q7 2 6 5II 3 12 I0 ? 9 Chairman Jones and Chairman Pickle, it is a pleasure to appear before you Sun also provides health insurance to retirees and a modest amount of life One is a defined benefit pension plan, the Sun Company, Inc. Retirement Plan, it The How IIn would would the can second we short-term, not say define tier surprise that of"adequate" our benefits themeretirees, main if more retirement may effect be ofassomewhat our of a income group, retirees tax policy "esecurity? xotic," are in is very thethat onfuture satisfied the is, way won't benefits plans with wantthat the are to the basic purpose of benefits, which is to provide economic security. This is changes in mind. For one thing, we are experiencing more mobile employees, today representing the views of the Sun Company. Your efforts to look at insurance. After retirement, there is an automatic 50 percent spouse's designed. especially true of retirement benefits. engage which aren't standard provides absol in of some utely livping afixed idnecessary that work retirement they after forhave retirement. theincome inprovision retirement, and of serveconomic esbased as uthe pon secuprimary rity. their careers source with of who change jobs more frequently than the traditional career employee we have public sector and private sector programs are very important. As I hope to pension provided. retirement the Sun Company. benefits. In Our Julyphilosophy 1984, forisexample, that a retirement one of our plan retirees should testified provide As we see it, adequate retirement income is a shared responsibility of the attracted in the past. We are asking ourselves whether we need to provide a APPROXIMATE RETIREMENT BENEFITS TESTIMONY make clear to you today, I believe that the U.S. retirement income system has abe federal In£stream ore the %he government, long-term, ofSenate income Fin however, employers, inance retirement. Committee. adverse and theTherefore, tax John individuals legisl W. KaFiebel, tion thethemselves. Suncanthen Company affect age plan 7not 7, testifled does only :lot the In These the programs future, Ihave thinkevolved we shaover ll seethea years return for of aemphasis number of by employers reasons. and At one by As retirement far as the arrangement company that itselfwillgoes, permitSun a has more evolved rapid pension a basic accrual philosophy for these with AS A PERCENTAGE OF EARNINGS AT RETIREMENT OF been a remarkable success. But the system could nonetheless be improved if The amount of money that Sun spends for its retirement benefits is allow how employees design his lump-sum ofretirement toa the pension distrib basic benefits utions plan economic but from allowed also security its him defined the to benefits. type successf benefit of program ully If plan. Congress overcome and even is adetermined year-long the very respect time or toanother employeetheybenefits. have beenItpro belie vided ves bythat enlightened benefits management, are part of and totalat mobile workers. We are also trying to understand what the implications of HARRY G. SMITH there were better coordination of our various retirement income policies, and substantial. In 1984, for example, for an average of 13,350 active employees, The battle to existence change Sun with Company of theacancer program. tax believincentives es at the its In other career Sloan-Kettering for words, employee employees the benefits Hospital decisions should beinin made provided connection Newby York. this enoughCommittee with And income tax he compensation other times, and no doubt, that companies in the aggregate, have been pushed this compensation along by strong should unions, be more second careers, and more two earner couples mean for the target Percentages of Earnings at Retirement SUN COMPANY, INC. for that reason, I conm_end you for your endeavors in this area. Sun paid $29.7 million in F.I.C.A. contributions. Our defined benefit Social pension compared the administration of his benefits at Sun with the unfavorable could have very serious long-te[_ implications for the future of American The competiti to reform, replacement federal support other vethen legislation, plan ain rates comfortable I our isdon't weaindustry have defined socioeconomic disagree set. basicand contribution lifestyle with in ourfactors, yourgeographic and capital making that andaccumulation the changes areas. employees' employees' in Sun plan, some believes expectations. ownwhich ofsavings these that is Percentage Sun Company, Inc. Security expense was $32.8 million. The company's contributions to the defined society. of Employee Retirement Plan Benefit Total called benefits experiences should provide "SunCAP". whichhe aren't the hadThis additional with absolutely planthecombines amenities publicly necessary. BEFORE a of administered cashlife. or deferred In designing Medicare arrangement program. our retirement 401(k) "The these Today, the benefit Unitedprograms States has should an excellent include system plans of for employer-pro retirement, vided benefits capital Earnings Population at Benefit Payable Payable Retirement Previous witnesses, in particular Mr. Dallas Salisbury of the Employee Benefit contribution plan was $18.4 million, while employees themselves contributed an as a result. at accumulation, with private benefits, Retirement a sector thrift Sun premat aims can plan uEarnings re toadminster feature replace death, Level which medical these 50-55 