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21 1_.9
17
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31
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22
27
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33
26
TABLEI0
u
Contents
Table 2
Table 6
Chairman Pickle and Chairman Jones, i£ is a pleasure £o make a
24
8
28
34
215 13 ii 30 18 12
EBRI ,-,, 14
725 432
THE DISTRIBUTION OF COVERED AND NONCOVERED WORKERS 23 i0
5
TABLE 9: EMI_LOYMENT, COVERAGE AND FUTURE BENEFIT ENTITLEMENT
capital 2c. What gains. is the desirable In other IN THE "mix" words, "NEAR-ERISA" L for thethevarious WORKFORCE system i sources? is efficient given our
plans are reported to increase savings by at least 35 percent. The Congress
employees--82 real (i.e., How Much inflation-adjusted) percent of Pension-Related of nonfarm private value Tax Deferrals ofemployees taxes deferred is are Lostcovered; toduring the Treasury? intheunionized pension
submission 344b c. d.. Workers Are $2,000 all Wh Hoat wocthey at cfor lwere ios on(plus ewithout ach the to the ie asvi$250 trecord ng hcurrent acu tcover rren thos level for taof ge esaaiyour lary of gnoa com who nonearning lad se eq hearing rwere cath uat turren axer e tco on ly? retir de than spouse) oftheem pJuly ren olea job vtisio von ing 18, nless ssecu a 1985, rit it pre co than ynin cerning tax aon re the a the bwyear aeplan sis, qtuoda subject .aaccount lifi y? ed
empl and schedules, oAyer-spons the recent pension ored with reporthe income t retirement fraver om rose age the to Svoc esting Table inc i$899 alome.4Secur peri and The ioty d pension capit being Adminis al tsix income rat accumula ioyears n was t.iindi on greater ca Motes stprogr public ath than msat
(see Does The Chart60 this i). percost cent If variation this replac does ementmnot akemtachange, rget a tax npolicy ote mthen d apension bdifference? ove iscoverage generaThe llyisanswer vnearly iewedwill as as
The nation should strive for a retirement income system that provides a
BEFORE ANDTABLE AFTER 8:THEEMPLOYMENT, RECESSION, COVER MAY A1983 GE AND AND VESTING: MAY 1979
AGES 25 THROUGH 64 WORKING I000 HOURS OR MORE
la. What is retirement? 4
Table 7
Z DISTRIBUTION _ BY _ SELECTED_BYCHARACTERISTICS, TABLE EA_$INGS _ ii _ FOR _ MAY NONAGRICULTUR 1983 AL
progressive tax structure.
Social Security provides a floor of income protection for retirees. At
firms--82 must determine percenthowof important workers are thiscovered; capital among formation those Taxes is 45-64 to years the economy. of age--65It
existed A number in 1950 ofwith different accumulated typesasseof ts plans of $12.h7avebillion. developed The sin pacrti e cip1921 ation to
of for participants' the Retirement with We Profit asset 9.7 arpercent einvestment income, sharing a W Income t working that ofwhich Security plans earnings the level career added noncovered, generally (in inreceiving $539 te the isrmsper United ultimately payand ofmonth. benefits tax th those St edeferred ates. targ rep who aets saidausually treatment. set lump as by income sum. worked the During Profit Pr tax esident lessduring than 's
new pension re employer asonable, benefipl cia pension ans, ries ascash long pl haave ns andmore use adeferred s five-year there supplement arris aangements, tion vesting. a minimum of et Socc., iaplayment designed Security progr toaatmdo? allsuin chcomeas
high as it can ever be Percent expected receiving to climb. retirement The benefits United otherKingdom, for example,
be yes if employee benefits were to be subjected to income tax or FICA tax.
reasonable enough level WAGEofANDincome SALARY toWORKERS, retirees,MAY at1983 an age which is deemed
lb. What level of work activity separates the working from the 4
Covered • ° °Distri- ° • ° o • Workers Distri-
Method Used Taxes Lost Deferred
than social security: Retired-worker beneficiaries re-
The Use of Preretirement Employment Lump-Sum Coverage Distributions Future Benefit
4d-ii. How efficient is the _current J_,_-__._,.=structure F/Ill/1/Ill/IX in assuring "_ pension coverage
retired?
