EBRI
EMPLOYEE
also show that participation rates among those not covered by an employer pension plan
income. Thus, this chart may understate the contribution to retirees' income of assets
BENEFIT
RESEARCH
_i_¢_ _: _ T- # 103
are lower (6.3 percent) than for those with a plan (9.2 percent).
1. What is the relative efficiency of tax expenditures for IRAs and for employer-
INSTITUTE
E
built up in pension plans and IRAs.
Testimony of Dallas L. Salisbury
President, Employee Benefit Research Institute (EBRI)
o
provided retirement benefits?
O
Chair, American Savings Education Council (ASEC)
3. In addition, please provide information concerning the extent to which funds
113
5. Is all income that might be attributable to assets that were once in an IRA
Member, National Commission on Retirement Policy (CSIS)
"S _L o
The government publishes tax expenditure numbers (current revenue not collected
E_
0_. c qa _ _- o_ h-- o_ _D ,_- G:) _- cq _o _ _ I 1_ o_ (D _ (N(D _I_ _ _ "_
O LO ¢xl LO'q'_ LO_I-_ OO(D CO _ (N
currently held in [RAs consist of amounts "rolled-over" from employer-provided
reported as IRA income? Senate & Committee on Finance
Statement Before
'-- E G)
due to tax deferral on contributions and earnings) on different programs, including IRAs.
March 6, 1997
retirement plans upon a change of employment status.
•_ _O
The U.S. Senate Committee on Finance
• _'Q _, _o o _ q _co._o_--__-_c:) _ _No _ _.o _- _ c_ c_ ._-
How does IRAthis assets nwnber frequently compareturn forinto licks asset relative income to during employment-based retirement, with defined the result benefitthat
Mr. Chairman and members of the Committee, my name is Dallas Salisbury. It is a
How much money is now in IRks2 ttearing Tableon 2 shows IRA and Keogh assets for
_6
and the income defined is contribution not reportedplans? as coming The tax from expenditure an IRA. Table for employer 4 provides pension a more plans explicit in 1995
G3
E
Individual Retirement Accounts
1985 to 1995. Total assets at the end of 1995 were $1.220 trillion.
pleasure to be here this morning to discuss issues related to retirement q_ income programs
O_
-
was: breakout $29.8 lbr billion incomefor sources federal,and state, theirand amounts. local plans It shows (these that plans 1 percent had about of today's 23 million retirees
O_
o _o 8 o_ _
CB_
o. co
in general and individual retirement accounts (IRAs) in particular. I ask that my full
G) -
report income from --- an IRA/Keogh or 401(k). Chart 2 is intended to put this number >_ in
J
total participants, and 16 million active participants); $14.8 billion for private industry
How much of this is from direct contributions as opposed to rollovers from
cO _ p-.. co co c3 _ c3 ob 1.13e,.o J[3
hE
stibmission be made a part of the record of the hearing.
tu-_ oh co co co co _" _" r_ co co c0
pcrspcctive as it shows the high proportion (46 percent) of total benefit payments now m
plans (these plans had 78 million total participants and 57 million active participants);
employers qualified plans?Testimony Table 3 shows of Dallas data from L. 1987-1990, Salisbury the most recent years
0_
President, Employee Benefit Research Institute (EBRI)
•- c ___ E
the tbrm of lump-sum distributions. Chart 3 shows that 54 percent of lump-sum
and $7.5 billion for military plans. The IRA tax expenditure was $7.7 billion (there are
Chair, Amcrican Savings Education Council (ASEC)
for which the tRS has made these data available. For these years, 76 percent of all new
t_ _ 0 O0
oo _ --
P
Member, National Commission on Retirement Policy (CSIS)
The mission of EBRI is to contribute to, to encourage, and to enhance the development of
-- 0 _ _ _ -::1- P.-- _.o0o qDcOoN- oOh-- 01_0,1 G3 0_1- -_" C:3 _ CO •
_o .o.. co ,::D
an distributions estimated are 60 million rolled over IRAs, into with IRAs about and4.3 shows million a rollover with new action contributions by 30 percent in 1994), of those
contributions to IRAs was fi-om rollovers. Our best estimate is that more than 80 percent
sound employee .= a. _ benefit < programs -_- and sound public r---S policy through objective research and
who get a lump-sun1 distribution.
and $3.3 billion was attributed to Kcogh Washington, plans (in 1994, DC about 1 million self-employed
of all IRA assets are from rollovers and the earnings on rollovers, as compared with pure
_ 0
r- N
education. EBRI does not lobby and does not take positions for or against legislative
o,_.- m
individuals made a contribution to a March Kcogh plan). 6, 1997
IRA contributions E,_ and earnings. P
m< -- _ E S
ca toO------ (D
proposals. ASEC's goal is to make saving and planning a vital concern of Americans and
-- 14-
03
6. What is the average direct employee contribution to employer-sponsored
F--_ m
23 _
4. How big a source of retirement income do IRAs represent today?
recognized _'_ by employers _ .- as being in their economic interests. The National Commission
Q_
401(k) plans and how does this compare with the IRA $2,000 limit?
2. It would be helpful if you compared participation rates for IRAs with
o of r0
r. ,.o 0.. _ _ ..... <:
0 _ I:::
R:D (XJ _ _ C _o_ ¢_fY
on Retirement 0 °_0 Policy _isc a newly fornled group that will assess the state of our retirement
Retirees depend primarily on Social Security. Pensions play a large role for the
employer-provided plans.
Table 5 shows our most recent data, which is for 1993. The average employee
=_ _ _ co
0 _'I::_ *_o o_
system and recommend adjustments to strengthen retirement income security prospects.
w
top contribution 20 percentacross of retirees all firms by income. is 52,681 Chart per participant. 1 shows sources of income for current
S _o -_o _ _ _ =_ -_ _o_
-- q) _ O _::_ _a'-- _ R 09
Do individuals participate in IRAs as readily as they participate in employer-
t-- LC) _ G)
_= o__> o__._>$._'6 E _ <_ E_ --
_ _ _-_--_ ._ _> < .._
retirees. Income from IRAs is reported here with income from pensions, if it is still
o _ soo_ 0_ __< _g ._=9_ - _oo
The views expressed in this statement are solely those of the author and should not be
offered plans? 1RA participation rates have been low relative to employment-based
I was asked to comment this mol-ning on the relative role of IRAs in our retirement
attributed to the Employee Benefit Research Institute, its officers, 0trustees, sponsors, or
coming 7. Do from contri an IRA. butions Many to retirees IRAs add take tomoney nationalfrom saving an s IRA ? or a lump sum distribution
other staff. The Employee Benefit Research Institute is a nonprofit, nonpartisan, public
c_ c