r - AT?ACIB,IENT I Legislation addressing all five principles was considered necessary because previous laws were deemed insufficient to provide the desired pro- tection to employees. However, it should be noted that even before ERISA There were two major causes of expansion in the private pension sys- _LEI-9 TAB _LEI-6 LE 1-8 i funded, benefits the PBGC are fmight ully vested not haveandtofully pay benefits; Tportable, ABLE 1-7 if andthe form planan himportant ad been less source THE PENSION REINSURANCETABLEPROGRAM 1-4 IN THE UNITED STATES* other PENSION problems PROTECTION are UNDER furtherERISA away from solution. Viewed together, these Depressed Value of Assets. As a result of the vagaries of the2 in- was Private that, passed, plan in Sector the sponsors. lawsPrograms event existed--at ofItplan has both termination, a financial the federal TABLE "call" theI-5 and participants solely state levels--regarding uponcould unrelated, look only ongoing extent the pension fund was unable to pay them. Another large union took payments In applying have the beenempirical paid to mathematical the plan TABLE since 1-2 formula the plan usedbecame to calculate subject to the ERISA pen- tem in the 1940s. Inflation and taxation during World War II stimulated TABLETABLE I-3 I-1 entitled to receive underTable the 1-10 Table terms1-11 of the plan. The demonstration of shutdown of operations, (d) Benefit where--under levels could PBGC not regulatlons--early be increased in retirement a year in which of retirement income to all covered workers. The Social Security system well-funded, the PBGC liability would be greater. Despite this, funding problems fall Thebasically Congress went into five one step areasfurther of concern: and said that the requirements for vestment to the decisions, available assets less assets of the may plan be available for fulfillment to provideof benefits their benefit than disclosure, fiduciary standards,E vesting BRI requirements, and minimum funding funding sion, opportunity this plan requirements. truth sponsors--no for aisreorganization notIfchanged, one a plan else.has of regardless It aacompany is, credit inofessence, in balance, whether an attempt aor its contingent not contributions to past avoid pension years bank- obll- the opposite approach. Its pension settlements did not require the em- the expansion of private pension plans in industry. More than 2-1/4 mil- entitlement such inability is extended benefits (i.e., to business all are employees reduced. hardship) who would met thetakerequirements place in the for bank- benefits, however, do not provide an acceptable level of retirement income at the maximum Mr. Chairman, tax-deductible it is a level pleasuredoes fornot theguarantee Employee that Benefit assets Research will be of service are included. pension plans should not be so onerous that employers would not create new standards. anticipated- entitlement.The Inonly certain new situations, concept produced however, bya ERISA collectively was planbargained termination labor mayruptcy, be Private reduced The gation so so-called a pension below clearing major the function "broken programs house. minimumpromlse"--the of are ERISA the established requirements PBGC failure should and financially bybe ofanto pension amount recognize supported plans up to these to the by pay ployer to guarantee payments of pensions; however, the contributions were llon additional workers became covered by plans by 1945. The other major PLAN TERMINATION IN THE UNITED STATES ruptcy courts in UNITED aEMPLOYMENT business STATESreorganization BENEFIT POPULATION PLAN COVERAGE or insolvency proceeding. A early retirement, except RETIREME RETIREMENT thatNTthey PLAN PLAN didRESER not COVERAGE VESsubmit an application. When RETIREMENT PLAN COVERAGE sufficient and, as at a result, all timesprivate to paypension guaranteed programs benefits. cover Other approximately plans using 45 million the pension plans or improve UNITED STATES existingLABOR plans. FORCE Therefore, it established the * contingent employer liabiity insurance (CELl); agreements The enactment specified inthat 1974 the of plan Title sponsor IV (pension would plan guarantee termination benefits, insur- if signs insurance, one additi the required of onal pensions offour trouble ato incentives types concept be thatactuarially in ofemployees aarrangements: that topension rush had(rightly determined out never plan. SOCIAL the before door, SECURITY or Ifand wrongly) appropriate been beyond be COVERAGE atconsidered expected least the statutory $6equal premium. toinreceive--sur- tothe authority theUnited normal credit balance o premium without increases creating awill funding bringdeficiency. additional adverse factor encouraging UNITEDtheSTATES spreadPOPULATION: of private 1900 pensions to 1978 stemmed from collective enlightened private interest lies, in having the 1974 version of Title IV new funding LEVEL OFstandard PAST SERVICE would BENEFIT apply toFUNDED a voluntarily OVER A PERIOD terminated OF TIMEplan. If the workers in the United States. this happens, if the early retirement benefit is greater than the actuar- (e) A plan would not be considered voluntarily terminated until minimum funding level still may have sufficient assets. Nevertheless, Institute to submit this statement to the Committee on H.R. 3930, the "Single ance) concept of the ofEmployee contingent Retirement employerIncome liability Securityinsurance Act (ERISA) (CELl),haswhereby had a the States. not Early covered ItThus Retirement. isbynot available theunexpected, ultimate Many assets, plans reinsurer therefore, toprovide the is extent that early all such of other retirement its hasty plan available legislation sponsors. benefits resources. that has Yet they were facedgranted, in 1964 selection theand PBGC inexorably among couldwell step ledfunded in to and theplans reorganize passage causing of ERISA the deterioration plan I0 years in certain later. cost Another plus example 30-year occurs amortization often of during the unfunded the process past ofservice negotiating cost. an Other bargaining. After World War II, many unions wanted to include pensions [in millions, except sm indicated. Estimates as of July 1, except as indicated. Prior to 1940, excludes Alaska and plan assets wereit less becomes than"insolvent." the value of vested benefits, the deficiency ial equivalent, substantial(BASED additional ON 6% INTEREST liabilityRATE) is thrust upon the plan. the plan adopting a faster funding schedule would have more assets at all No. 542.EMPLOYEE-BENEFITPLANS---SUMMARY1:960TO 1975 *PBGC lack ]iowa]i,would of Total insolvency popdevelop No ula.tion 643.includes LABOR an Ainsurance; rmeinsurance dFORC Fo E rces Aab ND road: EMPLOY system residen ME t NTpopula : tiounder n 1947 exclude TOwhich s 1978 them. Seeemployers text, p. 2, could protect resulted greater inimpact massive No. 539. onPROJECTED PRIVATE problems, retirement PENSION both NUMBER income ANDconceptual DEFERRED in OF the PROFIT-SHAR PERSONS and United practical. ING States PLANS:195 than 0TO 19 any75 other significantly In a will bankruptcy a single The findCexceed ono ngress employer, situation, relief the mustfrom actuarial unilaterally carefully plan thisparticipants potential equivalent consider established; burden could theof premium the expect by adequately normal issue. little, retirement Am funding if ortiany, zing their acquisition ways, Congressional unions Under thereby the (e.g., or aInternal possibly concerns sale in the where Revenue avoiding about craft therepensions trades, Code, plan is anastermination. construction unfunded and amended the philosophy past by industry, ERISA, If service planbehind the liability. termination and maximum ERISA maritime is adjusted to of reflect the premium experience."base," and in turn, higher premiums. and other welfare benefits in the labor negotiation process. In a land- for basis of estimates, See also llistorieal Statistics, Colrmial Times to 1970, series A 6-8] Depending would onbethe required levels to ofbeplan funded assets overanda period employerof net not worth, more than thisten bur- to fif- T-24 times thanWhile if it theadopted federala Social slower funding Security schedule. system was established as a sepa- Employerthemselves Pension ICoverag Plan against e data Amendments refer toall civilianor wagepart Act and salaro yof f wor1983." kerthe s at end30 of yea percent The r; contInstitute, ributions,liability. to amountsa subsc no ri n-pr bed oby fit, benefits- The /Includesactuary pay-a_-you-lzo, Pnormally Lmul AN tiempl TERMINATION oyer, expects union-administered,IN only THE and a UNITED nonpro0 fraction t orfzSTATES anization of plans,those and railroaworkers d financial event IPsince et_ormrecourse I$ yeara the old aenactment ndbeyond ovetr. Annual the averof agesassets ofthe monthlyfederal of figur(_the , exceplan ptSocial a._ indicated. itself. Security See also HistoricalAct in 1935. were averted, own plans.then There plan is participants, no relief inthe Titleemployer, IV of ERISA the for PBGC,planandsponsors the who Company evident industry) X is in felt the the declaration seller, there wasand AGE strength ofthe 65 policy buyer AND in in OVER numbers says the beginning that and Company had all of ERISA. Xemployers has to bear contri- tax-deductlble mark decision, Numb contribution er the of United PersonsisStates Covere equal dSupreme tobythe normal Court ruled cost plus in 1949 10-year (Inland fund-Steel employers and employees, in total. An "eu*ployee-I)enefit plan" is any type of plan sponsored or initiated uni- plans supplementing the Federal TOTAL railroad retirement prograul. I'lans are classified o_ insured and noninsured, teen years. Actuarial S_tistics, Colonial Tlosses irn_ to 1970, would series 1) 11-19have and I) 85-to 86] be funded over no more than . ] TOTAl .... denrate may and reduce segregated 3. the Planbenefits Insolvency. trust offund, otherAwith plan planreserve participants in reorganization accumulations or maywould increase fullybe contem- deemed the "in- Old-Age, Survivors, Resi- laterally orRjointl esi- y by employers __ or employeR