| | Merlin:
???
"Borrow untaxed from the plan"
But, the owner would need to payback the plan; the plan's books still has an *asset*(the owners debt.)
When the owner draws from the plan (not borrows from the plan) that draw is taxed, as before.
I can understand a regulated requirement on pretax plans to payback the loan or else it will be taxed as withdrawal, but ... why are only some plans treated this way, and not all such plans?
Because for -some- regulated pension plans, it -is- possible to borrow from the plan.
Put this another way: an owner A funds a pension plan and invests those funds with third party entity B. B 'invests' those funds by buying mortgages. One of the mortgages that B buys belongs to owner A. A ends up paying interest on his mortgage to B. B pays interest or provides some other return to A's pension account for having invested his pension funds with B.
At the end of the obligation, the mortgage is paid off, A's pension fund is fully funded, and B has skimmed some of the interest A paid ... for borrowing his own capital.
Why wouldn't A just fund his own mortgage by borrowing from his own pension plan, and pay interest to his own investment account? Why does he need middleman B -- who provided neither the original capital nor anything else but a pocketful of wanna -- to do -anything- in this transaction?
A still has the obligation to payback his pension plan. At the end of his obligation, his pension plan is paid back -- with interest, his obligation is complete.
Don't look for any 'social good' here, the answer is obvious: B has lobbied Congress to make that nearly impossible for the broad middle class, and a tiny cabal of B's are riding the middle class by A] collecting up their pension assets and B] lending it back to some of them!
In between is a Monty Shuffle of assets, gee, I'm sorry, but that crappy mutual fund lost money last year...here is most of your capital back, and thank you for paying your mortgage in full. Do that to a broad enough school of fish, and who cares what the spread is between not a lot of return on your mutual funds (or even, negative return)and not a lot of interest on your mortgage...
The Tribe somehow has been convinced that it wouldn't be 'fair' if A was the person who could put his own pension assets to work for A...fairness demands that a B ride along for free, like a parasite, using A's capital...to loan back to A.
Don't be confused by what is happening to the Middle class; although many in the Middle class have pension assets, few have enough to fund their own mortgages. But not important in the least; the middle class's pension assets are aggregated and lent back to them. The middle class has both mortgages and pension assets, and the capital to fund their mortgages is coming indirectly from their own pension assets. They are pooled up, like cattle, and herded as an aggregate by laws that make it difficult/impossible for them to put their own pension assets directly to work, except through the hands of third parties waiting for their 'Real Marks.'
If the government can get away with this nonsense with temporarily not funding government pension assets, then it begs the question: why fund government employee pension assets at all, ever? Whenever they need to fund pension withdrawals, they can always just have Congress sign pen to paper and borrow whatever is required to fund whatever is needed.
If they are temporarily 'saving money' by not funding employee pensions and it is not an issue, then ... why did they have to fund it in the first place? Because in this instance, what they are going to do is, wait for Congress to inevitably raise the debt ceiling in the future, then fund those government employee pensions from the new authorized debt.
regards, Fred
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