Yesterday we looked at the Obama Administration and its ideas relating to social security, today we want to check BarackObama.com for retirement savings.

At the heart of the Obama platform is something not fully discussed during the campaign, the destruction of pension and borrower rights under the so-called Bankruptcy Abuse Prevention and Consumer Protection Act.

Passed by a Republican House, a Republican Senate and signed by President Bush, this is one of the most one-sided pieces of legislation anyone can imagine. As I have reported on OurBroker.com:

>>>Effective October 17, 2005 most student loans can no longer be discharged. If your income exceeds the state medium you can be forced to file under Chapter 13 (a repayment program) and not Chapter 7 (a discharge and forgiveness plan). Credit debt is not forgiven if you spend at least $500 in the 60 days prior to seeking bankruptcy protection — say a cash advance to pay off a looming mortgage payment.

>>>Perhaps most importantly for mortgage borrowers, the 2005 legislation says homeowners must obtain credit counseling and develop a budget analysis in the 180-day period before filing for bankruptcy.

>>>If you put all the changes together the results are predictable: Bankruptcy filings should fall and that’s exactly what happened. According to court filings there were 1,597,462 bankruptcies in 2004 and 2,078,415 bankruptcies in 2005. As for 2006, bankruptcies declined 70 percent to 617,660 cases.

Most remarkably, the 2005 bankruptcy legislation prohibited courts from modifying residential mortgage loans. The courts could change the terms of loans on a yacht or a second home but not on a prime residence.

Obama proposes to undue the 2005 bankruptcy act so there is more balance between borrowers and creditors. That balance, in turn, greatly impacts the security of pension accounts. For example, your pension dollars could not be seized through a bankruptcy court to pay medical bills — a leading cause of bankrutpcy.

The Obama proposals look like this:

Reform Corporate Bankruptcy Laws to Protect Workers and Retirees: Current bankruptcy laws protect banks before workers. Obama and Biden will protect pensions by putting promises to workers higher on the list of debts that companies cannot shed; ensuring that the bankruptcy courts do not demand more sacrifice from workers than executives; telling companies that they cannot issue executive bonuses while cutting worker pensions; increasing the amount of unpaid wages and benefits workers can claim in court; and limiting the circumstances under which retiree benefits can be reduced.

Require Full Disclosure of Company Pension Investments: Obama and Biden will ensure that all employees who have company pensions receive detailed annual disclosures about their pension fund’s investments. This will provide retirees important resources to make their pension fund more secure.

Eliminate Income Taxes for Seniors Making Less Than $50,000: Obama and Biden will eliminate all income taxation of seniors making less than $50,000 per year. This will provide an immediate tax cut averaging $1,400 to 7 million seniors and relieve millions from the burden of filing tax returns.

Create Automatic Workplace Pensions: The Obama-Biden retirement security plan will automatically enroll workers in a workplace pension plan. Under their plan, employers who do not currently offer a retirement plan, will be required to enroll their employees in a direct-deposit IRA account that is compatible to existing direct-deposit payroll systems. Employees may opt-out if they choose. Experts estimate that this program will increase the savings participation rate for low and middle-income workers from its current 15 percent level to around 80 percent.

Expand Retirement Savings Incentives for Working Families: Obama and Biden will ensure savings incentives are fair to all workers by creating a generous savings match for low and middle-income Americans. Their plan will match 50 percent of the first $1,000 of savings for families that earn less than $75,000. The savings match will be automatically deposited into designated personal accounts. Over 80 percent of these savings incentives will go to new savers.

For the full story, see: Is It Time To Take The Tilt Out Of Bankruptcy?

This entry was posted on Tuesday, November 18th, 2008 at 4:57 am and is filed under Topics for Seniors . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.