the lowest income levels, for full career workers this can mean near total
is clear 0 from the udata I-i oWorkers ,_1presented r4 ,/'_ _ bu t._tion t_o r.above _ _ ,_ Not that the bution system is producing
percent retirement.are covered; and x of ..4 workers in durable goods manufacturing, nearly
Com fulfill mission)thesefortwofull-career sets of goals: low-inco retirement me workesrsa,vingneaarnd that capitalev l elaccumulation. for average
rlevels 1,000 ate I each These would As sharing This forhours these than non year provisions vesting like agri plans athe statistics cultural of year to population gener level begin areof accounted aldesigned wthe aindicate, by ge inavailability law commending acurrent nd offor were sto aall lathe another ry incr designed employment retirees, workers you retirement ea approxim se 10.3 and worker to ately wathe spercent plans and inand c25 rease other productivi per 13 thcapital ais ctent. of million ca members pit complemented supplementation all tyalaccumulation noncovered tax and formation of thisby
has Supplemental had 50 percent Securityof In the comeworkavaforce ilable covered to takeby ca employer re of those pensionwho plans have for not
reasonable for retirement, that they are not required to work. Why?
Employees Summary would of ceiving Cost come first Factors topayable (O00's recognize by benefit and Age infor the June (000's Use inequity 1980-May inand Costing 1981, involved by Entitlement Benefit in Plans paying taxes
by Purpose and Amount
Number of Workers (O00's_
(O00's) Across Covered a Across
[,-._i_Y///////////// -_ J
Households, by Income Level, Receipt of Earnings, and Income From
PIA quartile,%sex of , and marital status % of (O00's and
EARNINGS (as Employment Reported May 1983) Coverage Total Vested Benefits
Groups (O00's) Groups
across income ° levels? I I
Ic.income significant What replacement. should retirement the role For income the of post-retirement highest in the earning presence earnings quartile of be many it in plans might a mean that less 4pay
80 percent of the ERISA work force is covered, versus an unusually low 34
iworkers. ncomDefined-benefit returns eChart workERISA er 3have s andwith standards included Table plans a full-ca 6contributions state ashow rereerplthat that ansattachme pension whi Treasury tochnIRAs. t promise plans totaxtheonly expenditure aworckert need afin orce credit ,final statistics, anda at yeara
and plan benefit Over worker tosystem encentitlement--vested our 800,000 inahas tge erestgrown workers priv inate significantly efficiency to employer-sponsored insctre atus--e aseandaover rned their profitability the level under past retirement of 35 plans sas aving; years wellfrom and toin asprovide terms previous to capitalofa
Committee frequen worked cyenough forincscheduling reto asesearnwith work-rel this income ahearing ted asbenefits. the on aincsubject ome repla ofcement specialvalue importance of Sociato l
without twenty Treasury ====================================================================== years. reference Method to the true economic value 83% of the benefit 17% being provided.
BecauseSelethe ctedper Nongovernment centage who ca Snnot ources:work Monthly increAverage ases with , Secon each d higher age group.
Employed) Employed) % of Employed)
retirement income security system?
_:,.-
FIRMQuart SIZE ebr 1984
Total 88,214 49,530 28,708
i
benefits Coverage in forms is efficiently other than aspread nnuities.across income levels. Among full-time
than 25 percent of final pay. Employer-sponsored pensions in both the
percent me calculated ansbenefit. for coverage on workers aPriv cash-flow of atethe to status seERISA chtor ave basis, work employers assets Toleave talforce Low tothe min ake Second allow impression theall Third business lifestyle contributions Highthat service the transitions proportion asector. nd in upon of
aEach lof ccumul evel service Less produce aof tion ofthan these suto ffi iO0 capital plans employees ciency employees plans ac exist is cumu fowho rresponding l'ation. 6,215 mtod ost work ay h1,000 igwith he 17.4% to r hours the iacc ncome umul goals 12,352 orated wmore orke set rsunder assets outwho 68.1% for thehaex ve pl it ceeding an.in retithe red $925 tax in
Se participants, 3c. employment. Lifetime curity ItTo iswhMethod: de adifficult tcreaAbou extent assets, sest to 6.6 ("Income should benefit increase million our recipiency, of coverage workers retiremen New Retired tand and reported syst participation. benefit Workers em entitlement guamounts. aranby tee Social Last thto at year, aSe level cpension urity for of
todThis ay's could workerslead and to retirees. Total demands for less athan system$5,000 of taxing - $I0,000 based - upon Overthe actual
1983id. Do demographic and economic changes expected over the next 30 years
id. iO0Do to demographic 499 employees and fir. economic 5,545 E changes 15.6 expected 2,465 over 13.6 the next 30 5
Statement On
Nominal dollars a/ 14 Monthly income86
$5,000 $9,999 $19,999 $20,000
$1-4,999 I0,014 Defined Percent receiving-- Benefit 2,433 Life Insurance 358
.- ]_:. .... ,,,, _o _ >.
