Writing on the Double Yellow Line

Militant moderate, unwilling to concede any longer the terms of debate to the strident ideologues on the fringe. If you are a Democrat or a Republican, you're an ideologue. If you're a "moderate" who votes a nearly straight party-ticket, you're still an ideologue, but you at least have the decency to be ashamed of your ideology. ...and you're lying in the meantime.

Location: Illinois, United States

Saturday, July 20, 2019

Skinning a Dead Retiree

There’s More Than One Way to Skim
©2019  Ross Williams

Illinois just embarked on a cynical Master Plan to collect hundreds of millions of dollars annually − in 30 to 50 years − to cover its longstanding and notorious pension shortfall.  This will end up hurting, mostly, low-wage workers.  Illinois is doing this in the form of, nominally, a quasi-mandatory state-operated IRA for employees of IL businesses who do not have an employer-provided retirement fund option − a 401(k) or 403(b).  This program is purportedly to help those low-wage workers.

According to the state of Illinois, this will affect 1.2 million [current] Illinoisans.  And because the employment nature of these workers is highly fluid with extremely high turnover, the number of workers who will be affected by this will number in the hundreds of millions within a generation.  The way it works is this.

As an employee of an Illinois business which does not provide a retirement program, you may either:
1] set up your state-run retirement account
2] declaratively opt out of the state-run retirement account, or
3] do nothing.

If you do nothing, you will automatically be enrolled in the state-run retirement account − without your explicit permission or, likely, your knowledge.

Whether you set up your retirement account or do nothing, 5% of your pay will be extracted from your paycheck and invested in one of a very slim set of investment options typically offered by employer-provided 401(k)s.  The investment options available in the Illinois program are a glorified CD with a miniscule APY; an S&P Index Fund; a ‘conservative’ Bond Fund; and a “Target” Fund for your estimated retirement cohort.

Remember that most of the employees who do not have access to employer-provided retirement plans are low-wage workers of the minimum and near-minimum wage variety who work varying or seasonal hours.  They are also of the not terribly worldly and aware variety.  As such, they are very likely to ignore emails from the state of Illinois with their account “credentials” and never formally opt out of the program.  Because of the variable nature of their employment, they’ll never notice 5% of their pay missing from their fluctuating wages.

Their retirement accounts will continue to collect wages for as long as the worker is working in Illinois, and the worker will be none the wiser.

Or the worker will graduate from college, quit their part-time job making pizzas, get hired by some company in another state and forget all about that paltry little IRA the state of Illinois started for them.

Or the worker will get a job due to an ultimatum from the parents in whose basement he lives, work until he gets fired, and leave his state-held IRA to collect dust.  Rinse and repeat.

Or the worker will refuse to enroll or opt out because he doesn’t want to make his presence known to immigration officials, and will view 5% more being pulled from his paycheck as just another cost inherent to living the dreamer dream.

Or any of a thousand other scenarios all resulting in dust-covered retirement accounts earning value for decades.

In any event, there’s very likely to be hundreds of millions of IRAs held by the state of Illinois in thirty to fifty years, each holding between several thousand to tens of thousands of dollars.  It is also highly probable that the vast majority of these accounts will ultimately be classified as abandoned property under state law.

Current state law
 allows the state of Illinois to steal [the technical term is “escheat”, which adequately describes the process, even with the extra “es” on the front to be confusing] a person’s bank account, or insurance settlement, or inheritance, or bitcoin vault, or gift card [etc] after three years of dormancy.  This time limit was reduced in 2017 from five years.  Illinois apparently needed a lot more cash all of a sudden.  …for some reason.  …probably having nothing to do with idiot democrat policies.  ...perish the thought.

The escheatment rules for IRAs allow the state − currently − to steal the retirement accounts within three years of the statutory age of required minimum distribution … the age that the IRS says you are required to start collecting from your personal retirement fund.  The IRS has set this age to 70 and a half.  As with everything else socialist, and as a perfect bookend to the quasi-mandatory “from each according to ability”, these limitations can be altered according to Illinois’ needs.

What we end up with is a state government that’s been doing the slow toilet swirl typical of all socialist governance in desperate need for money because of its short-sighted policies.  They have created what is, for them, possibly the first long-term solution to their idiocies, albeit a thoroughly socialist solution.

Inspire the working poor to send you even more of their paychecks on the pretense of helping them save for retirement, even if they don’t want to.  Place the money in an actual investment fund, and not the T-bills that “excess” social security revenues are “invested” in.  Watch the money grow at 6-10% annually for a generation or two.  Wait for the working poor to move out of state, or get old and forgetful.  Then take their money when they aren’t looking and give it to the surly assholes who retired from the DMV because you ran out of the traditional sources of Other Peoples’ Money.

And don’t forget to turn on the Virtue Signal.  That will justify the socialist pilfery.


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