eein- s andCivil- provid , ing benefits that __ stem from Rth esl- e emp Cloyment Ivll- relation- * lack of a reorganization scheme for troubled plans; the former underwritten hy insurance companies and the latter generally funded through trustees. See also general eligible Thepublic afull to single retire realization wouldemployer, early all benefit, ofinestablished these any and year problems theto pursuant private is actually onlypension tonow retire a coming collectively system in into that would focus, year. bar- be some PBGC responsibility liabilities soundly fundover with their a respect longer own plans. peri to odthe ounfunded fA time resource, (this pension rate theoretically, obligation. equals approis ximatel The again y tax 5 bute to a single pension plan. Under these multiemployer plans, covered Co. v. National dent Some ship special amlLabor that dent are IN notinterests Relations uT ndeH rwrit EtenUNITED or pamight idBoard) de dir nt ecSTATES tly iaby accurately n g|that overn YEm AR ent employers (Federa argue l, State, or dethat nt local). were ]In anHR general, required 5950 the in-does to not Maior Pension and Retirement Programs llisloricalsolvent" F.latislics, Colonialwhen Times tobenefits 1970 series fI 287have -304] been reduced to the level of bene- ing of the fivepast years. service cost. Before ERISA, the maximum deductible con T liability of and the Disability employer Insurance or the PBGC (oooO(or, mittedmore ) appropriately, all other plated, its provisions, both by statute and practice, furnish retirement non-partisan Unfortunately, public tent is to pthe ino cllicy ude design plans research that prov of ide the in ao nrganizati orddeductible erly predet on, ermined amount fahas shion for co(1) nducted violates income mainten research ancethedurinbasic g YEAR One p0pu- other YEAR p0puaspect - YEAR Popu- of ERISA Per- popuwill - popu-|beANDnoted Popu-here [ Per- ]but popu- [popu- developed in a sub- five years Underafter ERISA,ERISA the TOTALminimum became LABOR law, contribution as CIVILIAmajor N LABOR Flevels Orevisions RCE wereare Nstrengthened OT Ibeing N LABOR proposed and a When plan gained termination labor agreement; is accompanied by the closing of the facility or tribution buyer strengthened. wants revenues, was in The Company It the the participants isUnfortunately_ United from normal hereby X either which States cost declared inthe (to plus our ooo ERISA O Congress reduce mi 1979 toI0 tted) be created percent forum the the hasasking policy concluded the carefully of the PBGC purchase ofpast this that toexcluded service guarantee Act changes price, tothe base. in orbene- PBGC. Title to But, IV employees could move from participating employer to participating employer periods when reg FOu RC lar E 1 earnings are cut off because of death, accident, sickness, retirement, F oO rRu CE nemployment and bargain on Ilatibnthe issue lation of pensions. lation cent lationAlso lation| in MON1949, TH :lation the cent Steel ]ation latiIndustry on Fact- plan sponsors). Persons Persons Persons Monthly YEARS Total fits guaranteed byFUNDING Title PERIOD IV and (yEARS) the plan is unable to meet the principles income solely of insurance. ITEMthrough AND TYPE OF PLAN aThisredistribution results 1950 1955 from 1960 of 1965 thewealth fact 1970 197that using 2 1973thethe 1974deduc federal 1975tible tax sequent section. {2) benefits to meet The medical law expenses.provides Excludes workmefor n's compensati a phase-in on required byof Statubenefits te and employer's guaranteed other HISTORYtermination OF PENSION ofPROTECTION employment, IN however, THE UNITED asSTATES it often is_ the increased most* significant nature of the reinsurance pension promise; Number program of and was added in Title IV. In contrast fits, to years) thebut Social Congress would it did Security allowbynot athe logive has wer Pension exhausted premium. the PBGC Benefit this This, powers Guaranty source however, to step ofCorporation ma revenues, in y be anda slight reorganize with (PBGC), price the the Congress a for givewithout credit loss for protect the of pension existing ... the credits. interests unfunded Conservative obligation. of participantsfunding Company in employee was X intended not considered to present the best solution. The Prreal iv W ate ith Planquestion Emplo s yed Go With vernment-Administered must Employe be r whether Persons PlansRecor eivingnot and it is a Finding Board liabilheld ity. See also that llistoricalthe Statiststeel ics, Colonialindustry Times to 1970, seriehad s lI 70-11 an 4] obligation to provide ELAPSED Following a voluntary termination, employers ceasing business opera- non- [r Female I Employed U nemoloyed laws to furnishrequired the necessary reduced changefunds. benefit Thus, ]payments. federal changeItSocial is anticipated Security bethat ne- plan Persons Percent of since amount 19is 78 not that predetermined can institu assist Percen,in and your isdecisi based on on making. an unrelated condition--the Porccn number byofthe early PBGCretirements over a five-year can Earnings add period Coverage significantly in following and Worker to the fully the establishment plan Monthly's Lump pension Sum of the to the situation FREQUENCY with respect OF TERMINATION to defined contribution BY SIZEplans, OF PLAN severe , re- agency* created a group benefit byofTitle plans employers IV and of ERISA acting their itself. beneficiaries, as a multiple As previously by employer requiring indicated, group, uni- plan pay troubled offor ERISA attempting that 190plan 0__were . liability 76.1 in needed 1920_an _to _ _ attempt find out to 19preserve 40of _..ways 13its With 2to .6 to Liavert future fe 1.the 3 balance 1Oth 32.,integrity 5ea r earnings. 13plan 2.1 |the I,_2 termination ....o still f ] 18 Fe rdefined _.6 Company deral unbalanced 1,5 Sta 18 tein ,benefit 5X .8andhas the 1837 reflect- Social same pension waySecurity plans necessary because many employers were contributing. Plan Terminations YEAR Coverage.tionalnet "I_............ of non- 1.000. Credits 9.800 14 Pe .200 rcent Effe LT c00 t !Percent 1.800 T2 axes 6.300 IPereen 7.500 L Insured 9.200 Benefits of 2 non- 9.800 30 Pa .3y 0ments 0 its workers with pensions and other welfare benefits to take care of tions _901_._ 77.6 would 1921___be I08.5expected 1941__. 133.9 Age to 1.0 65discharge a133.7 nd 132.1 | 1963 Total their .... 189.pension 2 [ 1.4 188.5obligations 186.5 along with Considerationinsolvency I0 should would be 20 given be linked to30 limiting to sponsor 40the insolvency maximum Interest guaranteed by law. Only fits are guaranteed by the Insuranpower ce Privateof the Railroadfederal Civilian government Local to tax its net worth of t Insu he repo d pulaplan plans, Total grosssponsor. ...... institu- 1,000_ Total _ 2,600In 3,80 addition, of 0 1,900 I otnon- i,'2f)0the 8,900insured 9 of ,500 Total 0.2(including 00 institu 10,800 11,600 plan plan or an amendment ITEM AND TYPEincreasing OF PLAN the benefits. The intent [is 1975 to balance TERMINATION liability. * nature INSURANCE Year of the pension obligation Year-End* Year-End (i.e., inwho Year pays Year-Endl" the Year-End bill?). l in Year strictions The laterally first were pension established; placed upon plan investment in or the United in securities States wasofestablished the plan sponsor by New termination that PBGCa tocourt t902pay ... the 79.insurance has in 2 disclosure o 19"£powers rder t___ llO. to l is under 19maintain 42 and ..still 135.Chapter 4reporting not 1.1 defined 134.in 6II 13to to 1.effect 4benefit [participants appoint 1964 .... for 191.9 pensi trustees multiemployer on 1.4 and 191.I plans bene- to 189.1and reorganize pension avoid ed good on the step budget. economic forward. effect of theFISCAL sale to YEAR that point, 1977 the amount of money Noninsured Year plans, gross__l,000__ 7,20Over 0 11,600 _,30Population 0 t,100 22,000 4,000 5,600 26,200 26,g00 temporaryYearand tipermanent on i (rail.) tionaldepreciation Compan)es (rail.) Total Pl civans il- of TotRetirement al human institu- [mployees Total machinery. civil- i [mployees (mil.) tionalFrom OASDH: 1950 on, Number benefit ofthose Cases on to early any retirement other creditors. to the actuarial If such obligations equivalent ofcould either be 2800met the from I903.._ 80.6 19'23__. I12,0 1943___ 137,3 1.4 135.1 128.0 ] 1965 ..... 194.3 1.3 193.5 191.6 citizens--what Contributions:economists call "transfer payments." It is not surprising, participants The Institute's 1945 through .......................their first collec educati 72,400 tive onal 39.200 bargaining project$ 1,285,486 related represen 33,400to ta the t 1,288 ive) plan $ 273,885can the need to (rail.) protect popu- the PBGC (mil.) against ian (rail.) tional early (rail.) termination Jan pol)u-of the plan with even though ficiaries the participants of financialwere, andfor other the information most part, with rendered re- risk-free and Theof"Studebaker the PensionIncident" Benefit Guaranty Corporation (PBGC). An articulate and aplans. York company. City 1940in ......................... Title 1859, IV covering only permits its 695 policemen. the 3.5.65 PBGC 1.349to The force first 745 a plan complete 1.552 in industry 27,622 termina- was Company X1904_has ._ 82.2funded, 192,4 __ 114.1and1944_._the [ 138.9cost J.2 of 133.9 the [ 127.2 |pension 1966 .... 196.6plan1.2 to 195,6 the 193.4 point of the unions have Covered embeen ployees: an important factor in the spread and direction of Employer .............. lation nlil.dol._ oo_ 1,750 3,2 labo:_ r,_oo 0 1,710 popu- ?,37oooo 0 12,580 labor 6,9_ 40 9,390 lation 23,020 27,.r-_0 5 43% 15% 7% 4% 0% existing1950plan ....................... assets (e.g., 82.700 through 41.000 purchase 2,667,077 of 59,800annuities 3.478 961.094 or lump sum participant then, that 'sThese over accrued the proposals STATEMENT years retirement since for OF plan DALLAS benefit 1935 reorganization the L.orSocial SALISBURY* the ERISA Security ofmamultiemployer ximum systemguaranteed has become plans are 1945___ 140.5 1.1 133.4 128.1 [ ] increase tion. the insurance Life insurance and decoverage ath l .................. (benefi force rail ts) lation without ,_ force , the consent of 62 2600 .4 the Past the 1945 need Service. ......................... Insu ofredemployees plansPension .......rail.dol__ toplans 1receive ,470720 are 1,1 5.240 0_ their periodically t,l_)1.846 [, vested 770 2,8 2.928 60benefits. improved, 4,200 2.008 5,020 6,050 often 40.4887,730every by Title IV of ERISA. 