Housing 3b. Purchase What is a desirable i0.i level of 9.3post-retirement 12.5 income _ in terms of 8
AGE Employment % Covered % Vested
and Salary Workers Social Securit100.00% y and Oversight66.09% of the Committee33.25% on
b/ After adjusting for inflation.
Unmarried ......... 26 1 4 43 48
Company earning or unionless pensions: than $25,000. While the proportion of those earning over
business. 4f. How does this system of tax incentives for qualified pension plans as
percent target in mind (a common formula is 2 percent per year assuming 30
Other and status. Investment interest on deferred 16.8 taxes 14.0 and on the 29.9 interest factor 45.9 used.
The employee first un category til recof eived. plans were Thesestriplans ctly cameet lled pensions an objective prior of to
nem positio employee employees. formula. ona ployme gr Less icult nnt-based than ubenefit roarThis l35Eighty-nine occupation. wa same pgrincentives eogram formula and "s. percent sa 14,588 The laparallels rme yaens vent woare rke 35.8 thrasotin ftaxhi_her ris eti nonunionized payments, mo rem 9,095 reent in • than come \iswith 50 individu jobs; fr 43.5 eq pe low urently cea44 nt ls income percent (identi see recpersons eive Cha fied are rzt a
Reportsreplacement (Household ofEconomi earnings? c Studies Series P-70, No. 4). Table 3 presents
plans and worked Women: at least 1,000 hours per to Employed year and had been to Employed on the job for
agecNearly change /2550-54 Interest to all 64, can working ofberate theaccused ommodated, government 112.5% to discount and and,academic taxes by146.0% apaidresearch system in retirement thdone at has on 1.0% tothis a signifi subject cantto
NumbeIn r wlan th ................. April 1985 survey 7,238 conducted Ways 520 and 2,17by 61Means H2a,milton 296 1,264and Staff, 477 23 583 percent 273 of
35 and over Married ............ 26,133 14 64.2 .3 1811,800 44 41 56.5
I000 Mean ahours mount ................. or more $394 $119 $219 $375 $452 $56l $674 $1,670
the year of retirement. U.S. House of Representatives
Unmarried ......... 27 6 21 48 48
$50,000 wellTotalas pfaorti r cin ipcare ting ased sa inv40,702 ings a retthr irement ou i00.0 gh casprogr h 20,894 oram deferred is I00.0 high, compenthese sation persons plans
years of service). o
Three percent of noncovered workers are in agriculture. Their coverage
Total 4Consumption a. 55-59 WMoney One individual Ahatreduction factor rolepurchase does that sin avings, fede 125.0% the 71.4% has rplans alves not with ttax inggener are p76.6% funds ol minimum aicy lly plans pla gener 216.0% been stand y 51.9% ain which lly aconsidered rdretipfrom raeid promise ment 42.6% ten out ininco ye discussing aasma1.5% rs e lump-sum secu certain to rfive ity? changes years
ocJ Total alinformation 1) with under getting Security and 19a7ge, 35; 4. over more or such ra 51 80 lJfor rThese oaof percent dpearsthe ce the the ntplans se value have "fcono ond r100.00% rmpublic-secto alwere been "of quarter rthe eti onspe rem rtax their ceof ifi nt ca em reductions 1984 lly p56.15% aloyees. current ge on undedesigned rthe job than a 84 pen less sio their million to n32.52% than prprovide share ogram households five of oryears th tax e
3c.much lower To whatbenefit extent rel should ative our to retirement income. A system pay-as-you-go guaranteeprogram that level should i0not
ERISA one date Work year. assumes ForceThethat improvements a change 54,363from in taxREApolicy are 38,05real, 7will but not such change 20,027 minimum the method standardof
component that is "advance funded."
