IF YOU'VE held several jobs during your working life, and they all provided a retirement plan, I hate to think about your paperwork. All the plans are probably trailing you, like a comet's tail.
Reader Suzanne O'Keefe of Brooklyn, N.Y., writes that she has two 403(b) plans, from when she taught at graduate school; a third 403(b) from her current employer; a self-directed pension from her current employer, which lets her pick the mutual funds; a 457 plan from the City of New York; and an individual retirement account.
The money in her six plans is spread over 11 mutual funds, and managing it all is "a horror," she says. She wonders which plans she can consolidate. Or is it better to stay diversified?
To me, it's a political disgrace that retirement funds should be so scattered. It's tough enough choosing mutual funds and balancing your investments. It's stupid to have to do it across different types of plans, each with different rules.
Congress cobbled together our retirement-savings system over many years: 403(b) plans for teachers and employees of nonprofits; 401(k) plans for businesses; 457s for state and local government employees; Keoghs and SEP-IRAs for the self-employed; IRAs for employees with no company plans, or for lower-income employees, and there are more.
Their excessive variety stems from the attitudes of different congressional committees, and the exigencies of different budget years. But there's no public policy that this Balkanization serves.
Why shouldn't all your retirement money be portable, so you can transfer it from one job to another? Why shouldn't there be a universal plan, to receive all the funds from all the different places you've worked?
Rollover IRAs come close to being a universal plan, but not close enough. Some retirement funds can't be rolled into an IRA, and there's no good reason why.
The White House and Congress (both Republicans and Democrats) agree that the current arrangement is dumb, and even agree on portability. It would cost the Treasury virtually nothing.
Several pension reform bills espouse portability, along with other sweeping changes. If the more ambitious bills don't get passed, there's a simple Retirement Account Portability Act, sponsored by Reps. Earl Pomeroy, a North Dakota Democrat, and Jim Kolbe, an Arizona Republican.
Here are five of the things that the Portability Act would do:
* Allow money in tax-deferred 401(k)s, 403(b)s and most 457s to be moved from one plan to another as you changed jobs. You could consolidate all your money in a single plan.
Three problems would remain:
First, employers don't have to accept money from other plans, so you may not be able to use this provision.
Second, 403(b)s are often invested in annuities and the insurance company may lock you in. The insurer might charge a penalty if you switch to another plan before a certain number of years have passed.
Third, you couldn't consolidate Keoghs or SEP-IRAs. They're not covered in the bill.
* Money from 457 plans could be rolled into an IRA. Today, IRAs can receive money only from 401 (k)s and 403(b)s.
* IRA money could be moved into 401(k)s, 403(b)s and government-sponsored 457 plans (but not 457s at tax-exempt organizations, because of their legal structure).
* There would be an important change in the IRA rules.
Today, many people feel compelled to keep two IRAs -- one for rollover money that came out of an employer plan and one for any money they saved independently. Only the rollover money can be consolidated in a new employer's plan.
Under the portability bill, you'd need only one IRA. All of the money could be consolidated in a new employer's plan.
* If you make after-tax contributions to your employer plan, they wouldn't have to be cashed out when you leave, as happens today. You could roll them into an IRA, too.
Pomeroy says that he has a 457 plan from previous employment in North Dakota.
"It just sits there, poorly invested," he says. "I'd like to have all my stuff in one place."
Until this bill passes, what can O'Keefe do to simplify her life? Just one thing: consolidate her two older 403(b)s into a rollover IRA.
As for investment diversification, you don't need six different plans to diversify. A single, universal plan could give you access to as many mutual funds as you want to buy.
Washington Post Writers Group