1976 .......... 22.9 million 10.7% Contingent erthe oding*American atheboard Employer PBGC Express ofpremium trustees, Liability Company base. acting Insurance plan Increasing as in a1875. (CELl) multiemployer the and Another premium Insolvency tsignificant ogroup, $6 hasestablished beenyear saidwasto [905___ spect 83.8 1925thereto, __ 115.8 by establishing |standards 1967 .... 198,7 of 1.1 fiduciary 197.5 195.3 Basic sale. Purposes The buyer has, presumably, taken Company X's ,economic I experience, 2400 Judged 1955 Accid....................... enta against l death and d the ismembeconcensus rment98.600 ...... mil__56,200 of the international 5,713,045 70,500 experts 7,960 4,968.155 assembled 46.5 pension coverage Noninsuredin plans the _raiUnited l. dol.. 1,0States. 30 2,180 _,5.'20 _,600 9,720 2,740 4,370 16,970 19,83o distributions), the liquidating sponsor would, of course, have no further benefit, t906_.1 _9whichever 50 8% ......................... 4 1926... 11is 7.4 1lower. 946__. 141.9 2.755This 1.0 140. 77 ,500 concept 138,9 | 1 1968 .881 is __. 200. fully 1.873 7 1.0 in 199, 2.894 4accord 197.1 44,477with the insurer a conduit most (PBGC).important. through 2000which .......... They tax deserve 31.8 revenues million serious 11.3% are toconsideration 12.9% redistributed by to thethe Congress retiredand by termination guarantee IIealth benefits: program, bringing together experts from several 1947 ..........] 103.4 60.9 58.9 59.4 16.7 28.1 57.0 55.2 2.3 3.9 42.5 41.1 1905 when the Granite Cutters _'I _o_ established _oo the oooo first / , _trade union (multi- three CONCLUSION years pursuant in 1960many ....................... to acollectively series of 109 collectively ,400 bargained 59,000 plans. bargained 11.876,220 When labor 84,400pension 14.844 agreements. 11.244,795 improve- 2200 including comprehensive itsconduct, projected summary ...of pension bythe improving U.S. expense, program the capitalized equitable was presented character it,inand theand determined book and is i907.__ 87.0 1927,_, 119.0 1947 __ 144.7 1.9 144.1 143.1 | 1969 .... 202.7 1.0 201.4 199,1 In 1963 Empan loyee event ............. occurred rail. dol__ _ that _ brought _0_ 990to 1,42the 0 1forefront ,600 1,710 2,O0_0 the 2,_'2question 90 195019......... 55 ......................... Insu ;Hre ospitalization 1d 06.6 plans 63......... 9 _ z........................ 5ra 9.il. 9 dol__ 62.24,105 18.4 12.2 280 na .-)9. il9 60 58.9 1,87655. 32 20 33 2. .3 50 333 5. 43 00 42 3..9 827 440 40.164,161 690 58.2 2030 .......... 55.0 million 14.0% to 22.0% social I0 philosophyI00espoused by 36 the Congress 17 under /the 9 Social Security 0 sys- liability. all studentsIfofthe pension business Submitte reinsurance were d toliquidating the programs. pursuant In addition, to aconsideration bankruptcy population I908__. 88.7without 19",____ 120.5significant 1948 __] 147.2 1.7accumulation 1_6.7 [ 145.7 ] 1970 of ,_ 20reserves. 4.9 1.1 203.8 201.7 1965 ....................... 121,300 66,400 17,205,372 94.800 20.867 18.310.676 ments are 1955 .......... made, Probably Non Sur in 1s12 g nthey red i.c 7al _................................. 68the plan .1are s____mi6 lmost ,0.4often dol_65 _ .0 difficult granted 1 20 30 .5 2 nail 31 80 .6_. for 62 480conceptual .2 all 55.2 670 previous 1,2. 07 90 1,and 4 2.0 40 44 1,service, .developmental 7 270 39._ 1,460 1,as 6005_1.6wellproblem PENSION FUNDING IN THE PRIVATE SECTOR , _ 2000 be "nAt othing" Multiple the present byEmployer the time, PBGC. Plans. almost But, Multiple itfive is 10 years 0% employer moafter re thanplans themuenactment stare, be paid in general, of forERISA, the an employer) plan. All these plans, as well as all other plans established a reasonable of The pension 190PBGC 9_.1 _960the purchase 90 ......................... security .5operates soundness 1929 _. 12price. 1,8inas 194the 9of ___an / 149 such The United .8insurance 5.475question, 1plans .7 149States 17.540 .3 ] 148 by company. .2 |requiring then, 1and 1.9 6 71 54 . __ledis 2072.707 ,1Its directly, whether Ithem 1,1practice I 2'5 0to 6.2 ,I 60_the vest ii 204.3 7buyer years should 3.845 later, isbe in The 1979extent , the pri tovate which pension accruing system benefits , and are the often future not retirement funded until incomemany security By 1960 .......... 1950, Rmore e 119.8 gular medical 72than .1 =....................... 60.2I0 69million .6 23.2 mi 33persons .|4 _ _ 65.8 54(out .9 3.9 of 5a .5 total 47.6 3population 9._ 56. l in proceeding, 1966 ....................... the pension plan 125,000 claim 69.000would 22,585,229 share 97,200 in the 22,767 liquidated 20,048.347 assets tem. Social Security does not provide unreduced early retirement benefits nations. needs The resulting to be given book, to comparable Pension Planprovisions Terminationfor Insurance: single employer Does plans. the It is essential, therefore, that Opene some d return to ' these \, basic insurance 1800 1965 1961 .......... ......................... MonthlyMajo 12b 9. er 2 neficiari medical 7 e7.2 s , .......................... t .....59.7 1.000._ 74.55,6354 26.2 50 18.440 980 rnil_ 35.2 _ 1,7 71.1 80 1,662 15.750 5.0 4.740 3.4 2,855 5.4.5 550 5 52 6 ,.1 3 .080 09 6.390 40.176,2957,05029.6 it as isforalmost under service ERISA universally after is SOURCE: the theagreed establishment Udate .S. Bureau of thatchange. of CELl Census of .is aPercentages This unworkable. viableincrease system The in of PBGC, termin benefits aorgan- tionforinsur- included assembly here of single as Attachment employer i. plans That forpaper the concluded purpose ofwith jointtheadministration. following asking before Private Company 1917, thesector X to accrued werepaypension funded forbenefits theprograms onpensions a ofpay-as-you-go fall employees twice. into one with basis. of significant two No important reserves cate- were more consistent lglO___ The 9"2-.4 private 1930___ with 123.1practices 1950__[152. pension 3 system underlying 1.7 151.91150.8in 11972 the an ___ United insurance 208.8 I States .91208.2company. ] 206.5 today continues There to yearstoafter the passage they 1967 have ....................... of accrued ERISA. orInbecome 127December .900 vested 69.900of in that 25employees ,423,792 year, 99,900 Studebaker, is 23,707 illustrated 21.406a,455large excess of 150 Covermillion) age, private employees were : covered under private pension plans. Pension Insured plans ........... 1,000__ 150 290 540 790 1,220 1,350 1,480 1,550 1,690 15 I00 63 29 15 0 exceptofinthe thebusiness case UNITED of according disability. STATESto HOUSE its Perhaps OF level REPRESENTATIVES itofwas priority ' recognized, ",in bankruptcy. when Social 1600 If the 1966 1962 .......... ......................... 131.2 78.9 60.1 75.85,77027.3 19 3,6. 370 0 72.9 1,643 55.6 2.2 9,943 3.8 5, 52.6 354 39.278,953 [911__. Federal 93.9 1931___ governmental 124.1 1951_,_] 154,9 employees, 1.7 154.0 151.6 |both 1973 ___civilian 210.4 I .7 J 209.9and } 208.1military, are principles be accomplished. for years 2000That and 2030 is, depend some risk on fertility must be borne by the de- ance incorporatng NoTemp ninsuro ed rary pla di ns sab......... ilitythe _..................... 1,000__elements 300 69 rai 0l.described _ 1,240 1,960 above. 3.520 4,200 The 4,600 relationship 4,840 5,36031.1 among ized Eachlabor, employer industry 1968is ....................... essentially representatives, responsible 130,800 and 71,300those for the 27.in 034,financial 289the 10insurance 2,600 security 24,562 and 24.936of ,pen- 435 its gories. past privilege established When service Under all operiods f creates maintaining from issues defined of contributions are an service, contribution immediate reduced a defined _0000 to to of meet increase cbasics, othe ntrib plans, 00000 minimum uti plan oninthe contribution vested sponsors. standards 000plan. 0singleliabilities _underlying of rates Iffund- a plan areunder element speci- sponsor the should of millions be evolve 19_7underwriting .......... ofin workers 133.3 size 80.8and rules may 60.6complexity depend that, 77.3 28.4consistent on 36. the (see 7 74.4 Congress Tables with 55.8 3.0good 1-2 taking 3.9through business action 52.5 39I-ii). .4practice, rather New than needs vividly automobile in [912,..Table 95.3manufacturer, 1932-,- I-I. _ 124.8If 1952___] the closed 157.6plan ' 1.7 terminates 156.4 its 153.9 main | 1974 at United ___ a 211.9time I States .7 when 211.4 plant significant 209.7 in South 1963 ......................... 6,060 19,990 1.664 2,985 5,940 81,035 reserves approached Benefit Longpay -term m ents disab ai ....... lity$12 ........................ rail. dol billion _. 370 and 850 mil 1.7annual 20 1.520 ' 7payments .360 0.000 _!.220 to 12.930 beneficiaries 14,81011 140 .5 0 Nature of the levelsPension used in population Promiseprojections. Security plan's was claim enacted, could COthat bBIITTEE notunreduced beONsatisfied EDUCATION early in AND retirement anLABOR amount benefits sufficientactually to provide [1 913.__ 968 .......... 97.2 1933-_- 135.6 125.6 82.3 1953 60.7 / 160 78.7 2 29. 1 2 7 159.0 37.1 156.6 75.9| 1975 56.0_._ 213.6 2.8 3.6 .8 213,1 53.3 211. 39 4.3 cision-makers, covered under 1969 be ....................... comparable the decision-maker "funding" 133.500 arrangements--that (a) 72.700 the 31.545.608 plan participants 105.400 is, an 25.314allocation 26t,hrough 750,841 of Foreign premiums, Experience Retiguaranteed rement Have ' ................................ Relevance benefits, for mil_ the employer _ United liability, States? _/ and examines CELl are many 30.3 extremely of Insured plans .......... rail. dol._ 80 180 390 729 1,330 1,700 1,910 2,190 2,480 sion plan own fields employees, (for all agree employees andthat TitleCELl who IV of should areERISA then beprovides vested). abandoned. the However, same Financial reinsurance theeconomists increased secur- Nature preserve fied statement, of inarethe PBGC dollars, recognized ing, still Pension remedies and true percentages ObliKation byby while today: requiring society limiting of almost compensation, plan PBGCdaily. termination liabilities. orThepercentages participants insurance. Thus, most of profits, inofthe the pension isbecame funding--when, 1969insolvent 19 .......... 64 ......................... 137.8how, or 84.2 and terminated 61.1by 80whom. .76,71030.5the 20. 373 .8 5plan, 0 77.9 1,650 the 56.5 pension 2.8 3,069 3.5 payments 5 63.6 ,330 38.9 83,400generally totaled Bend, i91Indiana. 4_._$370 99.1 million. 1934__.Thousands 126.4 1954__.Annual 16of 3.0 _ employees 1.8contributions 161.9 I 159.7 were | 1976 ___put to 215.1 out these ] .7of [ 214plans .7work [ 213.0 and exceeded the 1200pen- $2 unfunded liabilities Contributions:exist, there will generally not be enough assets in 20 NoninsurI00 ed plans t____mil, dol._ I00 290 670 47 1.330 _,800 6,03024 8,300 9,310 10,740 12,330 0 for guaranteed 1970 ....................... benefits, 135,900 an insurable 72,700 event 34,737,059 would 108.200 occur. 26.229 The 31.863,381 PBGC would are unemployment insurance--and neither Social Security nor ERISA was federal 1970 ..........tax revenues 140.2 85.9 without 81.3 82.7 a31.5significant 38.1 78.6 56.1 accumulation 4.1 4.9 54.3of reserves. 38.7 I establishment1965 ......................... of higher insured 7,040amounts, 21,060 or 1,66(b) 1 the 3,114plan 6.sponsor 780 87.267through complex, Allwith employees,the totaldevelopment ' ................... bil.of dol__a practical system at best difficult 67.3 and concur and liability ity. stopped theunanimously. These available and HR is 3930 all funded plans benefits als resources ocover over Since contains were arelatively CELl are long lost. prthen ohas visi period ons never equitably few ofemployees, that been time. reduce assigned implemented, Therefore, and the among will "risks"it individual not ifappears attached abeplan the to responsibilities leaving system--employers, [915these _._ 100.5 issues 1935__. should 127.3unresol be unions, placed ved. on the i thegovernment, plan1978:sponsors, practitioners--are since they control all demand- the sion plan plan to provide was 1971 ....................... terminated. the vested The benefits 138.200plan 73.100 had whenbeen due. 38.342 negotiated ,721 This 110,600situation with 27,291 the 37,170.726 may United billion by 1950. Life insurance and 1955___ death 165.9 _............ 1.8, bil. 165.1 dol 168.0[ 1977 ..... 216.8[ .g [216.3 I 214.7 5.1 1971 .......... ReIns serve ured s 142i.6 ................ plans .......... 86.9 61.0 b bil. il. do dol l._ .84 . .1 li_ 32 l .1 2 11.3 738 .5.2 79 18.8 $2-0 .1 2 8 55 7 6,..5 5 3 15.0 40.1 37.1 15. 5 67.8 09.3 55 180 .5 73. .2 4 3 191.7 9.0 58.0 212 67..4 6 thedesigned issues become 1966 to dealt ......................... solve trustee withtheand inSUBCO_I_ social H.R. provide 3930. problems 7I .8I 35Tsuch FEEON 21,71 Points benefits. LABOR of 0 unemployment. rele 1,6S 66T vANDARDS ant 3.322 to considerati 7.210 on91.768 of Virtually no informed discussion has taken place in the United States 1916___ 102.0 1936--- 128.1 1956___ 168.9 I 1.8 ' 168.1 // 166.1 | Jan. I 217.7 i .43 [ 217.3 ] 215.6 1000 the failure to maintain Accidental death and adequate dismembcrment.bil,funding dol._ or an adequate deductible .3(net perhaps 1972 .......... Noninsured impossible. 145.8 plans 89.0 ...... 61.0 bil. dol.8 _6.5 33 6:5 .3 138 6.1 .5 8 33.1 1.7 56 59..0 2 9 4.78.0 117 5.6.5 56. 12 86.5 3 133 9.0.7 145.2 likely (even subject athat well-funded of the further 1972Congress ....................... discussion. plan)will terminates change 140,600 the soon . 75.law 500after and42.888.228 aenact sizable an 113,200alternative. benefit 28.476 41 increase ,595.064 800 200participants. Under defined benefit plans, participants receive defined the The plan. Thefundamental very The nature PBGC'sissue right of confronting pensions to compelsuggests insolvency plans topre-funding. take insurance certainis action Benefits who should stems are be made Auto Under ing worse, Workers 1917.._ more 1ERISA, 03.3 as (UAW) 1937___ of indicated five the 128.8 andsystem. 19 principles 5contained 7___ 1earlier, 72.0 The 1.8 were the 171ultimate .2 if30-year 16established 9.1the | Fob.fate termination funding 1 217._,ofon the .04which requirement _ 217.private 4occurs / pension 215.7 during pension described secur-system 1967 ......................... Health benefits: 8.700 22.330 1.641 3.499 7.594 93.607 1973 ......... 148.3 91.0 61.4 88.7 34.5 38.9 84.4 56.9 4.3 4.9 57.2 38.6 30 i00 I00 I00 51 0 regarding one of_I the most fundamental questions_ in_determining _ a pension 1973 ....................... 142,900 78.100 51,907,100 116,400 29.868 51,459,310 worth). Interestingly, In the absence the of an receipts attempt and /"toCdisbursements lose ret durn to basicof insurance both Socialprinci- Security 600 1974 ......... 150. Hosp 8 italiz93.2 ation s6.................... 1.8 91.0 35.8 bil. 3 dol 9.4 85.9 57.0 5.1 5.6 57.6 38.2 13.3 is "full above. granted, y" [918__. funded 103.2 there 1938 plans __are 129.8being likely 1958___ maintained. 174.9to] be 1,7 Iunfunded 174.1 [ 172.2 With | ovested Mar. ut 1_c217.9 ommenting benefits. I .115 / 217.5 on I 215specific This .8 is what benefits in 1968 either ......................... specified 9dollar .155 22.9amounts 10 1.625or specified 3.565 8.012percentages 95.862 of from earned ity the could depends Some over PBGC's Congress theoretically an of onemployee's the (i.e., whether must early other decide rest: future plans working plan what changes required sponsors') career exactly will employee and tobe ultimate are do. economically paid contributions, Theobligation out Institute in andretirement socially 'stoin research pro- whichsound, bear the cost. Any system of insolvency insurance is, by definition, depressed [919___ securities 104.5 t As 1939__. of end ofmarkets 130.9 year. 1959.._ _ Exclud177.8 esor bteneficiarie if 1.7 s,an 177.1 unusually a175.3 Includes | Arefunds pr. 1 a2 nd 1_.1 large lump s .o7 ums.number | 217.6 216.0of early Concern had Surgicabeen l and regular expressed medical ........ bfor il. doh_ many years by a growing number 8.2 of 1975 .......... 1974 153.4 ....................... 94.8 61.8 92.6 145.200 37.0 39.9 79.300 84.8 55.3 58.906,577 7.8 8.5119.800 58.7 30.854 38.2 58.521,344 If, following a voluntary HE&RING termination, OF a plan sponsor found itself so Phase-in Rules. ERISA provides that only a graduated portion of the tK 593 and0 were the philosophy. federal highlightedgovernmental Thatin.-question "this '''"-"_ bemployee oo / k.is: A Wh plan plans at is terminati are the oincluded npensio benefit n promise? in the guaranty 400 federal Is the en- 1969 ......................... 9,920 24.410 1,620 3.627 8.303 98,012 inequitable. ples (i.e., The risk Givengoals borneofbythe related PBGC in planestablishing sponsors and levels theirofemployees), premiums, guaranteed the " Decisions Source: Maj U.S. or mSocial edicamade l S_ ec ..................... urity in Administration, the next bil. dol__ Socialseveral Security Bulletinyears , Novemberin19the 77. 5.7 retirements happened ease Multiemployer or these in occur. irrational. the amounts Studebaker Plans. wereDecisions 1960___accumulated situation 180.7 While 1.6made multiemployer lS0.0 described inin 178.1employees Ithe next earlier. "plans Iseveral accounts. present / Ini years addition, aHowever, difficult in the theitareas vide after compensation, benefits the career towith employees ends. the Properly, plan covered sponsors under the liability accepting terminated must responsibility plans. be recognizedforwhile the 1978 .......... 1975 15....................... 6.0 96.9 62.1 94.8 148.300 38.4 40.5 78.300 87.5 56.1 64.259.394 7.3 7.7122,800 59.1 32,085 37.9 66.922.707 The PBGC submitted a report to Congress in mid-1978 formally r_om- observers as to how well private pension programs were functioning. While 40 Private i00 employees: .-"i_I_ - _ _ _II00 183.71 _ _0_ 17!m.o1181.11 I00 _0000 0000 i00, _ / _ I 0 200 benefits financially 1that 970 ......................... havedistressed been in effect that 10.580 itunder 25was .520 unable the 1.633plan to 3for .625 meetless its 8.591than funding 98,five 935 obligations, years budget. 19tire 77 .......... pension 158.6 99.always 5 62.8 compensation 97.4 40.0 41.0 90.5 for services 57.1 6.9 7rendered .0 59.0 37.2in the past, or is only solution can be excessive premiums (i.e., risk borne by unrelated financial benefits, resources. 1976employer T....................... emporary disability liability, s I ............150,900 bil.and doh_ 80.700 CELl have 71,594.624 been 126.400 succinctly 33.024 7stated 5,664.649 4.7 by the mending required prdescriptive ovisions,the liberalization elimination areas the challenge, billdiscussed significantl of of they CELl the here y dovesting and -- represent restricts funding, presenting requirements aplan themajor several ability termination, under sector alternatives. to ERISA manipulate on the has United sub- theA PBGC the indicates tookemployee ,58 years however is from working, , that the itestablishment since is time pensions for Congress ofaretheinfirst tothe act.nature pension ofplan deferred to the *discussed [978,disclosure Jan.-Apr: 160.2 here--funding, of 101.5 pertinent 63.3 99.3 plan 41.1 information termination, 41.4 93.2 to 58.2 employees; insolvency, 6.1 6.2 58.7 reorganization, 36.7 the The 197Studebaker 1.......... ......................... s S plan had 10.been 880 amended 26.580 1.5just 78 two 3,5% years9,079before 100.392the plant Source: U.S. Bureau Retirem oen f t the 7 Census ........................ , Current PopulatiOnbil. Report dol__s, series I'-25, Nos. 706 and 724. 29.9 only a small percentage of pension plans had actually failed, a considera- No. 540. PRIVATENONINSURED PENSION FUNDS: 1960 TO 1977 proshall gram: relief be guaranteed. could be sought The gradation, by requesting or phase-in, funding amounts waivers. to For the greater example, the part of 1977the ....................... pension compensation 153.000 83.400 for services 78.710,397 to 128.200 be rendered? 