-----Original Message----- 

From: rjosephs@uchicago.edu [mailto:rjosephs@uchicago.edu] 

Sent: Sunday, February 21, 2010 3:26 PM 

To: EBSA, E-ORI - EBSA 

Subject: RIN 1210-AB33 

Gentlemen, 

I oppose the government plan to use funds in retirement accounts (such 

as those in IRA, 403b,401k accounts) for the purchase of a lifetime 

annuity. My objections are based upon the following reasons: 

1. The plan contemplates making the conversion to retirement funds 

compulsory. This is in effect a confiscation of the funds 

 taxpayers have accumulated for their own uses. Such uses may include 

retirement or passing the funds on to beneficiaries. 

 It is not for the government to decide how individuals should use 

their funds. 

 

2. The government proposes exchanging taxpayer savings accounts for a 

payout. However the government could change the terms of the payout 

simply by passing a law much in the same way that the government has 

changed the terms of social security 

payouts. Even if the plan were voluntary this would still be a problem. 

3. It is obvious that the government's plan is a device to obtain large 

amounts of money to cover current expenses and that it is likely 

(actually absolutely certain!) that the funds will be spent rather than 

being invested. Any legal restriction on the use of the funds could be 

circumvented by legislation. The plan is very reminiscent of how the 

government has used social security funds to disguise deficits in the 

budget. One result of that policy is that that there claims that 

there is no money to pay benefits and that the funds in the 'trust 

fund' are not really available (a position taken be many of the 

faculty of the University of Chicago Booth Business School). 

4. The government has no way to constructively invest the vast amount 

of money involved. Even investing it in an index 

will greatly distort the market. And whoever the government chooses as 

an investment agent will reap an enormous commission windfall. 

Moreover the insider knowledge of the details of the investing will 

provide the government investing agents with valuable 

information which will undoubtably be used for their own enrichment at 

the expense of the taxpayer. 

Investing in treasury paper is an even worse idea because treasury 

paper provides a very low yield which would be made even lower (because 

the increased demand would drive up the price) as a consequence of the 

purchases. One other effect would to suppress interest rates for 

treasury paper which would also lower the income for people living on 

fixed income investments. In effect the government would be taking 

money from retired people to lower the government's cost of borrowing. 

5. This program would create a new and very large and expensive 

government program. It's administration would initially involve 
startup errors which would result in unfair denials of benefits (look 

at the veterans administration for an example). 

6. Finally there is no need for the program from a taxpayer point of 

view. If individuals need assistance with their retirement then this 

could be addressed in the context of social security. No one will see 

this program as anything other an attempt by the government to 

confiscate private funds. 

Robert Josephs 

Professor, University of Chicago