Not-So-Unforeseen Outcomes

Thanks to their mother, my kids have grown up with a variety of pets in our house—but none more bizarre than our experience with… a chicken.

My son’s elementary school class had been exposed to the miracle of life over the course of several weeks by watching a set of chicks spring forth from eggs that had been carefully tended by the class. Once hatched and ready to be turned loose, the teacher offered to let selected children take one home—provided they obtained their parent’s permission, of course. My son was smart enough to ask his mother—who, seeing how much it meant to him—and much to my amazement, acquiesced to the request. 

And so “Grr”[i] entered our lives. Mind you, we were living in a residential neighborhood in Connecticut at the time, miles and miles from anything remotely resembling a farm. That said, the little peeping chick was adorable, and my wife persuaded me that, as the chick grew we’d be able to erect a small pen in the back yard. We even joked about being able to have fresh eggs.

Or did until the day we discovered that Grr was biologically incapable of such things—at which point it was clear that while we had thought things might turn out one way—well, we now had a loud, smelly and fairly aggressive bird in our house! It’s not that this was completely unforeseen, but it certainly didn’t take a lot of imagination to see that it could go “wrong.”

In that spirit, there are a couple of initiatives rumbling around in Congress at the moment—arguably well-intentioned, but almost certainly likely to have consequences that are not unforeseeable, though surely not what their champions expect or intend. 

The first of these is an initiative focused on expanding spousal consent—not the beneficiary designation requirement in place since the mid-1980s, but one that would basically require an in-person notarized consent for most distributions. The second revolves around discussions to significantly expand the size and flexibility of emergency savings accounts.

‘Missed’ Directions

The expanded spousal consent provision is well-intentioned, of course. Much as the beneficiary designation requirement, it is designed to prevent one spouse from taking advantage of the other by wiping out what might well be their life savings without their knowledge or involvement. On the other hand, it doesn’t require much imagination to, in a day when men and women are about equally likely to have a 401(k), envision a situation where an abused spouse, needing to access the funds in their account to escape their situation, would be precluded by this legislation from doing so by the very spouse they are seeking to escape.[ii]

Now as for those emergency savings accounts—while the notion is quite popular these days—the problem lies with an idea being touted by the Aspen Institute. It would establish a sidecar emergency savings account with your 401(k) that could be matched—but that you could basically withdraw for pretty much any reason once you got the match. More on that in a minute.

Now, emergencies come in all shapes and sizes—but the Aspen proposal is calling for $5,000 in those accounts (rather than the $1,000 embodied in legislation such as The Enhancing Emergency and Retirement Savings Act of 2021—and they’re suggesting it as $5,000 every year. Five thousand dollars that could be put in the “emergency” savings account every year (just) long enough to get the match—and then, as mentioned above—withdrawn for pretty much any reason whatsoever. And then the next year they could do it all over again. And again. In fact, it doesn’t require a lot of imagination to see this turning into one of those “Christmas Club” savings accounts that banks offered once upon a time. Which arguably stands to create a whole other type of emergency: retirement plan “leakage”—on steroids.

You don’t need 20/20 hindsight to know that bringing a chick into a suburban Connecticut home won’t end well. We did it with a genuine desire to do something nice for our son—and hoped in our hearts that it would turn out differently than our brains would acknowledge. It didn’t, of course—but it turned out to be a situation that didn’t last long, and—thanks to a farm-owning colleague—had a (relatively) happy ending.

Something that ill conceived legislation, however well intentioned—can’t—and shouldn’t—depend upon. Particularly when the potential negative outcomes are… not so unforeseen.

- Nevin E. Adams, JD

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[i] While the name eventually seemed to fit his personality, my son simply chose to name it after a favorite character in the “Invader Zim” cartoon series.

[ii] The good news is that the champions of this legislation have decided to study the matter and its potential implications under the auspices of the Government Accountability Office.