Benefits November 12, 2004

AARP Against Social Security Privatization

November 12, 2004 (PLANSPONSOR.com) - The AARP has come out against President Bush's proposal to partially privatize Social Security.
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Under President Bush’s proposal, a certain amount of payroll taxes would be diverted to private accounts that could be invested in private stocks and bonds. The AARP has come out against the idea, stating that it favors incentives to supplement Social Security benefits with individual accounts such as 401(k)s and favors diverting payroll taxes into individual accounts.

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“Market returns can be attractive, yet they come at a risk. Private accounts can lose money just as fast as they can make it,” a statement posted on the AARP Web site asserted. “And, unlike Social Security, you run the risk of outliving your savings and you lose the protection against inflation.”

Instead of diverting payroll taxes, the AARP favors incentives to increase supplemental programs. “AARP opposes private accounts that are financed out of the Social Security payroll contribution,” the Web site statement continued. “Private retirement accounts in addition to Social Security, in contrast, are an essential part of personal retirement security.”

According to the statement, the group offers three specific proposals:

  • investing part of the Social Security surplus so that it earns higher returns than those offered by US Treasury bonds.
  • raising the cap on the amount of wages taxed to support Social Security to cover the same share of wages as in the past. That would gradually raise today’s cap of $88,000 to approximately $140,000.
  • include all newly hired state and local government workers in Social Security.

“It is true that Social Security needs modest changes, but the guarantee it provides is one worth strengthening, not replacing,” the organization said.

More information about the AARP’s position on social security is at www.aarp.org/socialsecurity .

Benefits November 11, 2004

Wachovia Switches to Salary-Graded Health Care Premium System

November 11, 2004 (PLANSPONSOR.com) - In a move that some say signals a significant trend with health care benefits, the nation's fourth-largest bank, Wachovia Corp., has given workers with lower salaries a cut in their health care premiums and will subsequently raise the premiums for employees hauling in a larger paycheck.
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Some, however, say that this could be used against the bank and other institutions that use such salary-graded systems – a group that includes 18% of US employers, according to a Hewitt Associates survey – by competitors hoping to lure away top executives, according to the Associated Press (AP). Companies have to weigh the benefits of lowering costs for low-income workers with losing top executives, analysts say.

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This new tier-priced system replaces the older flat-payment one in which all employees paid the same premium for health care coverage. It is a move that is meant to reduce health care costs for low-income employees, and it has been seen in other large institutions as of late. Davidson College, situated near Wachovia in Charlotte, NC, last year chose to adopt such a program. The program will be altered slightly next year to base premiums on household income, however, after it was noticed that some lower income workers receiving premium cuts actually had high-income spouses.

A Wachovia spokesperson would not comment on how the premiums at the company actually were altered, but the company is asserting that the plan has been met with approval, according to the AP.

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