programs together percent care, atdisability of beautifully," age propreretirement vide 65 income, for pre-tax heatincome paid said. age time-off, employee 65 forAndtheI Income The point is, your Con_ittee is not alone in asking these important questions. SUBCO_{ITTEE ON OVERSIGHT AND SUBCO_4ITTEE ON SOCIAL SECURITY Research Institute (EBRI), have presented you with the relevant national additional $50 million to the defined contribution plan. The Sun Company's $i0,000 - $19,999 8.2% 26_ 44% 70% contributions, quote: Overall,"They the do current the a wonderful first body5 of percent job.tax And code of in which provisions the private are matched aresector achieving dollar you are fortheir eyeball dollar social by to etc. But higherinSun paid, thealso process andbelieves 65-75of percent tax that reform, itsforbenefit the don'tlower programs undercut paid. should the Thesetax enco targets uincentives rage have employees been that Companies like Sun are analyzing changes in work habits and trying to consider CO_'_ITTEE ON WAYS AND MEANS data. EBRI's research on this subject is the very best that exists, and I annual spending for medical benefits was $36 million, of which $22 million was 20,000 - 29,999 51.7 32 32 64 goals. set with Inthetheneeds Sun Company's of a retiredopinion, couple Congress in mind. hasAndcontributed we have achieved to what is these an to Sun support eyeball plan Company with and the save contributions. the basicadministrator forcoretheirof o_ Upon employer-pro of economic the termination program. videdsecurity. or retirement If retirement, youThehavefederal and a problem anwelfare government, employee's youplan can It the is adjustments psychologically that areunsound appropriate to assume to accomodate that humanthose beings, changes. if left to their JOINT HEARING hope you will give it your careful attention. for active employees and $14 million for retirees. We also spend another $5 30,000 - 39,999 12.2 36 24 60 account go benefits, absolutely to them; balance which brilliant theyis have know available success been who tr you ustory-- ly in are. the succesful. with form You the of areIf aprivate not lump youa do number. sum. sector cut Sun tax now And Company incentives complementing it has hasjufor st an likewise, replacement own devices,hastargets would an important provide through for role a themselves combination to play with in ofensuring logical, defined basic sound, benefit economic cost-effecti pensionsecurity vplan e, RETIREMENT INCOME SECURITY IN THE UNITED STATES million on long-term disability and over $4 million in death benefits. 40,000 been -a wonderful 49,999 experience 12.5 to be with Sun and 39be retired." That19is what our 58 arangement benefits the Socialintegrated with Security a major and withMedicare insurer, Social efforts which Security. allows by providing The employees following comprehensi to convert tableve illustrates their retirement lump through those basic programs benefits, like Social then tax Security reform andwill Medicare, end up and hurting throughAmerican reasonable workers, tax integrated benefits. It is therefore very important for an employer or some What role does federal tax policy play in retirement income security? I would like to answer the four major questions you posed in the press release Altogether, then, the Sun Company's expenditure for the combination of 50,000 - 59,999 7.5 40 15 55 sum precisely retirees and toother an think, annuity howbenefit weand at achieve as programs a favorable I say, thoseit's forinterest targets amillions matterat rate. ofvarious ofpublic workers, income record. retirees levels --andandtheir how incentives retirees, and to their stimulate families additional -- instead necessary of helping benefits.them. central source -- it can be a union -- to provide structure and leadership, as September 6, 1985 announcing this hearing, with reference to the experience at the Sun Company, 60,000 retirement - 69,999 security programs3.0 amounted to nearly 41$95 million. Let 13 me emphasize 54 well as economies of scale and time. much families. of retirement These benefits income comes are broadly from Social distributed Securityacross and how people muchofcomes different from I think an important first step in answering this question is to understand where I have worked since the 1950s as Director of Special Projects, Director that the $95 million total excludes roughly $60 million in pension paya_ents to 70,000 - 79,999 3.0 42 II 53 Although The the income Sun average levels. Company Sun age doesRetirement In ofnotthe oursubscribe oil-related retirees Plan. to has activity the heldprinciple steady of our atof about company, automatic 60.5. forinde About example, xation,one all it in In Sun ourCompany's benefit retirement planning, postretirement and welfare employment programs are is not designed a factor to that providewe why employers provide benefits to begin with. Many policymakers appear to be of Human Resources, Vice President, and Director of Compensation and Benefits. 