34.082 84.575,800An example plan sponsors) or application of September general 28, tax 1983 revenues (i.e., risk borne by PBGC (in a paper defining the program objectives of CELl) as follows: stantially States private increased Benefitspension paid: vested scene.liabilities For the most underpart, many these plans.plans(In areadefined later 1972 ......................... insolvency, privatization, 11.545 27,400the basic 1,575 nature 3,737 of 9,56the 3 103.976 brief compensation. establishment * asummary basic returnnature of to The of basic the early the of the PBGC first insurance history 'pension s funded current of principles, promise, pensions plan proposal, inand, the ismost so-called rife United important withStates. Alternative the of failure all, The first the of C, ultl- wasTheclosed. PBGC has The submitted amendments a increased bill (S. 1076) the benefits to the substantially, Congress this includ- year ble Society, number z Includesasof Armed represented workers Forces. _did Seasonallbylose adthe justed,benefits Congress, except population even has figure. after determined many years that the of service. loss Fiscal Quarter 1 2 I 3 4 1 2 I 3 4 _= 1 2 I 3 4 1 2 I 3 4 1 12 Iln A mlillions l emploof yeedoll s, _mt.otal Cove i ................... rs all pension fund bil.s do oh_ f corporations, nonprofit organizations, unions, and multi- 47.9 waiver of up to $i0,000 might be appropriate for employers experiencing may make this clear. of (a) 20 percent Note: Data of are revised. such benefits, or (b) $20 per month, multiplied by There 1973 ......................... is no reinsurance 12,485protection 28,700 1,582 for participants 4.030 10.050 in 108,268 these plans the general taxpayer). Life insurance and death l ........... bil. dol 3.6 section by "dumping" Defined is Source:discussed UContribution .S. liabilities Bureau of Labor the Station phase-in sPlans. tics it, Employmand ent Under rule athr nd E o augh rnin ingsdefined , relation monthly. the PBGC, contribution to othis n spons situation.) ores plans, of bene- follows. benefit pension (Alternatives pension employer plans. groups,promise, exceptAThey thoseand mand, anaged are B in bymost established insurance the important comPBGC panies. paper Also through of includesall, are deferred a the not, series profit-sharingasof plans; ofcollec- now, which pension plan incorporates *mate established plans fiduciary financial that aon standards were plan aresource--will funded administered reorganization ofbasis conduct; be foroncritical both program a pay-as-you-go the in for employees determining multiemployer " basis. and the theThe future plans. employ- low of the Fiscal Year 75 76 _- 77 78 79 of these ing benefits pension benefits for past should service. not There be borne was solely insufficient by the time employees in twoin-years Vested rights for workers were far from universal, and the funding provi- Accidental death and dismemberment.bil, dol__ .3 operating 1974 ......................... excludes *Socialosses. l Secu health, rity welfare, AdministrHowever, and ation bonus 13,335 estim plans. ate if M oif nu 29.240 s persons onthe sign (--) whofinancial 1 de .589 nhave otes ever loss] h 4,052 ad _.ove relief red 10 ea.r835 nings.available 108,854 to a plan the number of years (up to five) they have been in effect under the plan. other than the taxing powers of the federal government. ultimate financial resource -- will be critical in * to Heaassure lth benefits: a financially substainable program at reasonable premium being tive seriously bargainingconsidered.) labor agreements between a single labor union and a group outlay fits er's * to higher money inparticipants thefunding wasearly the levels, years Teachers" are directly enticed Retirement many relatedemployers System to accumulated ofinto the promising Cityfinancial of New higher York, re- This This chart bill private shows would planpension also termination strengthen system activity in since the the enactment minimum United ofStates. funding ERISA. requirements for such 150 volved, to build as had 1975up ......................... been *-Beginning the the assets in 1965, case figureneeded s in inclu15 dethe ,195 transl to tpast, iona 3l0,augment /y300 insurand ed 1.pe 574 rthe that sons. Dnew ata 4,130 it represent is pastnumb the 11,230 service er duty insured 1I0.085 alof beginning benefits, the sions for some plans were less than sound. Hospitalization *.................... bil. dol__ 13.1 The phase-in sponsor o Affects concept through the is funding beha anvior obvious waivers of the compromise proved sponsors insufficient, between of pensionthe need further to prevent relief would Levels ofTheGuaranteed funding Company requirements Benefi B hires ts Johnunder SmithERISA at age increased 25. Company the contributions B tells Johnre-Smith, ASSE_[_, RECEIPTS, 1960 1965 1970 1972 1973 1974 1975 1976 1977, oflevels; following year. Table I-I shows the percentage of the past service liability that has well-funded of employers 1976 plans. ......................... determining whose Surgical and employees reguthe lar medica future l16.9are ....... 85 bof irepresented l.31 do ,4l_ 00" the _ private 1.565 by 4pension .184 that labor 12.000 ° union. 113.724 7.4 Con- sources. which began Investment operatingperformance, in 1917. good In 1921, or bad, the inures first directly insured group to theannuity plan plans. pensions. * The minimum These essential vesting employers, points requirements; of after the aplan period reorganization of time, found programtheir setpension forth federal even government though theto funding provide of these the benefits plan wasfromin funds accordance to which withallthe cov-labor AND DISBURSEM ENTS prel. be available Source: MajoSo r ci monly a ed l ica 5el( u'rit.................... vthrough gdmiru_tralior:, HR the 115. bil. d D3930 oe hpar _bankruptcy tment ot Heallh. Edureorganization cation and _,Wellare Data perprocess. tairring 4.5 to The quired under plans many includin plans. g howUnder to fund ERISA, the the defined minimum benefitrequired contribution anti-selection "We have by a pension employersplan"dumping" giving you liabilities a pension onof the $I0 PBGC a month (i.e., for on each year State and 1977 ......................... Municipal Government 19,240 __ Programs 32,500" _00 1,572" 0000 4,288" C 12,500" 117.482 inbeen tributions thisfunded bill include: to at various the multiemployer elapsed timesplanafter are the set liability forth inisthe established, collective * The lowercentral guaranteed system Privatfeature e emp in loyeethe benefits, s: of United Alternative States". C involves a separation of the payments contract increasing was issuedat by suchthea high Metropolitan rate that Life the plan Insurance could Company not be finan- of New participants. theNo "'Mediother care"programfinancial are rto_ includeresources d in thi_ table Data are tot 1available, 977 pertainin K t() coveand rag,_, and Title in,_ured _IV t,Jtusof ered agreement. pension plans As acontribute. result, the The assets federal in the agency pension which fund administers were insufficient this During the 1950s and 1960s, typical eligibility requirements for Temporary disability _ ' ............ bil. doh_ 3.8 all other plan plan sponsor sponsors) would petition by adopting the or courts improving to reduce a pension its general plan and obligations, soon is equal of service. to: plan, are e_tim how ated.If to you investwork thehere assets, until and age whether 65, you orwill not get a pension of $400 Termination insurance under ERISA is intimately tied to the level of Note 1.rota llisnot l_semtt possible .................... to obtain a total 33.f1 or 40 number 59.180 of 9pe 7.r0sons 10 11covered 7.530 126.53 by p0 ension 133.73plans 1 145.1 by66 addin [f_ g}.4 to 14 get1 h8er 1.5_ York. The to concepts provide ofadequate distress protection terminations relative (Section to 106), the needs terminati of onplan par- Retirement 7........................ bil. dol 14.8 SOURCE: concepts ERISA depending bargaining is Pension not (although onagreements. applicable. the Benefit past not Guaranty necessarily service These Corporation funding plans theare timing) period administered used. of (a) Ten-year voluntary by, and funding have termina- their is cially *maintained. minimum funding standards; and program to meet is called the pension the Pension liabilities. Benefit Guaranty Although Corporation there was enough (PBGC). money to pay Cash and deposits .............. 550 940 1,800 1,860 2,340 4,286 2,962 2,199 3,72 vesting for the f gures plans shown that by year.had Each sevesting ries has been were derived separately 15 years and therof e areservice differences inand amountattainment of THE SINGLE EMPLOYER PENSION PLAN AMENIhMENTSACT OF 1983 The United States consists of 50 states. Each state consists of thereafter including a month." to terminating continue those Johnto sponsoring it, Smith the andworks plan, thetheneed I0 to plan; years to some protect and lowerhas plan andearned participants affordable a pension level. whose of $I00 Any a guaranteed H.R. 3930 benefits. U.S. Government Basic securities .... premium 2,680 2,990levels, 3,030 3,690PBGC 4,400 liabilities, 5,533 10,764 14,713 employer '20,1_ ticipants, employers, and creditors; the benefits shortest dupl established icationperiod with PE in RCENT eachthat Oby, series F WORa KE a ndcan RS amon board COVE gbe RED lhe1|vof used arioustrustees series toandobtain also differences consisting a infully definitionoftax-deductible of equal "coverage" numbers tion, and (b) insurable event. Voluntary terminations as contemplated un- * i.prohibition Employer Withdrawal. of plan termination A withdrawing for solvent employer employers, would and be required the benefits to those workers already retired (including the benefits that of ages 40 or Corporate45, bondsbut ................in many 15,700 cases 23,130 29,the 670 28employee ,210 30.330 35had ,029 37to ,809 be 39,070laid 4.5,5_ off or reduction among the sin eries. the In addition, employer's private plans withobligation lile insurance companies to the include plan persons would covered by necessitate Keogh the legitimately smaller month. * normal subdivisions increased Company cost, Bplus pensions of then local tells are governing him, _eopardized "Webodies havebyagreed (counties, a _ustifiable with cities, yourplan union ter- towns, to raise liabilities, and PreferredCELI and com will mon stock.