Make 'em Provide Pensions

Now look at what's going on with defined benefit pensions. When a plan is frozen -- a "hard freeze," not merely closing the plan to new employees -- those in it stop earning increased benefits. That means, in a typical plan, that workers now in the middle of their careers will still get a pension eventually, but it will be drastically lower than it would have been had those workers earned benefits over their full careers.

Thus the freezes we're now seeing are going to catch many members of the huge baby boom generation right at the point where they are too young to have already earned high benefits under the plan but too old to build up a big balance in a 401(k).

Remember, too, that the generous 401(k) matches many employers are now promising to palliate the freezing of their pensions are not guaranteed by law. Employers can and sometimes do reduce or eliminate their matches when times get tough. Will that happen at companies with frozen plans? Who knows, but who would have thought 20 years ago that they'd be ending their pension plans?

Even young workers, who might in theory build up a nest egg large enough to retire on comfortably, are at risk. If they don't participate, or if they invest unwisely, or if their employer cuts its match, they may not make it.

The likely result of this, if nothing changes, will be a world with a large number of retirees struggling to make ends meet, and a smaller number who through luck or skill have turned their 401(k) into a small fortune.

And what will the large number do? Most likely, they will turn to the government for help. But the government won't have any money. According to the Government Accountability Office, by 2030, just as today's 40-year-olds are turning 65, the cost of Social Security, Medicare, Medicaid and interest on the federal debt will consume just about all of the government's revenue -- more than all of it, if the recent tax cuts are extended.

So the government will turn to the small number of wealthy and not-so-wealthy workers and retirees for more revenue. How about a surtax on retirement-plan withdrawals over a certain amount? Since minimum withdrawals are required and related to age, it wouldn't be hard to pick a figure that would hit retirement-plan balances larger than a certain amount.

If all this doesn't sound appealing, start talking to your senators and members of Congress now. Stop sneering at unions. Think about what kind of future you want and start working for it. It's usually a lot cheaper to prevent an ailment than to cure it.

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Here's another reason not to move to California, or any of the eight other community property states: If your spouse screws up your joint tax returns but you manage to get relief as an "innocent spouse," the Internal Revenue Service can still take your assets to satisfy your spouse's tax liability, the U.S. Tax Court has ruled.

That makes the innocent spouse provision, broadened by Congress back in the '90s, "very little relief indeed" for a California wife, when the IRS can still "levy on her wages, her bank accounts and her other assets, which are community property under state law, to satisfy liabilities she was 'relieved' from," wrote Judge Juan F. Vasquez, dissenting from the opinion of the majority.

The badly splintered court found that the law allowed the IRS to collect back taxes from the couple's assets for years after at least nominally relieving the woman of her share of a $160,000 liability. Unlike a lot of innocent spouse cases, the couple remained married.

The decision, written by Judge Joseph Robert Goeke, parsed through the law, deciding which phrase modified what, to conclude that the woman was "not entitled to a refund of an overpayment made from community property."

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The earned income tax credit is supposed to help low-income working families, but over the years it has been clear than many eligible workers don't apply for it. To help out, the IRS has set up something called the EITC Assistant on its Web site to provide information, eligibility worksheets and explanations of the credit. Taxpayers -- or those helping them -- can go to http://www.irs-eitc.info/ and follow the links. The EITC is worth claiming: It's refundable, meaning that if the amount of the credit exceeds the tax due, the taxpayer gets the excess along with any refund that would otherwise be due.