I. I think you have raised an interesting question about maximum contributions to IRAs for those who do not have employer-sponsored defined benefit or defined contribution plans. Equity considerations would argue that the $2,000 limit should be raised for such workers. I think there are several reasons why lawmakers have been reluctant to move in this direction.
1. Compliance could be a problem. Those with employer-sponsored retirement plans are eligible for IRAs if they have incomes below $41,000 for individuals and $61,000 for couples. The IRS would have to have an easy way of identifying those eligible for the higher contributions. This, of course, is already a problem but the incentive to cheat is lower if the maximum contribution is $2,000.
2. Few would be affected. Very few of those who lack an employer sponsored retirement plan and who have relatively low modest incomes¯less than $50,000¯contribute to IRAs and even fewer contribute the maximum. Of those with incomes above this level who both participate and contribute the maximum allowable amount, many I suspect are eligible for Keough plans and those plans have a much higher limit.
3. The budget costs might be high. This of course can't be true if number 2 above is the case. But lawmakers probably suspect that it would be politically difficult to set one maximum for those with employer sponsored plans and another for those without such benefits.
4. Lawmakers fear the erosion of employer-sponsored plans. If individualized retirement saving vehicles become a reasonable alternative, more employers may decide to scrap their employer-sponsored plans. They could give their workers a pay raise in year one equal to their contribution, but over time this employer contribution could erode away. More would be left without retirement benefits.
II I don't know the answer to this question. It sounds like a reasonable idea although businesses will object because their flexibility would be reduced.
III. I think it would be a terrible mistake to have collective investment decisions affected by social concerns. The investment should only be done if it can be done in a neutral way. I think very strong institutional protections should be established to protect collective investment from all types of political interference.