80,000 annuitants, - 89,999 excludes the health 0.9 insurance contribution 43 for active i0 employees as 53 has financial of five In our meeting granted does regular security some this approximately employees vsocial olunteer and purpose, -- independence I0 work I00 ad percent and hoc employers about increases for-- are provided employees, one covered toquarter retiree benefits which bydothe pensions some are in pension the work long-standing since context plan. for 1960. pay, of give consideration to, except in the very broadest terms, when we are looking shocked by how much of an employee's total compensation is in benefits. For well as spending for disability and death benefits, and it excludes the 90,000 - 99,999 0.5 43 9 52 Today although we have only a15system percentcalled have ORBIT regular wherejobs. employees Only 43 may percent choose to don't use work part and of These national the medical then-current replacement benefits policy goals. alone, tax targets code. the Without bill doToday not the is enormous. include each currentindustry monies tax incentives, has savedevolved through SuntoCompany athelevel SunCAP would of at special early retirement arrangements. In other words, we plan for our %_at Is Retirement? $I00,000+ employees' contributions to 0.7the defined contribution 44 capital accumulation 8 plan. 52 If you are reexamining these tax incentives with respect to basic tax reform, their be don't program. lesswant SunCAP The inclined to employer account work.to Money develop to matching purchase is not newcontribution the programs an prime annuitymotivator and for which would this among will program likelyprovide people reduce is designed whoinflation existing work to or employees retirement toandhave otheradequate benefitsretirement that meetsincomes each industry's based on different Social Security, needs. the Tax encourage I would recommend individualsthattoyousave. view And benefits most in of two them tiers. do. ButThere if are an individual the first protection. want to work.Sun The matches main employee motivations, contributions we learneddollar in aforrecent dollarsurto veypurchase of Sun Sbenefits un Companyto pension coincide plan, withandnewtheir limitations, own savingsproviding for retirement. employees and retirees policy Employee hasbenefits had veryhave little an important to do withsocial the reasons purpose. for Benefits creating are thosedesigned benefits, to Notes Retirement is the completion of an employee's tour of duty with an F.I.C.A. contributions made up about 31 percent of the total, defined benefit wants Company tier of morebenefits, retirees, than theare thetarget basic the pleasure replacement benefitsofthat the rates, work are they just itself, have the basic the to save feeling needs moneyof of making for humanity thata the with annuity a loweredat retirement. level of economic This provides security. a total To theof extent 15 annual that retirement these tax but it plays a really key role in determining their shape and their future address the basic needs that arise from aging, death, illness, disability and organization, and the time when the individual turns his or her attention to pension expense about 34 percent, defined contribution plan contributions purpose. levels. associated with aging, disability, illness and death. And there are some increases. contribution, incentives are Yourand"rolled-back" Committee the enjoyment couldbyof help Congress being American with as others. part industryof provide Financial tax reform, some necessity inflation financialor %._at are the major sources of retirement income today? so forth. People also need to be able to cope with inflation after i. Retirement in 1984 at age 65 with 35 years of service. other activities. comprised 19 percent, and health insurance for retirees about 15 percent of protection money newer independence for formsextras for of of retirees benefits, workers are secondary if and like you retirees 401(k), would reasonswould approve which for be work working. legislation replaced very well These by (H.R. greater infindings this 3179)dependence context that for Sun is by retirement, so I would add to that list of basic needs the need to accumulate the $95 million total. promoting capital accumulation that can be used, for example, to buy inflation before Sun At on Company Sun, the maintains you, public we retirees aresponsored aprograms. concerned carefully accord bywith about Rep. The designed results public the Kennelly, changing retirement from programs, Chairmen acomposition nationwide program as Pickle, thisfor ofsur Con_ittee our vRep. career ey work conducted Archer, employees, force certainly for and and In capital talking for about retirement. the effects In other of taxwords, policybenefits on employer provide provision economicof benefits, security. 2. Historical salary increases of 6%/year. Currently, the Sun Company has approximately 12,500 active employees and protection for retirees. others. the knows,National have H.R.serious Council 3179 would long-term on Aging. encourage problems As the health ofspread their and own. of longevity this typecontinue of postretirement to improve, which of I would our issociety, say intended thatandto you wemeet have are their reviewing to distinguish incomeour replacement retirement between needs. income the short-tet_ plans This program withandthese the is Sometimes we become so enmeshed in the technical details that we lose sight of approximately 10,400 retired workers and survivors of retired workers. benefit adjustment to offset inflation. Attached to my statement is a fact made long-term up of impacts. two plans. sheet I hope that thesemoreremarks fully explains have been the helpful benefitsto the of this Con_nittee legislation. and would be happy to respond t.o any quest.iolts you may Imve.