Plan For America Q+A: Key Questions
Entire contents copyright 2015 by Terry E. Nager, CFP®
1) Why is a contract needed to protect the interests of “We the People”?
We need a contract to protect us from the government.
The government has the power to pass laws and repeal them. If we put a plan in place that solves America’s retirement and debt funding problems, we must protect it with a contract. Otherwise, the government could come in and repeal the whole plan.
A contract is a legal agreement that has penalties for violating the terms of
what each side has promised to live up to.
A contract will be long-lasting if it is of benefit to everyone concerned.
So let’s look at the three parties involved:
“We the People” — represented by the For America Security Trust (FAST)
The Federal Government — represented by Uncle Sam
The 50 States — represented by “The Statesman”
“We the People”
Benefits (what do “We the People” get out of the deal)
America will have a retirement trust (FAST) that is independently funded not depending on the government or the politicians.
America’s retirement benefits will be secure and fully funded rather than heading toward collapse and bankruptcy.
Retirement and disability benefits are guaranteed to be at least equal to what Social Security presently provides but in most cases will be far greater.
There are numerous tax savings for almost every working American.
All retirement benefits paid by the FAST will be 100% tax free and when the benefits pass to the heirs they will be estate tax and income tax free.
All FAST retirement contributions will be 100% tax deductible on a federal and state basis.
Each year about $1 trillion will be injected into the U.S. capital markets — millions of jobs should be created on an ongoing basis.
The Millennials (those born between 1980 and 2000) can be confident that the money that they are paying in (12.4% of earnings) for their retirement will be there for them in their own account unlike now, where their payroll taxes are only going to support the older generations. The Millennials realize that the present Social Security scheme will not be around by the time they need it.
The 12.4% contributions enjoy the best of both worlds — that is, stock market returns (with a 4% minimum guarantee) and backed by the “full faith and credit” of the U.S. Government.
The Plan For America will form the basis of a financial plan available to every U.S. citizen, even those with very low income.
Costs (What do “We the People” have to give up?)
Zero — Nada — Nothing!
“We the People” — reaction to the deal.
So, what’s not to like? All pluses and no minuses, massive job creation, a federal government moving toward fiscal responsibility instead of bankruptcy, tax reduction, secure and increased retirement benefits, and no longer having to live in fear that everything is going to collapse in financial ruin.
Give us the contract, we’ll gladly sign!
Uncle Sam — the Federal Government
Benefits (what does Uncle Sam get out of the deal)
Being relieved of $14+ trillion of what are called unfunded liabilities — this is the amount of money that will be needed to pay for all of the promised benefits from Social Security.
After the FAST has paid off all of the unfunded liabilities then the Federal Government will receive 50% of the yearly surplus which is expected to be trillions of dollars each year to pay off the national debt.
After the national debt has been fully repaid then the 50% of the annual surplus trillions from the FAST would be used to reduce taxation and eventually become the main funding source for Federal Government operations replacing the need for taxation.
Costs (what does Uncle Sam have to contribute to the deal)
The Federal Government must allow any and all citizens that want to opt out of Social Security and join the FAST to do so.
The U.S. Government must get out of the retirement providing business (with the exception of those not opting out of Social Security.)
The U.S. Government must get out of all private businesses like: auto companies, banks, mortgage companies, and all others.
Repeal the payroll taxes for all who join the FAST.
Make the contributions to the FAST tax-deductible. The 12.4% of earnings — FAST contribution (which matches the present level of the payroll tax is calculated on earnings up to $118,500). At the option of the one contributing, if he/she has earnings over $118,500, then the tax-deductible contribution could be increased to 12.4% of total earnings.
In addition to the 12.4% of earnings contribution, each member of the FAST could contribute up to $100,000 annually and be fully tax-deductible.
Direct the current interest payments from the notes held by the Social Security Trust Fund to the FAST since it is taking on the responsibility of paying all of the benefits due from these programs.
All retirement payouts would be 100% income tax free.
The annual retirement payouts upon the death of the one who made the contributions would pass income tax free and estate tax free to the heirs.
All ordinary (cash) dividends on common stock of publicly-held, U.S. domiciled corporations would be tax-deductible to the corporation and tax-free to the one who receives the dividend.
The FAST would issue bonds to pay for the present Social Security retirement and disability benefits. The U.S. Government would pay the interest on these bonds and guarantee them with the “full faith and credit” of the U.S. Government. The FAST would call in and pay off the principal on the bonds out of its growing annual revenues.