___ all be 11,510affec 25,870ted53,480by 76.060the 81,8amounts 50 80,448 8of 4,842 benefits 94,609 98,1_ that trusts (Section 108) and plan restoration (Section 109), are all consistent der contribution. of Alternative union It is and of interest management CThirty are events to orrepresentatives. note forty notthat, years presently under represent defined permitted the contribution under minimumERISA, past plans, because service the In 1935, All employee the s: establishment of the federal Social Security system A *"funding to plan continue termination method" its is funding insurance. a budgeting for a proportionate process that share provides of the an orderly plan's If this lans. were tax-sheltethe red annuities complete and. after issue, 1974. IRA plans, termination but other private plansinsurance do not include persons would coveredbe a had been increased two years earlier), there was little left for the cur- lose his job Morthrough tgages ...................... a plant closing 1,300 3,380 to4,170 vest; 2,730 employees 2,380 2,372 who 2,393 quit 2,369 could 2,4_ not (, mination. Life insurance and death 77.3 o Affects the sponsors' balance sheet, the valuation restructuring of the plan's liabilities to its participants. or villages), they thpension ese plans.often fromcollectively $I0 per month called to $20 municipalities per month for or each localyear govern- of work. are guaranteed* to by minimize the PBGC.abuse; Judged Accidentaagainst l death and disme the mberment consensus ........... reached in that 1979 meeting, 57HR .6 3930 they funding involve requirements the loss under of benefits ERISA, in whereas a pension interest-only plan which funding would continue was the accumulation greatly * a plan unfunded expanded reorganization of funds vested the idea during liability. of procedure, apension worker's planning employment and created to provide a floorbenefits of pro- relatively rent work simple force.concept. EmployeesHowever, within there a fewwould years beofnothing retirement to prevent lost about an 40 entire proceeds can be invested in securities of the plan sponsor. In- get a benefit [Receipts unless L ........................ they were 5.410 eligible 9.280 13.200 20.070 to retire. 19,670 21.0co0 26.Many 583 (NAplans ) (NA) had no Note 2. tHealt heseh dbenefits ata represent : various da 0_ tes 0 during the year _0_00. since the fi_c _00alyearsof the _ plans are not_m necessarily of corporate securities, and the conditions of * 40-year funding of pre-ERISA past service costs, plus ments.Therefore, Each state if you and continue municipality to work hashere certain untilrevenue age 65 raising your pension powers, will be with bringing Employ greater er contributiostabilit ns ........y 3,520 to the 5,600 PBGC 9,720 12, and 740 the 14,370 pensi 16,970 on19,8_')8 system. (Nx) (NA) minimumPrior past toservice ERISA, requirement multiemployer beforeplans ER_SA. were Using generally a 6 percent considered interest to be to be maintain the same. ed T 1r los ends by pitalization fromthe year ....plan to year witsponsor. hin each series areAlternative not affected. The number C recognizes of persons covered inthe clude 72.2 real- when deed, tection. due--the the Congress Contributions accountant's of the were United concept paidStates into of the matching has fund indicated, starting revenues through inand [937, tax expenses. although legis- percent The of first theirprinciple, pension. disclosure, Younger employees requires lost plan their sponsors entireto pension. inform employer from establishing a high level of vested benefits in a plan, vesting before Employereaching e contributions retirement ........ 480 6age. 70 1,070 In 1,200short, 1,270 from 1,460 1,604 1950(NAIthrough (NA) 1974 __ __ _ _ -_ The mergers actual Surgical and scope acquisitions; of such restructuring of plan benefits 70.would I be a within$800 surthe vivors a month, limits or dependentsbecause established of deceasednot workonly ersbyandwill the beneficiaparticular ries your as wfuture ell as retiredstate. service workers. Retirement be An credited importantat the 100 The compromise, particularly the $20 per month minimum for each year, Two areas Inves to of tmenminimize tmajor income concern .............administrative 1req ,260 uire 2,390 attention 3,8complexity; 70 4,300 4,84 in 0 the and 5,980 legislated 6,703 (NA) (NAlevels ) whoity would pays of the reduce benefit bill?incentives losses (which for sponsors can occur to terminate today when underfunded an employer plans. chooses Among lation, rate, definedthe that contribution table itRegular enthusiastically shows medical__ plans that in during thesupports the sensefirst that Employee I0 eachyears, Stock participating the Ownership liability employer 69.5Plansis Ordinarily benefit 2. Plan payments this Reorganization. does didnot not create beginA plan until problems would 1940.for be As aconsidered continuing a result, inaplan. afund reorganiza- was Pension creat- participants arrangemen of stheir for memberrights s of the armed and forces, obligations and provisions for veteranspensi under othe ns, areplan not included. and Persons to provide terminating the plan, and walking away from his responsibility, with the employees had Net prlimited ofit on sale of asseguarantees ts ...... 110 that 570 --1,590their 1,720 pensions --920 --3,480 --I,659 would(xA) be {NA)paid if by-product Majorofmedithe cal ......... bankruptcy proceedings. If the adjustment of 36, 7 debt left seems aspect to *$20err of 30-year rate, our on the but system (40-year side the isnew offor that excessive rate multiemployer the willfederal employee apply to government plans) protection the past funding has I0ifyears of no there control post-ERlSA that is to you or have covered by private l_lans and many persons covered by l_overnment-administered olans are also usually of guaranteedContingent benefits. liability The firs (Secti t is on early lll), retirement funding waiver benefit liens s that (Sectiex- on more than ten times better funded on the 10-year period than the 40-year to underendwhich his tion obligation employees Pri state vate employees if : contributions obtain to further an ownership fund were any notposition plan sufficient benefits--colloquially in their to amortize employer theby costs, Ihad ed / from Pension noasobligation which a percentage Plan benefits Termination beyond ofwere compensation, the paid. Insurance: requirement In can theDoes early be that the predicted it days Foreign meet thefor the Experience fund a contributions plan and incoming within Have PBGCthem and,with There therefore, the are necessary two the points economy information of interest in general to here. make "holding proper, First,theinformed the bag." loss decisions. In of pension its covereDi d sbursements by Social S................... ecurity. Data for "Other 1,370 Priva 2.880 te Plans". 5.180 compiled 8.490 by 9,540 the Social 11.030 Security 12.597 Administration (NA) I ,NX_ their plan terminated. _ oo theo past employ Affects Temporary service er the obligated disabilit decisions c yosts, plus forof at employers least PBGC-guaranteed and employee benefits, 47.5 then the beauthority a viable ! been over here." reinsurance _most If taxes John program. _1 levied °°_°°_°°°°°°°°_ Smithby If isthe there vesstates tedwere (and onnotheir hephase-in probably _ citizens. _il of is), benefits his vested ceed the actuarial * Ben to efitsbalance paidequivalen _out ............... social t of 1,330 andthe 2equity ,800 accrued 6,030 considerations. 8,300 benefi 9,310 t 10,740payable 12,334 (._A)at (_:A_ normal fully R--elevance funded excfor ludeplans plthe ans forUnited the(on self-employed a termination States? those havi(Washington, ng vested basis) benefits HR but not3930 D.C.: presentlwould y employed Employee not at thefully firm Benefit whereneutrali Research ze means period, required of and abydefined that the it labor contribution takesagreement. over 20 plan. years Since The on these Congress 30-yearplans funding has provide alsoandencouraged specified about 30 referred contributions to as Loa ng-ter were "freeze") m disability sufficiently and redefines large to the maintain notion the of benefits voluntary ontermina- an 17.6 actu- a relatively unfundednarrow vested range. liabilities Problemsforsometimes benefits arise, in pay however, status over when I0a attempt Fiduciary benefits Titleto IVinhibit standards occurred of ERISA such despite assure looks conduct, first employees the fact the to the Congress that thatplan they thesponsor created Studebaker will beorthe treated sponsors, Company fundamental equitably met in- i_s Expenses and other ............ 50 90 150 200 230 ".>90 263 (NA) (NA' benefils were accrued, and also exclude an estimated number who have vested benefits from emp oyment plan might Retiremcontinue--for ent example, as a frozen plan--even though 46.2 a loss of pension representatives has suddenly regdoubled arding the from type $I00ofto retirement $200. When was the additional for five years, or longer, the funding of pensions would be encouraged by 112) and the evasion screen (Section 114), move the program in this same re tion. tirement age. The second is the existence and application of the phase- Institute, 1979 Net rece) ip. ts ...................... 