@patriciaborns On the one hand, policy wonks are looking at the recently published "Global Aging Preparedness Index" for ideas on how to keep public benefit programs and seniors incomes sustainable as the world population ages. The report released by the Center for Strategic and International Studies concluded:
"Two strategies in particular are crucial if countries are to escape or at least mitigate what is too often a zero-sum trade-off between fiscal sustainability and income adequacy: extending work lives and increasing funded pension savings."
On the other hand, Congress recently proposed -- but for the time being backed down from -- taking the opposite approach. This was the bipartisan proposal to repeal the Medical Device Tax and substitute in its place a tax-raising sleight of hand called "pension smoothing."
The Medical Device Tax was created to help pay for Obamacare.Together with fees on drug makers and insurance companies, the tax is projected to add an estimated $14.3 billion to government coffers by 2018,
When Congress proposed to let those companies off the hook, it offered, in place of medical device tax revenues, to allow the companies who put money into your employee pension fund to put in less over the short term -- theoretically reducing their tax deductions and raising revenue for the feds -- and make it up to you by adding more money to the fund in the longer term.
If your employer offers a pension fund, federal rules require the company to keep it funded. This allows employees to do some forward planning -- work so many years, get so much in your pension. Smoothing promises to even out your employer's contributions over time. but "It's a gimmick," according to Chuck Marr, Director of Federal Tax Policy for the Center on Budget and Policy Priorities, a bipartisan nonprofit focused on policies that affect low- and moderate-income Americans.
"In practice, manipulating the pension funding rules this way would raise money at first, but it would lose money in later years," said Marr.
If that's what pension smoothing would have done for Obamacare, what would have been the effect on retirees?
"If you go too far with smoothing, you could put the retirement fund at risk. They're doing it for all the wrong reasons. This is not a good way to make pension policy," Marr said.
As a Congressional funding technique, pension smoothing isn't new. The highway bill enacted June, 2012 used a similar formula, allowing companies to use a lower interest rate when contributing to their plans, to offset the cost of highway infrastructure and student loans.
In the end, "Income smoothing is likely to mean companies will contribute less to their pension plans and increase the risk of being underfunded," said Joellen Leavelle, a spokeswoman for Pension Rights Center,a consumer non-profit promoting retirement security for American workers.
While they contribute less now and, theoretically, make up for it later,"'Later' is very unlikely to come for many companies. They can and have found ways to contribute less, or none," Leavelle said.
Congress took the Medical Device tax and pension smoothing off the table for now, but they could reappear in future budget negotiations.