Plan For America is a comprehensive solution to America’s impending Social Security funding crisis as well as a remedy for our suffocating state and national debts. PFA is very different and distinct from any of the proposed solutions that have been offered thus far. What makes PFA unique? PFA constructs a powerful, rapidly-growing, funding source to fulfill its important goals. It GUARANTEES everyone at least the level of what Social Security benefits are presently. The Plan not only resolves the retirement dilemma, but also is geared to eventually pay down state and federal debts. Ultimately, PFA could supplant taxation as the primary government funding source! This plan truly is a plan for America. It provides a bigger slice of an expanding economic pie for each citizen while solving the nation’s crushing debt problems.
Plan For America establishes a private retirement trust called For America Security Trust (FAST). FAST would enter into a contractual agreement with the U.S. government and each of the fifty state governments. This contract should be inviolable and, perhaps, even should become a constitutional amendment to safeguard the people’s retirement assets from politicians. The contract, through FAST, relieves the U.S. government of about $14 trillion of unfunded liabilities arising from Social Security. Additionally, it can be extended to handle the unfunded pension liabilities of the state governments. No more cobbling together concessions from different constituencies. No more partisan politics frustrating all attempts at reform. No more endlessly spiraling debts. Finally, a breath of fresh air for the citizens of America!
How it Works
The FAST guarantees that each participant at retirement would receive the greater of: 1) what it would have been under the current Social Security program, or 2) at least 4% of the guaranteed account annually paid out on a monthly basis. The guaranteed account value is determined by combining all of the contributions along with a 4% compounded annual rate of return. If the retiree’s account was larger than the guaranteed amount, the retiree would instead be paid 4% of the account value at the end of the preceding year.
It is clear that equity-type returns are needed for Social Security, but there must be a guarantee in place in order to ease participant anxiety and be politically supportable by all constituencies.
In exchange for that guarantee, the trust fund would charge 2% of the value of the account each year. The entire amount of all of the present 15.3% payroll tax payments would be put into an all-U.S. equities index (only companies domiciled in the U.S.) that would encompass small, mid, and large companies — similar to a total stock market index. Since this would be an index, there would be minimal management, transaction, and maintenance fees that would be paid for by the FAST out of its 2% annual charge.
In order for the trust to meet its current obligation and the additional obligations generated by a market downturn, the trust would have the ability to sell longer-term callable bonds that would be backed by the full faith and credit of the U.S. Government. The government would pay the interest on these bonds, but the trust fund would ultimately call in and pay off the bonds out of its cash flow from the annual 2% charge. The 2% annually on the cumulative amount with trillion-dollar-plus contributions becomes an enormous growing cash flow in perpetuity enabling the realization of Plan For America’s ambitious objectives.
Each U.S. citizen has an account with Social Security and is sent an annual statement indicating the account value and the projected benefits that will be available upon retirement. For those who are already receiving the benefits because of retirement or disability, the benefit level has already been established. Under the proposed plan, the entire Social Security payroll tax amount would be invested in the FAST stock index and the total return, which includes dividends and interest as well as realized and unrealized capital gains, would be credited to the individual’s account. From this total, the 2% annual FAST charge would be deducted.
Health insurance for every United States citizen is the most practical approach to universal health care. Some of the currently proposed plans would place control and in many cases the complete responsibility for health care in the hands of the government. This approach would be very dangerous and would most likely end up lowering the quality of health care in the U.S. and at the same time bankrupting the nation. The solution proposed using the FAST plan would not only take it out of the government’s hands but would also have each U.S. adult citizen owner of his/her own completely portable health insurance plan. Most importantly the taxpayer would not be required to pay for other people’s health care expenses.
The main components of the plan are that a high quality, comprehensive, individually-owned policy is available for every citizen over age 26. The 100% tax-deductible premium would be paid by payroll reduction. Each standard policy would have a health savings account attached at a cost of $100 per month and the total co-pay plus deductible would equal $1,200 per year so that there would be no out-of-pocket cost over and above the premium. Any portion of the $1,200 left over at the end of the year could be withdrawn tax free. There would be no restriction for pre-existing conditions and, via the FAST, there would be no cap on the benefits. Interest-free loans would be available for those who could not afford the premiums. There would be a provision for on opt-out of the health insurance if certain conditions were met so as not to burden the taxpayers. Many innovative variations of the standard policy could be offered by competing insurance companies. If an insurance provider should fail, those policyholders would be offered policies by other companies at their standard prevailing rates. There would also be a provision for those with no earned income to participate.
The FAST, when fully implemented, could provide a reasonably comprehensive financial plan for middle and lower economic class Americans. The FAST not only deals with the retirement and health care needs but it also, through guaranteed insurability purchase options contained in the health insurance plan, has provision for disability and life insurance needs as well as a legacy for the heirs of even the most modest income earner. This plan should give the U.S. the highest quality social safety-net program in the world.
We need to change from the “Culture of Debt” to a “Culture of Equity.” Borrow-and-spend is a failed policy that must be abandoned. Widespread ownership instead of debt will make United States citizens into stakeholders in the success and prosperity of America. The democratization of wealth will bring unity of purpose and solidarity instead of class warfare and strife.
Once again America can be the land of opportunity for all, and it can all be made possible because of the powerful funding mechanism that is completely independent of politicians and the government whereby benefits are increased and yet the debts are all paid.
(For more information see the Q&A at www.planforamerica.us )