THE WAR ON 401(K)S

House Democrats are considering an alternative plan that would replace 401(k)s with a flat tax credit at all income levels. The plan, supported by Reps. George Miller (D-Calif.) and Jim McDermott (D-Wash.) states that:

• All workers would get a credit of $600 if they invest 5 percent of their pay into a retirement account run by the Social Security Administration and invested solely in special government bonds paying 3 percent plus inflation.
• Existing 401(k)s would be allowed to remain, but would no longer be tax-deductible.

This plan may have a short-term selling point in its risk-free bonds. Its participants would be in no danger of losing, or making, money in stocks -- but in a few months, the market may look quite a bit brighter and the public may not be so receptive to the idea of trading so much freedom for mediocre, if secure, returns.

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