full-time workers rated the existence of a pension plan at work as being
retirement:
Car Purchase _= o®_ 4,8 (= I-4 4.8 _ r" r" _ _, r"
Own public pension
of income in retirement, and to what extent should individuals
(age HOURS 25 to 64, working 100.00% 70.01% 36.84%
60-64 o 160.0% 323.0% o_ ..' o . 2.3%
represent Table only 4 shows 2.89 that percent the ofmean all So pension cial Separti curity cipants. benefit paid to the lowest
Vacation Number rate andw_thindividu is ................... theallowest savings of3.2 23, all 50 acc 8ounts noncovered 5,2993.1fit 6,929 in groups with 5,49] _ atcurrent 3,132 just over 1,39] _debateI0 577 over percent. b690 asic Many tax
in the contribution retirement distribu taxtions. treatment inby cometheof aemployer. s employee a streamThe benefits, ofworker payments. however, absorbs Priv investment that ate could employers gains involve a
$1-4,999 "would (see mandato In Tax Table rincrease y1"950, policy I0). agethe odefined-benefit fplays rpeti erce rem nI00.00 ta ent. a gecentroal fplanreti role costs rees24.29 in by recreeti between ivin regment pens 2 io and incom n3.57e7 income percent security. wasof
surveyed payments, be used to onand fill thetherel thehighest ative "gap" vafor paid lue these of getting altern persons. aless. tive The sour In cother government es ofwords, income. should a change Table providein 4
changes Less than are 2000no replacement Total ......... 7,525 for 16increases 18.5 18 185,481 in 15 coverage 12 26.2 through new plan
!00D hoursbearor the more,responsibility one and risk for providing for themselves?
2providing a. What are or• 1tpricing he majorbenefits. sources of ..... retirement I I I in _nc 0ome today?
, _ I ¢}
M"very ean a_mount. important." Only 15$56percent 2 $351 of $5those 54 $664 polled$666 felt $640 that Social $676 $7Security 20
Other Use 63.4 68.7 40.9 _ *
$5,000-9,999 65-69 2000 and over Men: 225.0% I00.00 33,176 "81.5 *37.51 15,413 73.8 2.3% 13.20
year of tenure or more)
refor_n? There are still many workers not covered by a pension plan, but they are
income retiree couples Married ...........is equal to 19 the56 mean 29 earnings 15 10'amount, while for the
Total 40,702 i00.0 20,894 of,,t I00.0
Bagricultural Base leas than 2employees OO,000. are low-wage seasonal workers, employed on more than
$10,000-14,999 the significant and tax losses. treatment shift These inoftheplans benefits I00.00 incidence generally would of the encourage lead 57.93 income to atax workers regressive is the to30.76 increasing select result.an cost, More
nshows Epayroll, employees gligVesting gener Iibl nchow re e,.aasin lly were ewheth agrnings lrepresents By y,pay er 1the 962, reti they aaemployer nd ll1r6ement having benefit be pe contributions rcent fedis to earal levels nonforfeitable of ma ,marintain kre ed stat tirvin ed aeas ry the these an ma the by drried local same right in poi cpome lans. ntcoup benefit gto oole level vfesranmeli These epayment and ntga,ibi formula. nd5liplans provides ty pe orrfrom cent prifvoat rEBRI the oefaa
creation C_U incentivesamong to en small courage businesses. persons to save to supplement "', Social \ Security, even o,_
3d. How close to that level of adequate retirement security are we Ii
The Finally, major econometric sources of retirement estimates of income private for health elderly insurance households suggest are common that
Unmarried ........ 17 19 17 18 13
would be a major source of retirement income. Sixty-four percent believed
a Recipients by lump sum amount are less than total recipients and
_15,000-19,999 I00.00 71.92 44.83
Women:
1979
today?
SEX
almost entirely a Married ccounted ........... for by the 11 reluct 7 ance 13 14 of sm26 all employers to offer
highest The eAdministr arners Q '< athe tionSoc IEiaalrgues Security in its benefit proposal ma ° y represent for tax only reformI0 th peractentonlyof
percentages one farm. They are frequently less than I00 facepercent a complebecause x set of of other the omission labor market of "don't problems.
(.,)_ and therefore value of benefits, as workers age. ,...1 This "-,_ would \ , represent " a ¢} _
$20,000-24,999 unma recent retirement estim rrannuity Cin iaash etes cdlude studies ror eti indicate orre rather defined-benefit deferred ces apital by received that economists thaccumulation aarrangements nI00.00 the apension result pension lump-sum Deboraplan. hcould inare come. pl Chollet adistribution. ns be 79.34 increasingly This many Byand payment and 1982 more defined- ,Sophie aworkers referred may Ce The cnontr sus Korczyk be 54.85 iTIAA-CREF bution in being Burto ethe auconfirmed as eligible form surveyof
view psecto those ensior, of n atthe hafr vlow eomwaayinapcin rome efe pawhi rreticula nclevels, che arltern for job due ative forced to or in high sa fr come vom ingretiree s,sour Social pa ces rticula medi Sfit ecu ca rly rlity. together. and forced long For savi term most ngs , care on it
Forty-nine million of 88 million nonagricultural wage and salary workers
Women 16,335 40.1 9,932 4/.5
asignificant mong married numbers and Unmarried unmarried of........persons households, now 16 covered 19but the 13 would recipien 15 not 24cy choose rates differ. to purchase
they would have enough money in retirement, though most of these apparently
know" and "no response" to the survey question on the value of the
Men 24,367 59.9 10,963 52.5
Civilian L_plo_ent 95,372 53,445 22,633
4a. What role does federal tax policy play in retirement income II
Source: U.S. Bureau o£ the Census, Current Population Reports, Series P-T0,
I,o
SOURCE" The Costs of Employing Older h%rkers @_ashington, DC" U.S.
