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Your 401k could be supporting a presidential candidate you hate

by Broderick Perkins

(3/22/2012) ERATE Exclusive - Your nest egg for the future could be padding the political war chest of a presidential candidate you hate. That's also true when it comes to a candidate for any public office, a ballot initiative, or a piece of legislation you don't like.

The California Public Interest Research Group (CALPRIG) says your contributions to your 401(k) retirement investment can become contributions to political candidates because your 401(k) managers could invest your contributions in companies that contribute to Super Political Action Committees or Super PACs.

But you have no way of knowing if or when those companies are making Super PAC contributions.

"It's time to end secret political war chests. If companies want to throw money at politics, they shouldn't be allowed to hide it," says CALPRIG.

40(k) plans

Available from many employers, a 401(k) plan is a type of tax-deferred, retirement investment plan that allows participating employees to contribute cash to the plan and have the employer contribute a matching amount.

Your contributions are made with pre-tax dollars ‹ the money goes into your retirement account before it gets taxed. Taxes are applied during withdrawals, generally after you've retired and are in a lower tax bracket. Your employer's match money, earnings, including interest, dividends and capital gains, are all also tax-deferred.

Also, every dollar you contribute reduces your current taxable income by an equal amount, which means you will owe less in income taxes for the year.

Super PACs

A political action committee (PAC) is an organization that raises money and campaigns for or against specific political candidates, ballot initiatives or legislation. Regular PACs are limited in the amount of money they can raise.

Super PACs can raise unlimited funds, but purportedly only from people, companies or groups that are not directly linked to a party or candidate and cannot coordinate with a candidate or party.

"There are a bunch of loopholes, but as long as you don't give money to a candidate or get directions from a candidate about how to spend that money your Super Pac can raise and spend as much money as it can get its hands on," said Pedro Morillas CALPIRG's legislative director.

"A lot of the money comes from corporations, but thanks to a couple of loopholes it's easy for them to hide that fact from the public and even their shareholders," Morillas added.

The current 2012 presidential election cycle has put the spotlight on some of those loopholes leading to comedy show lampoons, public debate and federal court cases.

The Huffington Post recently reported: "Billionaire industrialist Harold Simmons is pumping millions into super PACs to fight, in his words, 'that socialist,' President Barack Obama. A closer look at his contributions suggests that while he certainly hopes to oust Obama, Simmons' political giving has another goal as well: establishing his own influence within the Republican Party no matter who wins the nomination."

The Labor Department has accused Simmons of misusing pension fund assets while making investments. He has vast holdings in regulated industries like nuclear waste disposal and chemical and metal manufacturing.

To shed more light on who's donating how much to which campaigns or causes CALPRIG is mounting a letter writing campaign to drum up support for legislation that would end secret contributions and demand disclosures of political spending to make the donations more transparent to shareholders and the public.

"Shareholders in California have a right to know if the companies they own are playing politics ‹ and that includes every one of us who has money in a 401(k)," the CALPIRIG campaign says.

"If we win, CEOs will no longer be able to secretly leverage a corporate treasury to fund their own political beliefs. It's a simple plan: no more secrets. If they want to throw money at politics, they can't hide it from "the campaign continues.