Uncle Sam’s reaction to the deal.
WOW! What a deal? Where do I sign? This is better than buying Manhattan Island for $24, or buying the state of Alaska from the Russians for $7.2 million! I get to escape the consequences for the sins that the politicians have committed through the years. Yahoo!
“The Statesman” — the 50 states
Benefits (what does “The Statesman” get out of the deal)
Each state (if it elects to do so) could be relieved of its pension liabilities — both the funded and unfunded portions.
After the FAST has paid off all of the unfunded liabilities then each of the states will receive its share of 50% of the FAST’s annual surplus, which is expected to be trillions of dollars each year to pay off the states’ debts. The pro rata share for each individual state will be determined by the percentage of national GDP that is generated in that state.
After the state’s debt has been fully repaid, then the 50% of annual surplus trillions from the FAST would be used to reduce taxation and eventually become the main funding source for each state’s government operations replacing the need for taxation.
Costs (what does “The Statesman” have to contribute to the deal)
The loss of tax revenues (for states that have an income tax) on the FAST contributions representing 6.2% of earned income up to the $118,500 cap.
The loss of tax revenues (for states that have an income tax) on the FAST contributions over the $118,500 cap if the FAST participant elects to contribute beyond the cap. This could represent 12.4% of the total earnings above the cap.
The loss of tax revenue on the elective contribution (for states that have an income tax) of up to $100,000 annually for each FAST member that elects to participate — regardless of his/her earnings.
Each state’s tax-free municipal bonds would have to compete with the tax-free dividends from U.S. domiciled publicly-held corporations. This would likely require that these bonds pay higher rates of interest in order to attract investors.
“The Statesman’s” reaction to the deal.
This is a great deal! Where do I sign? The unfunded liabilities have put some of our states in danger of bankruptcy. This deal offers us a painless way out. Count me in!
2) What are the terms of the contract between the For America Security Trust (FAST) and the individual participants?
The FAST commits to provide the following to the individual participants:
To take in all participant contributions and invest the money into an all U.S. equities (stock) fund similar to a total market index fund.
To provide a guarantee of a compounded 4% rate of return on all participant investment accounts, and, upon retirement, pay out a minimum 4% of that amount annually.
To provide the stock market’s actual annual return less 2% for the FAST
charge for delivering:
the administration of the plan,
the 4% guarantee,
interest-free loans to FAST accounts to protect against “drawdown” during times when the stock market is under severe pressure,
a guarantee that retirement and disability benefits will be at least the level that they are under Social Security.
To provide tax benefits to the participants through the terms of the contract that the Fast would have with the Federal Government and the 50 States.
All retirement benefits will be 100% tax free to the participants when paid out.
Under this PLAN FOR AMERICA, all retirement benefits (the annual cash flow) will be paid to the heirs upon the death of the participant with no income or estate taxation.
What do the participants have to do to comply with our part of the contract?
First, you have to opt out (withdraw) from Social Security and join the FAST.
Second, the 12.4% that is the amount of the current payroll taxes will be withheld from your paycheck through a payroll reduction agreement and sent to your account in the FAST.
3) Why would the Plan For America (PFA) appeal to liberal Americans?
The Plan For America (PFA) would appeal to liberal Americans for the following reasons:
The ultimate funding guarantee for the PFA is the “full faith and credit” of the U.S. Government as is the Social Security program.
The retirement age would not be raised in fact retirement could begin as early as age 60 at the worker’s option.
Retirement benefits would not be reduced regardless of how much the retired worker earned in retirement.
Pension benefits for public employee unions could be protected.
Executive compensation would be under close scrutiny which would have a limiting effect on very high pay without corresponding outstanding results.
The PFA funding approach would make retirement benefits much more secure than the precarious funding scheme that is presently in effect.
A great degree of “Social” and “Economic Justice” would be achieved under the PFA because the retirement plan of the workers and retirees will ultimately own the greatest part of U.S. corporations.
Under the PFA wealth distribution will be much more equitable.
The PFA would end the regressive payroll tax.
Every worker, even moderate and low-income wage earners would have a legacy to pass on to his/her heirs.
The PFA provides the basis for a financial plan for moderate and low-income American workers.
The benefits from Wall Street will flow primarily to the retirement plan of the workers and retirees instead of to the “Fat Cats.”