pension retirementplans. income Among meritsmedium tax inand centives Ownla IRA rge or Keogh and employers, benefit that present nearly rules all should full-timebe
lump-sum final earnings. distribution. ". \ _, ._
Nearly 25 percent of all noncovered workers in 1983 were under 25 years
$25,000-29,999 which forTotal teachers small taxesbenefit retirement are de amounts. ferred I00.00 system 40,702uUnder ntilis I00.0 current bthe enefits equivalent 79.1 law, 20,894 a4re there ofcei workers aved. I00.0 money5could 5.26 Epurchase mploye bersrequired have
fmajor an re these oupnd reannuity ssalary en33 effect findings, ts percent th reduction orof e lump-sum tax tas roansition f did policy oveplans r-a apayment. geCongression change. toor 65ama bype rr If aried ltheir iodtheBudget couples du accrued code ring Office section, awhich nd value 15 (epe Cais BO) rr401(k). ne cent dless analysis inco ofthan mueThe nmarr of $3,500 isiedthe no
were expenses plcovered ans .No.whi 4, chbyEcrequire onomic employer-sponsored Charac paymentteristics of benefits programs of Houin sehol intheMay dsform inofthe of1983 United an annuity. (56States: percent).
(All health employees insurance & self- if it were 100.00% not available56.04% from an employer 23.73%and largely paid
security?
Special Committee on Aging and the E_ployee Benefit Research
believed that employer-sponsored pensions would enable them to achieve that
b Percentages may add to over I00 percent because recipients may have used
Total ......... 2 (I) 1 2 3
$30,000-50,000 i00.00 83.91 61.57
employed)
Second Quarter 1984, Table E 0';ashington,DC: U.S. C_vernment Printing
TENURE e Institute, forthcoming).
workers 3a. How are can covered we defineby "aadequ plan. ate" retirement income security?
lmuomp dified sum distribution to turn Men: savings in moreplathan ns into one way. retirement income pl\", ans. There X is no", ._ o
of age. This age group was not Table subject3 to ERISA participation standards
$50,000 re health tiree plan plans Employee and s care Office, owhich vhad er also tax benefits pr1985), ivate only represent cap proposal pays ppension such .I00.00 5. benefits anaspublished employee idefined-benefit ncome. in annuity in andThe 84.90 1983. employer Socia form. pensions l partnership Secu As rand ity of 68.50 the health Admend itoward nist insurance of ration
Most pr upon lo toong vided eaccept These rcovered separation esseth ntial in ese these centives workers pfrom rfsmall oogram r th earn sca service, enbenefit majo fbe orelatively r rmost ity dthe ecades amoun oeffective worker ftsmodest one' asass can aimmediate income when salaries. means be ,required tied even oflump-sum allowi to Over thou to employment. gng h76 take distributions ipercent twordo the k-efsorlump cnThe eot ofI
,,.,_,.. _ _ _.,_ Table 1 _. _ _ -.,
4b.for byWhat the were employer. the current income tax code provisions concerning 12
Less than 5 years Married ........... 10,613 2 28.0 (l) (1) 8,328 2 4 51.3
Number of workers too small for rates to be calculated reliably.
_ °
goal. When asked if they would have enough to retire with a reduced
_ot reported i00.00 27.23 13.94
Unmarried ........ 1 1 0 0 4
_:onagricultural Wage 85,181 52,019 21,399
5 to 9 years 9,734 25.7 3,958 24.4
qualified pension plans, cash and deferred arrangements, etc.
