flaw, I don't see why the government has to get into the 

annuity business itself. Why doesn't it just offer a further tax deferment for people to roll 

their balances into qualified annuities managed by the private sector? Why create another 

huge bureaucracy and let the government take on investment risks? 

The second big concern is: 

Let's assume the government got into the annuity business and received some umpteen 

trillions of dollars in 401(K) funds in return for an obligation to provide income for the 

rest of the retiree's life. 

What will the government do with this money? Do you seriously want the government to 

take on this level of investment risk and potentially create yet another unfunded tail 

liability when we have so many already? 

Of course, for a "risk free" return, the money could simply be deposited in long dated 

treasury securities. I believe we already have a government program like this: citizens 

pay small amounts over a long period of time into a fund, the fund is largely invested in 

treasuries, and the government implicitly guarantees the citizen a certain amount of 

income for the rest of his/her life. Yes. You guessed it. This program is called Social 

Security. Why do we want a second social security program? 

The problems don't end there. Under this program, the Treasury would be competing 

explicitly with a number of private sector enterprises that already offer annuities. The 

Treasury is obviously a very powerful organization and can strongarm people into this 
program through the carrot or stick (it doesn't matter). But, assuming the Treasury 

competes "fairly", one of three things will happen: 

1) The government would not be able to offer as high of a retirement income than the 

private sector, because the government would be invested in much lower yielding "risk 

free" treasury instruments. This would cause the treasury's program to fail because they 

would be unattractive to investors. 

2) The government would have to take a major role in capital markets and make 

investment decisions with trillions of dollars. This opens a huge cans of worms about the 

government's role in capital markets and possibly opens the door to all sorts of corruption 

and abuses, or just plain old incompetency involving a substantial portion of our GDP. 

3) The government creates yet another huge unfunded open ended liability -- if the 

treasury offers high annuity payments that are not supported by the income generated by 

its escrowed funds. 

I would add to this list a fourth very real possibility: 

This program would be a short-term way of paying for our giant fiscal deficit. Just like 

Social Security, the DOL's proposal would generate an immediate flow of money which 

would be available to fund immediate spending and thereby kick the can of our 

profligacy many years down the road. This is not healthy, both for the government and 

for the nation. 

Anyhow, I highly doubt you would take my advise. I see the political expediency to this 

program: protect retirees, fund the deficit. It's a win-win situation, right? Well, that's just 

smoke and mirrors. I hope someone reads this missive and pays attention to it, but my 

hopes are not so high.