Lawmakers consider 401(k) alternatives

Calls are mounting to overhaul 401(k) retirement plans amid a decline in investor confidence after the U.S. markets slid during the past month, experts say.
Citing the Employee Benefit Research Institute, the Los Angeles Times reported Sunday that so far this year, the average worker's 401(k) account balance has dropped between 21 percent and 27 percent, depending on the worker's age and time with his or her employer.
The current 401(k) system has not turned out to be as secure as we want it to be, said Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee. It has not provided the returns that we want it to. And it's not provided the level of savings that we want it to. It's kind of failing on a number of fronts.
The House committee has held two hearings on the effects of the financial crisis on retirement savings plans. At one hearing, a professor from New York's New School for Social Research called for the creation of government-backed retirement savings accounts that would offer a guaranteed, inflation-adjusted 3 percent return.
The idea has not gotten much traction because it would abolish the tax break on 401(k) savings, but the newspaper said the fact that the idea was considered is evidence that confidence has been shaken in the 401(k) system.