Such a reform would also create an enhanced awareness among all American taxpayers that they are saving for their own retirement security. But if individual investment accounts are to be considered as an element of reform - we at State Street also believe that there are some real constraints on how they might be implemented. First, they must be strictly regulated and fees must be kept low by intense competition. In addition to these basic principles, there are also a series of demanding technical and administrative hurdles that must be addressed if the individual account option is to meet the test of economic and political viability. As a company, a trust bank that does accounting for millions of accounts, we at State Street take the issue of practicality very seriously.
Employers collect every pay-day, but they only report individual's contributions annually.
Processing of this data by the IRS and SSA takes more time - before individual FICA contributions could be broken out and directed toward investments. Nonetheless, we at State Street believe that in the United States today we have the experience, the technical know-how, and the financial infrastructure to meet these challenges and create a system of individual retirement security accounts for all working Americans. If the Congress were to choose to establish such accounts, the possible approaches range from creating a basic structure with no investment choice for the individual and few account options to establishing an elaborate structure that offers a full range of services and choices similiar to the most advanced defined contribution plans. The most sophisticated defined contribution plans permit account-holders to make contributions each pay period, to shift their investments to any one of dozens, even hundreds of investment options including mutual funds, stocks, bonds and money markets. These systems permit account holders virtually unlimited access to their accounts via telephone or the Internet.