Individual retirement accounts are most frequently opened by individuals
comprehensive Ideally °individu rationale a,o ls put should forward be by ablethe toAdministr 0m_aintain a otion . a ._ rel inatively support cof onstsu ant ch
Women:
according to the 1974 law. Young workers are more likely to have short
sum. are involv 1984 Priv the almost e ate "goal withd there always rretirement awal ofwerecapital discussed fr appro om progr xact imately accumulation. ivas aem alitax fflat e180,000 " fexpenditures odollar r mEmployees ost of cost these initiper alform make plans re employee tithe contributions re ines oper single to orada tion as y. largest a level
rupon ecently Theseparation second found that Incategory from comeamon Sour employmen g cof nesew plans ta.bene nd fLevels, icia Under areriesidentified these 1984 substa Second current ntial inQuarter ERISA rules, numbersasdata ofthose reti indicate rees
andall adj feder Salary uTen stm acovered len years ts Workers government and while employees over maintai has and ning 100.00% rec 17,518 o70 gnized individ percent 46.3 this ual of 61by di .07% gn all ity. establishing 3,830 vestedTheyemployees 23.6 have 25.12% militbaeen ry earned eand ncouracge less ivdil
Note: Same life insurance cost is assumed for 65-69 as. for 60-64
The previously Inco referenced me Sourcesanalysis for Elderly by theHouseholds, Treasury Department 1982 shows that
Married ........... 1 (I) 2 2 2
designed to do?
pension, only 24 percent answered "yes." A full 82 percent of employees
Total 38,017 i00.0 16,116 i00.0
Unmarried ........ I (I) 1 2 I ¢1
Percentage Distribution Across Earnln_s Groups a
I ' \ ° °
=========================================================================
who have an employer-sponsored pension, as well, and the distribution is
life a changestyle in poli after cy. they Additionretire, ally, the as Admin compared istration to propos pre-retirement. al maintains IThe RA
because it is assumed that the benefits will be reduced to
years of service and to work part-time schedules.
ha lpercentage that b. d Wh pin with eat nsio these thenleve pre-tax private of ilamoun ncom of pay etswor sector. per fr dollars kom are %activity employee. Employ- angenerally eand mploye sepa many r-s rEmployee ates pconsumed, onsoemployers red %theofrepresentatives, worplan: rakin ther gprovide fr than 56 om%peof the raused ceTotal nemployees, tmatching retito roed f ?increase married and
to service category doNearly which so by retirement ofprovide 58th tax epercent cuexpenditures rrent for systems. oftax capital Number all treatme in those State nthe accumulation t Mean covered ofederal fand cont Monthly rloc ibutio bybudget. aluntil an nsMean government employer-sponsored up termination They Amt. to aarise ce %and rtai of from nof Tot. priv level plan ate the
_onagricu!tural than $25,000 Wage a year in 198363,201 (see Married Table 8). %42,576 Unmarried 19,836 %
for employer-sponsored plans the tax benefits are distributed across the
4c. Are they achieving those goals currently? 13
aIncludes workers ) L'css with than 0._nper o centcoverage, . workers who do not know whether they
*The agreedviews with expressed the statement in this that: sta"If tement employers are those did not of provide Dallas Salisbur benefits, y and the
Source (millions) Income of Source I ' Income l
and Salary Workers ment 100.00% Coverage 67.37% 31.39% Vesting
Source: Appendix table A.
equal cost; regulations allow a 30% reduction.
have coverage and workers with no coverage information reported.
much limitsmoreat weighted their current toward individ high income ual leindividu vel, expands als thanthecoverage spousal orIRvesting A, and
replacement rates noted above were designed to do this at alternative income
should Workers contribution not be 65 attributed years into of anto ageallocated the and Employee older account areBenefit also for a special Research each worker. case; Institute, 2.7Thepercent its
deferral employers retirement An indivi of have income dtaxes ualbeenpaid c(see acontent n beon: Table "rwith eti (i) ii). red"this pension In and approach other sand tillwords, retirement since work afaster thelarg sactual aeving vesting number distribution contributions will of hou only rs
coupl atoday s deductib es have hadle peans exp io vested ennsesinco . mbenefit e--38 pein rcentthe with planprivat ate their pension, current 21 peremployment. cent with
ageemployers 25 When employment. to 64one only haveconsiders done These thethose plans same.that were These ERISA specifically programs required represent to designed be included forced to provide in savings employer for
income spectrum Social inSecclose urity relationship 92 to income. The 89 lowest income groups
4d-i. How efficient is the current structure in distributing tax 15
officers, government trustees, would end sponsors, up paying." or otherThestaff. answers to these survey questions
Total 100.00% 100.00% 100.00%
Nonagricultural Social WSe age curity 58,009 23.5 40,830 $1,590 $562 19,522 35.3
bpercentages exclude 12.7 percent of employees for whom firm size is not
Employer Pensions 49 26
benefits?