4,040 6,400 7,02(} 11,580 10,130 I0, 030 13, 9S,6 (NA) {NA) the benefits establishment to participants, of defined the contribution Congress included plans for multiemployer self-employed plans individ- within company years ariallyonhas years, sound other 40-year overall lhan basis. plus |romfunding theifinancial ramortize current This, to employment. fund together problems, the 00000 even remaining 00000 with half or in of the unfunded 0000 cases the factpast where that vested _ service _the the_liabilities official work liability. force name and fairly and that the pension funds will be used solely for their bene- cluding 30-year all corporations funding obligation with common to theownership plan. Second, (i.e., the scheduled controlledcontributions group issue that complicates Title IV--employer liability. Employer liability Some pension plans were insured. To the extent pensions were pur- PERCENTCO _ NTRIBUTIONSOF TOT 00000 ALWAGES AND 00000 0000 _ _ non-guaranteed income planvested to establish benefits and maymaintain. have resulted. Future payments to the inparticipants. rules.$I00 * "Estimat 15-year earned? ed. This(20-year might Was it beforearned reflected multiemployer the ininstant theplans) willingness the funding increase ofofwas both experience agreed labor to by Employees of state and municipal governmental units may be covered by Relation to Funding uals against and adverse those individuals selection. SALARIES whose A lidfixed employers premiumdoincrease not provide to $6.00 a pension (Section plan, 103) isTitle declining. IV of ERISA, so that, theoretically at least, the Participants in concept). of the over This Social 25 NAcontrolled years. NSecurity ot available, (Assets iAct group Book valueis , would concept endthe of year. "Federal be 2has Inapplied cludes been otherInsurance items first affirmed , not shownto sand epadetermine ratein ly. Contribution federalthe givesfit. under the Under the PBGC plan the mostexceeded right plans,to the ERISA recover 'minimum s vesting from funding the standards employer requirements up guarantee to 30to percent bean prescribed employee of chased from and guaranteed by an insurance company, they would be paid. plan i'lgains nccould ude All s em membe ploye and be res: s losses, ofmade the U.S. Civi under plus l Service Retire themenminimum t System. the Tefunding nnessee Valley Rstandards, et_rem('nt 5_stem. thewithout PBGC and management Company Btoand allow the some unionof , or the ispension it being dollars earnedtoratably be usedover to ensure John Smith's locally adopted governmental retirement systems either supplemental to or stabilization direction. And, for all plans, the specification of all actions Minimum multiemployer Funding Sourceplans :Requirements U.S. Secuhad rities andthe Exchangesame Commission reinsurance , Statistical Bulletin, provisions monfhly. as participants A voluntary Foreign Ser Lifevice termination insurance Retiremand ent dea Sy th stem,would and the Retioccur rement Syunder stem of theAlternative Federal Reserve Bank,C ...65 whi when r n .in(: 63the ude,, .65plan District again with Act," II years through atCourt has unfunded least later ledtax (PBGC I0 most by vested legislation. years law v. people (ERISA). liabilities Ouimet of service erroneously Corporation The for Congress that benefits to heand view will hasothers), in not Social be pay provided entitled status.) Security but the any to as areinsur- issue benefit insured the Under employertrusteed 's net plans worth and to offset, certain ininsured part, the plans, costhowever, of benefits employees paid bycould involvement. The publication,On the drawing other upon hand, foreign if the experience, settlement with indicated creditors that: arising 50 the BankAcc Pla iden n tal and dea thethBoa anrd d dof ismGoverno embermenrts' P ............ la\ n. 04 .04 .04 theexclusive payment expected of of coverage future the pensions working under promised the years? Socialrather Security than system. just to That increase is, state, the - __ _o_ _ 6 _ _ It is natural to relate termination insurance to funding. Funding willEarly significantl Retirement. y increase The PBGC the approach pure subsid on yguaranteeing of the PBGC by earlythese retirement plans. isinamended single to employer provide defined that future benefitservice plans.willInnoactual longerfact, be credited however, for the ance and program actuariallyfor Health sound, be such nefits. plans, and to however; expect a the relationship plan participant between 3.02 their assumes 3.11 3.contri- 45 the starting at normal retirement age {usually 65), regardless of the age his the hasReasons not PBGC yet asforreached a Insufficient result theof United theFunding plan States termination. Supreme Court. The United An interesting States Court side- of look only to the funds already accumulated for payment of their pensions. :llncludes persons employed with coverage in effect at year-end including the self-employed, worker', retired out of bankruptcy proceedings reduces the employer's obligation to less benefit *level. 30-year PrivateThis employees funding *would : The vbe iews of beneficial gains expressed and toilosses nall thisphases resulting statement of society are from changes involved in county, and municipal governmental units participate in the Social Secur- benefits after September is to compare 20, 1983 the asactual fallingearly-i within mmediate SEPPA'spension purview with limitthe theactuar- likelihood entire Before pro investment vides for agERISA, e othe r disarisk. bilitfirst y,the depende minimum source nts of retiredto required workers pay andbenefits--plan sur contributions vivors of deceased worassets. kewere rs who are equal rece Termination iving to the in- any effective purposes.dateAsofa part the application of the voluntary of Title termination, IV to multiemployer the plan would plans also has butions (a) and Aexpected Teplan mporary in disability benefits reorganization similar could to thebe relationship amended to reduce between .71 .73 accrued premiums .75 Appeals light employment is (in whether Nachman terminates. United v. PBGC States This and law UAW) avoids canupheld reach some the of beyond the rightpre-ERISA theofboundaries ERISA horror to subject of stories the In the opinion of many pension experts, the Studebaker closing was The allocation of the available funds also could vary widely from plan to periodic Retirement benefits. .... those of the author and do not necessarily 3.82 4.14 4.73 with athan pension actuarial guaranteed Historically, plan-- assumptions. benefits, the workers employee, thenhave an labor, seemed insurable thetoempl feel event oyer, that would and itoccur was the earned gand overn- theinstan- PBGC ity system on a voluntary basis. ial equivalent surance provides of the maximu the msecond. benefit Although payable pension at age actuaries 65. The higher have been of aware Provisions in this bill for a CRS premium study, and movement towards a normal cost plus interest on the unfunded past service cost on a cumula- bebeen amended deferred to three eliminat times, e supplemental most recentlyanduntil ancillary May I,benefits 1980. for which UnitedandOccasionally, States proceedstobenefits from foreign due an derived insurance parent to thesecorporations. from financial company. employerproblems contributions or for other to thereasons, level ofa regarding employees with 20 or 30 years of service who did not receive a employers the single to liability most significant for®_the factor payment oo_o leading, _o_oo of vested first, o_oobenefits. to_ the._ passage A _ separate of ERISA plan, depending Source: Compile(on I bthe y the Am rules erica() Coot)oil of the ol Lileplan h)_uranceand the Internal Revenue Service ment. would step in to make up the difference. taneously. Z _ thanCertainly $,5reflect 0million. the the vSouth iews oBend f theemployees Employee Benefit at Studebaker and others that sponsors will take action now to avoid the law's consequences. these tive tbasis. of wo the amounts problem As shown is guaranteed. ofintermination Table I-I, Therefore, since past service the the advent value costsof ofwould the pension plan not'splans, beguar- amor-no ade- various plan participants_ had o_not o satisfied _o_oo all _oo the requirements (e.g., Defined Benefit Plans for Single Employers. Under defined benefit plan--voluntarily benefits or involuntarily--terminates. guaranteed by Title IV. When this happens, even pension and, second, becauset Incto lude they sthe groupleft and inclusion whothe lesale lifecompany insuof rance termination butprior excludes Service to men's retirement insurance Group Life Insuran(voluntarily in ce program. ERISA (Title or District Court decision (PBGC v. Ouimet Corporation and others) held that (IRS) regulations. Some employees would receive their entire pension, o adverse selection ResearchisInstitutte, inevitable as itsloTrustess, ng as the sponsor ERISA requires the enrolled actuary to maintain a funding standards who As in have =the Includefelt scase personsvictimized covered of federal by group comprehensive bygovernment the major- "broken medical systems, insurapromise" nce as well asstate thosewould with basic andbenefi agree. municipal ts. Perhaps anteed variable early raterepremium tirement offer benefi sponsors t can the be hope significantly for equitygreater in the future. than theSince tized quate on an solution interest-only has asbasis yet and, been inbrought this case, forward the other continuation than accelerated of a death and A joint disability board of benefits). trustees tested the application of Title IV of ERISA in plans, plans Byparticipants that 1940,have the private been receive in pension existence specified system for benefits many in theyears, upon Unitedsatisfying plan States assets covered specified may not more otherwise) IV). Since the orfirst •Includ the esfinancial plan private hosp was ital pterminated lans resource written in coiis npliashortly ncethe with plan Statebefore temporary sponsor, dthey is ibility am inwould suranceinterest- lawhave in Cali- been employers under common control may be held liable for the employer liabil- some would has receive the discretion a portion of to terminate it, and some a plan. employees That would is, receive noth- members, or other staff. Isaccount, HRReorHanization 3930 to A Good determine Solution? for Troubled the required Plans contributions, and to certify to the the employer