Obama Plan Could Ease Child, Elder Costs

WASHINGTON (TheStreet) -- Less than a week after the Obama administration proposed taxing the nation's biggest banks, the White House has unveiled initial details of a comprehensive plan intended to help middle-class families.

Though a full report by the year-old Task Force on the Middle Class, chaired by Vice President Joe Biden, will not be released until February, an overview was made public on Monday, two days before President Barack Obama's State of the Union address. Here are key issues the group plans to address:

Retirement security: Reacting to the 78 million working Americans who lack employer-based retirement plans, the task force promotes the establishment of a system of automatic individual retirement accounts. The government would require employers who do not currently offer retirement plans to enroll their employees in a direct-deposit IRA unless the employee opts out. The contributions would be voluntary and matched by a Savers Tax Credit for eligible families. That credit would match 50% of the first $1,000 of contributions by families earning up to $65,000 and provide a partial credit to families earning up to $85,000.

The administration is pledging new scrutiny on fees and expenses on 401(k) plans, and a push for more "unbiased investment advice." The group would also promote annuities and other forms of guaranteed lifetime income, a move intended to reduce the risks of retirees outliving their savings or fail to maintain their living standards.

Target-date funds, portfolios that automatically become more conservative over time, would be subject to new reviews and required to clearly disclose risks of loss.

College tuition: The taskforce proposes a cap on payments to federal student loans at 10% of a borrower's discretionary income. The monthly payment for a single borrower earning $30,000 who owes $20,000 in loans would be $115 a month, compared to $228 a month under the standard 10-year repayment plan. The administration would also make a push to forgive all remaining debt after 10 years of payments for those in public service work and 20 years for all others.

Child care: The task force calls for a near doubling of the Child Care Tax Credit for families making less than $85,000 a year.

Two-thirds of families with children are headed by two working parents or a single working parent. Child care costs have grown twice as fast as the median income of families with children since 2000. Full-time care for an infant often costs more than $10,000, and monthly child care fees for two children at any age are higher than the median cost of rent, according to the taskforce. The Child and Dependent Care Tax Credit, however, has only increased once in 28 years and is not indexed for inflation.

The taskforce seeks to increase the credit rate from 20% to 35% of child care expenses for eligible families, allowing them to claim up to $3,000 in expenses for one child or $6,000 for two children. The maximum credit for a family with two children making $80,000 a year would increase by $900 from $1,200 to $2,100.

The taskforce also recommends allocating an additional $1.6 billion to child care in 2011, the largest one-year increase in 20 years, to serve an additional 235,000 children through the federal Child Care Development Fund.

Elder issues: The taskforce estimates that 38 million Americans provide unpaid care to an aging relative. The proposed $102.5 million Caregiver Initiative adds $52.5 million in funding to Department of Health and Human Services caregiver support programs that provide temporary respite care, counseling, training and referrals to critical services. The extra funding would seek to help 200,000 additional caregivers and provide 3 million more hours of respite care. It also adds $50 million to programs that provide transportation, adult day care and in-home services, such as aides that help seniors bathe and cook.

-- Reported by Joe Mont in Boston.

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