in levels reduemployer-sponsoredplans. ces after signific adjusting antly for what redu cacned goexpenses into ca and sh taaxnd es. deferred This could arrangements be termed
of known. all noncovered workers fall into this group. ERISA states that
of increase cost doesretirement not affect ineither come if the taxes workersto be arepaidrequired by the employee to roll\or over the
andpublic pReduction and er Salary Profit wemployer e(2) Private ek.pWorkers ensi eato The rnings on sha;contribution Pension ring atrue and five-year ron plans measu 42these 100.00% rpeis are ercvesting 7.2 not eis contributions. ntplans whethe taxed of rstandard, which uas nm$1,902 70.39% th arr eincome ied usually indi The vEBRI idual bene todollar "promise" the ficia estimates, $394 eco 33.65% employee rinevosamlue ically a had of given until would 20.7 nthe peens edsio vest tax nto
retirement. Tax savings policyfor Most hause s state, also on ahelo lped discretion cal to andary assu priv reabasis tethat programs upon most retirement worakre ers advaatnce orallupon funded earningsso
receive more of the tax benefit than the proportion of taxes they pay,while
plans--i.e., those between the ages of 25 and 64 working 1,000 hours per
Property Income 77 61
If benefits are not reduced, assume costs at 65-69 are about
$1-4,999 Dallas reflect Salisbury the importance is President of 12.47employer-sponsored of the Employee 5.14Benefit pensions Research to1.30 the Institute, Americana
age 25 toFed 64,Pension working 1.7 $2,643 $944 35.7
o _
Earnings 36 12
4d-ii.Clncl The uHow des absolute efficient workers whonumber isarethenotcurrent ofcovered workers structure by a union covered incontract, assuring by pension workers pension who and do capital 24
through "adequate."salaryFurther, reduction."minimum" The argument adequacy appe might ars to be beguided that for thesetheprograms lowest
I000defined-benefit hours or more plans may exclude all new employees within five years of
$5,000-9,999 nonprofit, be lemployer. distributions evewo ls percent received. rkiwould ng 3nonpartisan, 0% gAs higher. iv of ha einto nvaThese epayth result, thanother eecontribution public plans poppo res 19.08 ernce the tu retirement nmeet ity polic only of yan to pto enresearch attention sio objective pa an plnratici n. 12.13 individual income patorganization. egiven ,of iand nindividual employee pto roth gream date styp 7Before .33 eso account, to savings, ofthat actual wojoining rkSocial thper ey
iapproximately expenditure ncomeother --2 Mil 7 Pension pseparation erdem cent 1.9 andswith million that from private equity additional a 1.3 job. pensio and These n workers, efficiency an$d3,555 pla1ns 6 per include increasing cent questions $i,014 witdefined-benefit h pub thebe licpercentage explored. pe 28.5 nsion. ofA
that present Other taxpayers, workers 13 and stockholders 18 pay for their own
year and on the job at least one year--the base drops to 54 million workers,
higher income workers receive less of the tax benefit than ] their ' share of o
not know whether they are covered under a union contract, and workers with no
coverage across income levels?
ERISA Work Force 49,736 36,890 18,941
$10,000-14,999 Source: U.S22.20 . Social Security21.80 Administration, 19.87
EBRI worker--and he serwhy ved this in senior Committeecareer is concerned policy about research them.positions at the U.S.
St/L Pension 2.5 $2,211 $573 25.9
reported information on unionization.
accumulation in arecome less individu efficient plans als has and continued than households employer-sponsored to agrow, s the but benefit due ato nd levels thefunded large under number plans Supplement ofwhere anew l
$15,000-19,999 normal withretirement the dollarage.amount Social 16.32 Furthermore, varying Securitywith benefit Bulletin, 19.89 corporate accruals Vol.profitability. 48, have no.21.28 not 5, been The required
Department (ageSe maemployee co 4e. racu jor ev25 ered rFwith ity and doi oShould rtong new the 64, .workers of funds bdefined-contribution cost ene Labor study these "working The fit newly variation generally s with inand provisions dividual by wrould etir vested the Dr. ed100.00% "phas baU.S. eidKorczyk, te cou benefits sbe been rme out upppl Pension pl ldedesigned aens as mented undertaken "f inully lump-sum Retirement to which 1Benefit 9871, 4.1 62 torieti 7f%percent. encour in pay rdistributions. they very edGuaranty cases "Security a,ge out wo recently alo uwh lDefined-benefit edne, er xas 38.08% clusively Corporation. enot and aonly di toddo lump-sum Tax assess: nth compensat oteretirement Policy, hus prpl ovi This baaens, nde d(i) d
of benefits. which 38 Above million some retirement (70 percent)income are level covered the by government a private shouldor require public
tax payments. Source: MaAccording rch 1983 Current to analysis Population by theSurvey Treasury Department the "tax
4e. Should these provisions be designed to encourage exclusively 32
Table 3 (Washington,DC: U.S. Government
I000 hours dpercentages or more, exclude one 4.4 percent of employees whose earnings are not
$20,000-24,999 12.81 17.22 20.43
statement The system draws ofheavil employer-sponsored y from research pensions studiesis becoming conducted,increasingly published, more and
Source: Survey of Income and Program Participation
Defined contribution costs are the same by age.