4) Why would the Plan For America (PFA) appeal to conservative and libertarian Americans?
The Plan For America (PFA) would appeal to conservative and libertarian Americans for the following reasons:
The PFA incorporates tax reduction as part of the strategy. The payroll tax is eliminated, corporate dividends become tax free as well as being tax deductible to the corporation, and the retirement benefit cash flow is income tax free and estate tax free when it passes to the participant’s heirs.
The PFA retirement account will be held by an independent trust, not by the
government as is Social Security.
Participation in the PFA is voluntary; joining the For America Security Trust
(FAST) enables individuals to opt out of Social Security.
Under the PFA, each individual will ultimately pay for his/her own retirement.
The PFA contract with the federal and state governments requires the U.S. Government to get out of the retirement business as well as any and all aspects of private enterprise.
Each participant and his/her heirs get to keep the wealth that they have
contributed via perpetual cash flow.
The federal and state governments should eventually be able to balance their budgets because under the PFA the burden of the Social Security program
would be eliminated.
The PFA provides the funding method to pay off federal and state debt.
The PFA will ultimately provide the funds to eliminate the need for taxation at the federal and state levels.
The size of the federal and state governments should shrink under the PFA
because fewer government services would be needed.
5) How reasonable is the 2% charge from the For America Security Trust (FAST) for what it provides, and is it a good investment for “We the People?”
For what the FAST provides, a 2% charge is extremely reasonable and it is an excellent investment. The following are the benefits for the FAST participant:
All contributions to the FAST are 100% tax deductible.
All growth of the invested assets is 100% tax free.
All payouts from the FAST are 100% tax free.
All payouts to heirs after the death of the participant are 100% income and estate tax free.
All contributions (for the purposes of retirement payouts) are guaranteed to have a minimum 4% compounded annual rate of return and to payout 4% of that amount.
All contributions will receive each year’s market rate of return on the FAST stock portfolio less 2% for its charge.
The FAST will provide an interest-free loan to the participant’s account if the
market is suffering a downturn and the participant’s account is in danger of experiencing “drawdown.”
The greatest benefit of all is saving the United States from financial disaster
and bankruptcy, where all benefits and government services would be lost.
Contributions to the FAST are an excellent investment. Any investor would love to have the opportunity to have an investment that:
Is tax-deductible and pays out tax free.
Passes to heirs’ estate tax free.
Is guaranteed by the “full faith and credit” of the U.S. Government.
Guarantees a 4% rate of return.
Earns the stock market returns less 2%.
6) Why would employers pay the 6.2% that is being paid as their share of the current payroll taxes to the employees if the employees enrolled in the For America Security Trust (FAST) and payroll taxes were no longer required?
The employers would in almost all cases increase the employees pay by the 6.2% that they would save by not having to pay the payroll taxes because:
If an employee did not opt into the FAST and out of Social Security, then the employer would still have to pay the government the 6.2%.
There would be a great deal of publicity, and the employees would know that the employer was keeping the 6.2% which would strain relations with the workers.
Implementation of the FAST would bring an approximate $1 trillion capital infusion every year to the economy which would be great for business. Almost all employers would do whatever they could to encourage this economic activity.
Employment levels would very likely increase greatly, and there would be more competition for workers. Consequently, employers would be prone do whatever they could to retain their employees.
7) What actions could be taken to initiate the Plan For America (PFA)?
How to initiate the Plan For America:
Have Congress pass a bill (signed by the President into law) authorizing the Federal Court to appoint a Receiver for the For America Security Trust (FAST).
The Receiver would have the authority to appoint five interim trustees to operate the FAST until the votes can be taken for the initial five elected trustees.
The Receiver would have the authority to tap a line of credit extended from the U.S. Government to the Receiver for the purposes of establishing the FAST and enabling it to become operational.
This line of credit would be repaid along with all costs for the Receivership upon the first bond offering by the FAST, which should occur shortly after
A court-appointed Receivership should provide transparency because the
court would require full reporting.
A court-appointed Receivership would provide accountability because the
court would require the Receiver to account fully for every penny.
A court-appointed Receivership would provide safety because neither the
politicians nor any unscrupulous individuals would have access to any of the funds.
Any vendor contracts entered into by the court-appointed Receiver or the succeeding FAST Board of Trustees would have to be competitively bid and published for transparency along with a report outlining the rationale for granting the contract to that particular vendor.