is remiss in not letting the employee know that the employ- government fornia. programs 4 Group suare pplementary financed and comprehenby sive local major-medicaltax insurance revenues. written by commerciSome al insuranof ce these value of funding the plan or 'conversion s guaranteedto anormal definedretcontribution irement pension plan.if the maximum plan to multiemployer was an absoluteplans, necessity contending to ensure that payments such plansof were, benefits. in fact, In effect, defined age and (b) service A plan requirements. in reorganization The important would be required issue then to becomes fund at how a lev- the beeligible than sufficient 4 million to retire. to persons provide (out the vested of a total benefits. population Threeslightly circumstances more than that130 ing ity question under a is pension where companies. plan the _ Include obligation of s priva a tebankrupt plans wrfalls itten in affiliated comp with liance witl respect l State company temporto ary dother isability (i.e., inscreditors urancewithin laws in ing. Companies were not legally required to guarantee pensions. Occa- PROBLEMS WITH termination TERMINATION of plans INSURANCE that are either overfunded or er's true intention is somewhat as follows: Internal Revenue Service (IRS) that the assumptions used are reasonable. programs are well-funded, using sound actuarial principles, while others California, llawaii, New Jersey, and New York; and formal sick-leave plans. Excludes credit accident and health 1-5 6-9 10-25 26-49 50-99 ] 00-249 250-499 500 or limits contributions employers contribution do nothave apply. plans onvolbehalf untarily and thus of established younger not subject workers defined to Title were benefit IV helping ofplans ERISA. to this payThe"hope" thefederal past may be financial An insurable resources el sufficient event are would to to be occur amortize provided coincident by unfunded the with, plan vested sponsor or subsequent liabilities or sponsors. to,ata million) receiving annual benefits of $140 million. Pension reserves to- can lead to an insufficiency of plan assets are: depressed value of in the a"controlled liquidation ingroup"). surance situation. . 6 Long-term di.c, abi Will lity policimortgage es included in temholders, porary disability. bond 7 Includeholders, s pay-as-you-go and and sionally a company would undertake to provide pensions payable to the underfunded is more likely with a guaranty program; more are handled Plan as termination a direct does "income not transfer" often occur redistribution "out of the blue"; of current the signs tax of ::::: ::::: :::: - o_ _g There deferredwere profit-shaman ring y plansat , plans the for nInstitute's on-profit organizations, 19 unio7 n9pensforum ion plans,who and raibelieved lroad plans supple-that the The PBGC is, in effect, the reinsurer of pension benefits, with the voluntary service taled $2.4 benefits termination billionof when in pensioners. 1940, the employer one-fifth Undersponsor ofcertain whatdemonstrates they funding wouldmethods itsbefinancial tenbefore years Supreme CURRENT Court STATUS affirmed OF PENSION(inPRthe OGRAMScaseINofTHConnolly E UNITED v.STATES PBGC) that Title IV of assets, early the retirement, amortization and past periods service. used to establish a reorganization other preferred The restmcreditors eritin of g thethis Fcderalbe rapaper ilroad displaced retirewill ment progra deal by m. a Excludes higher primarily plans forclaim? the self-with employedEven the and tax-more remaining sheltered dras- annul- two extent the pension fund was insufficient, but this was a voluntary act, i_ °° _._ The trouble Each preceding year are visible thesection funding before identified standards the plan some account termination of the is charged proactually blems with with occurs. the termina- minimum An anal- revenues, without liPs. RccWe tirenlentaexpect cosignificant verage e._tilour uatt_s exfuture cludeaccum annuitants, uprofits latioan Includesof to datareserves. be for suppl satisfactory emental unemployment asin- a In determining the funding requirements for a plan, actuaries common- ERISA, enough pension experience to offset trustcurrent gains the primary could cost be incentives insurer. used as for As a direct atermination. reinsurer, offset the against And, PBGC by the thus continuing next provides ERISA later. Prior does tonotERISA, apply the to multiemployer tax laws were plans, used tohowever, encouragewhenadequate and if coverage funding inability to provide the guaranteed benefits to which participants are state, subject Size of toPlan some(Number adjustments Of Participants) (e.g., to reflect a tic,prlnciples--fundin_ perhaps,o is because surance whether Iwnefits, of standards the not unpaid shown adverse separ wages aand tely, selection plan will iIncludes termination be datawhich displaced. under long-term results insurance. disabilit These yfrom policies,are The tomajor For allfirst not required by law. required ogy may contributions be made to bankrupt to thecy_a plan and company credited 's becoming with the bankrupt actualwithout contri-signs tion insurance under resultERISA--namely, of your continuing (a) thetoviolation work for of us. sound Therefore, financial elnployt_s, coverage and contributions relate to private and government full-tilne and part-time civilian elll- lyPBGC isassume_and allowed shouldto beexperience become eliminated effective. bears alongthe with m ouan t-- ytha form t of onlytermination some of the guarantees. employees There excess coverage over the available assets, plus a deductible related to 30 and year'the s contributions. accumulation of adequate reserves. The plan sponsors ° financial declining contribution base during the remainder of the term issues threenotprinciples as yet tested are designed in the courts to ensure nor that understood all employees by most who Americans. are eligi- Federal Government ploy(_es and payrol ProKr_ms h for private cmployt_s, to wage and salary full-time and part-time labor lorce and payroll sponsor control of the termination event, premiums will butions made. If the charges exceed the credits, a funding deficiency and insurance of troubleprinciples, first appearing and (b) as phase-in a warning and early is theretirement exception,aspects not the of rule. Title IV of we ERISA promise is specifically to use thesenotfuture applicable earningsto these to payplans. for As to allow voluntary in private industr termination y. (Section I05) "fully" funded plans are not given eligible to retire early in any year will elect to do so. When a plan is contributions percent of werethetax netdeductible, worth of the provided plan sponsor. that soundIf actuarial a defined princi- benefit plan of the establishing collective bargaining agreements). bleITento percent pension ofentitlement the past service actuallybasebecome is about entitled 16-yearto them. funding on Funding 6 One large have to union be much took_I higher the °°_ posi thantion originally that funding expectedwas andnot willimportant Source: U.S. Social Security Administration, Social Security Bulletin, November 1977. the benefits that are guaranteed by the PBGC. Other critical problems exists and the plan becomes subject to additional taxes and penalties and SOURCE: in the Pension caseBeof nefit your the Guaranty federal increased Corporation programs, pension,there as well is noasreinsurance your increased protection terminated, are man terminates y toda howy ever, who at still athe timenu feel mwhen ber that the of wa early assets y. Most, retirements are however, not sufficient cantake be the expected toexistence provideto all of of ples The were secondfollowed financialand resource minimum contribution is the PBGC. levels But the werePBGC met.is Prior not a to standards The Social and termination Security system insurancein the are United designedStates to ensure provides that a minimal those percent provided interest. the employers Ten-year were funding contractually of the past liable serviceto cost pay on pensions 6 percent to the grow continuously; is also required to report this occurrence to the PBGC as a reportable have been The recognized analogy wages by •" with thebankruptcy PBGC and have may been be carried reportedonetostep the further. Congress Just for participants in these plans beyond the ability of the local govern- increasethesignificantly. guaranteed benefits This is under especially ERISA, the true PBGC in the (as case agentoffor a complete all other plan ERISA, these plans could be terminated at any time. Most plans provided *Presentation (c) Benefit given levels byapplicable George B. toSwlck, past Chairman service could of EBRI not 's beResearch in- source interest employees ofisfunding. about who are 13.6 Itentitled percent has no to resources ofpensions the base. other actually than receive premiums them. received from level of retirement income. Benefits are provided free of tax, except with event. the reco If mmendations the credits that exceed changes the should charges,be the madenetin credit the law. balance Stillis mental as Chapter units toII taxoftheir the citizens. United States federal bankruptcy laws provides an the program as a given. If it is, then both the public interest and sponsors) creased must until pay these all reduced unfundedbenefits benefits. have If beentherestor plan ed.had been better Committee. 2pension Assistance Benefit Guaranty in the Corporation. preparation ofContingent these remarks Employer was Liabil- given by that employee Social Security taxes are paid from after-tax income. The brought forward with interest. At any time, the net credit balance indi- 8 ity David Insurance: H. Gravitz, Status Consulting Report to Actuary, the Congress. Buck Consultants, July I, 1978. Inc. cates approximately how much extra contributions over the minimum required 29 L EMPLOYEE BENEFIT RESEARCH INSTITUTE 3O 28 27 13 9 25 12 2121 K Street, N\V Suite _¢_0 \Vashington, l)t 26 200_7 ]elephone (202) e,59-0670 6 215 3 19 20 24 21 I0 14 16 2.2 18 17 .;

Volume T-24

Pages 35

EBRI Testimony

Sept 28, 1983

Dallas Salisbury

Financial Wellbeing Retirement