jobs being created by small businesses, the percentage of the total work
parti reported. cipation retirementis income mandatory. security, o :ggggooor d are other _ goals _ equally _- '_
Security Income, unemployment compensation, or worker's compensation.
yearbeyond wassesses ork. of tenure the these normal or more) incentives retirement Printing inage Office, a (usually lifetime 1985), agep. context. 65), I0. m although She finds many employers that the _
re effort approaches ceive worker distribution. s ata to absorbs the benefi health individu t, investment the care al avcost er level agegains containment Social without and Secu losses. fur and rity ther(2)check Some incentive. possible of was these $disincentives 671(The plans per law monthnow ;to
which ade income quatecurrently security, benefits.have or Nare ondisc moreother rthan iminagoals t40 ion million equally standa participants, rimportant? ds in the lnow aw an commonly d restrictio use nsthe
copyrighted by EBRI.
employer-sponsored plan (see Table 9).
subsidy" is distributed evenly across the income spectrum, with 76 percent
important?
$25,000-29,999 6.87 9.21 11.04
N
important to the provision of retirement income nationwide.
eTotal excludes 11.2 percent of employees who have worked at their current
force covered by plans has declined. The primary reason: small business
3b. What is a desirable level of post-retirement income in terms of
Ideally, fundamental changes in tax incentives which have been the law
$3 SOUR 0,0C0E: 0-50,000 Individual Preliminary retirement Employee 8.23 accounts Benefit have Research 11. been 71Institute available tab tou1lations all 4.75 workers of
do provide allow the post-65 workerpension to chose accruals. to take a portion of the contribution
tho on Ic. hiring economic se"What inwith tegra orvalue should tio pekeeping nn" sionto sthe hathe ve recei onrole government vre ed older sulof teadnpost-retirement workers. additio inis bnrsignificantly aoad-ba l These $656. sed earnings recent pWahen rticipatio greater both bestudies nin than the aahnulooking dretirement sshow band benevfand ery itat
ten-year spejob cifies Who Capital for is less "cliff" acovered than limit formation onevesting on byyear, what anand doesn't employer-sponsored stand employers savings ard includeallowed are c d/ar. n offer important plan in ERISA. under is not toIntern Defined-contribution the a gamble. al nation. Revenue Coverage While Code
of the value going to those earning less than $50,000, as compared to 6
4f. the How does May this 1983 system EBRI/HHSof tax CPS incentives pension supplement for qualifiedandpension May 1979 34
$50,000 and over 2.01 2.89 4.01
The role of employers in providing pensions has increased dramatically,
0 0 0 0 0 0 0 0 0
does not provide pension coverage at the high rate found in large businesses
since 1921 should not be changed without this Committee's careful review.
rep SOURCE: lacDOL emen /SSA tPreliminary ofCPSearpension nings? tabulationssupplement. of EBRI/HHS May 1983 CPS pension supplement.
plans as well as for increased savings through cash or deferred
the wi since fe recei 1982. ved be These nefits,accounts the monallow thly Sworkers ocial Seto curity contribute check ros upe to to $836
re plans, income se significant tax studies cei ction pexpenditure t. security with 415. indicate cost Individuals approximately system? numbers variation that IRAsalone haby ve are 28age towould not million provide (Ch yet artimply. adding 4for participants, and themselves As Table to much savings, 7).asuse beyond 72 employer-sponsored many percent this different limit.) of the
is a function of very predictable factors: in larger firms of more than 500
percent in the case of tax exempt municipal bonds and approximately half for
compensation plans and individual retirement accounts fit in
SOURCE: Preliminary Employee Benefit Research Institute tabulations of
07/05/85
especially in the aftermath of World War II. Twenty-five thousand private
0
accounts fit in with current debate over basic tax reform?
the Hay 1983 EBRI/HP_S CPS pension supplement.
Iso3 a_e._aV Io luao._ad m
EMPLOYEE BENEFIT RESEARCH INSTITUTE
2111 K Strect, N\V Suite S00 \Vashington, DL" 200_7 [elephone(201) 659-0670
a Percentages exclude 9.0_, of employees whose ea[mings are not reported.
