16 TABLElO I_ Summary of Statement by Harry Smith 12 20 416 TABLE OF CONTENTS 821 622 19 15 713 Employer-sponsored plans and lEAs perform very different functions 923 in the Table of Contents, ctd. Page I0 II 26 24 14 225 Mr. Chairman, I am plea_ed to testify before the committee 517 on Distribution of IRA and Spousal JRA Participants of the Sun Company TABLE 6 Before the Table Table Senate TABLE TABLE TABLE TABLE 43Finance 12 13 Ii 2 Committee The May 1983 Census reported TABLE 8 that among those not covered by by Pension StatuTABLE s for5 1982 PAGE HOW DO DEFINED-BENEFIT PLANS AND IRAS BIBLIOGRAPHY TABLE COMPARE? 7 retirement system. Employer plans TABLE provide9 savings for many who do not save Table belongs The II Mayto -- Spousal a1983 different IRA CensusUsage individual, reported Among Respondents lEAsthat were among used with by andthose 16.9 percent not of covered the labor by Department. If public employees and plans are included, the number of Covered with defined-benef increased other Employees from it saving pl theans are current and should Found Indlimit ividual attherefore All of Retirement $250 Ages.to consider $2000, Pension Accounts orthe coverage the (IRAs). net samerates increase levelare as high that and possibly there that sowere meindicating sur 240,000 vey respdefined that ondents employees benefit interpreted will plansst questi ain y long ooperation. ns longer on coverat aThis gejobs trepresents o which mean acoffer tual an Different Groups Benefit Placement of IRA Investments for 1982 IRA Usage by Earnings for 1982 Spousal IRA (Civilian Usage Among Employment, Respondents July ii, May 1985 with 1983)an IRA by Age for 1982 Spousal lEAIRAUsage UsageAmong by Sex Respondents and Earnings with for an 1982 lEA by Earnings for 1982 IRA Usage IR byA Taxable Usage byIncome Age for for 1982 1981 and 1983 IRA by Earnings for 1982 19 IRA Usage Among Workers Not Covered by Pensions (Civilian Employment, May 1983) employer-sponsored EMPLOYMENT, Coverage Employment pensions COVERAGE and (Civilian Future 3.F and AND million Pension FUTURE Benefit Employment, BENEFIT Coverage people Entitlement MayENTITLEMENT, (12.1 Among 1983)Among percent)MAYhad 1983established Defined force. Benefit (NonagricPlans ultural Wage and Salary Workers, May 1983) i Emily Andrews. The ChanKing (CivilianProfile Employment, of Pensions May 1983) in America. (Washington, employer-sponsored for themsel Some vof es; thelEAs major pensions depend differences 3.7 on by indi million Earnings vidual between people forsav1982 pensions ings. (12.1 Employer percent) and IRAsplans hadconcern established offertheir ways participants throughout redistribution traditional grows of wealth to 46full-time million that results people, working fromoryears expanded 44 percent between pension of ages allcoverage. workers. 25 and 64. A In available Almosttosin employed ce the establishment persons. This of effort the person toalgenerate income tax, retirement the Internal income pension participation. increase lEAs coof verage. and 112,000 employer-sponsored Second, Inpla1983 ns, itonly or is almost 29plans important percent 90 are percent, ofnot toworkers substitutes, remember over with the 1974 that less however. level. than by one lawNearly During year any Number Number Within Nonagricultural Nonagricultural Returns Wage Wage withand and Salary Salary Workers, Workers, 1983 1983 Value of Trends in Plan IRA Growth Usage Within Earnings SpousalLevels IRA I D.C.: EBRI, forthcoming). Table 12 - Spousal Usage Among (Civilian Respondents Employment, with May an IRA 1983) Number NumberContri- of Within Age Civilian Employment IRA Usage Pension an lEA St for atustax yearNumber IRA 1982 IRA Deductions UsaKe (see tables 9Coverage UsaKe and Contri- I0). In Future IRAcontrast, Deductions BenefitofEarnings the total Since the early years of the (percent) income tax system, federal policy has offered an IRA Numberfor oftaxPeople year Participating 1982 Employment (see tables 9 and I0). InIRA contrast, Usage 2of the total Earnings effects to protect ongroups. byagainst saAge ving,forINA the the 1982usage erosion inflation increases of protection the purchasing with income. they power offer, Of ofall the benefits 20people spousalthrough making and Labor 1983, Inflation Department 61 percent Protection survey of nonagricultural found that inworkers 1983, 82 aged percent 25 toof44full-time were covered; employees 65 Revenue protection Codefor hasnon-working provided forspouses tax-deferred could help accumulat elderly ion women, of fundswhoin constitute two types of three private-sector thejob past out tenure decade of four were covered theIRA covered, number holders employee ofcompared defined are whoalso meets to benefit covered 56 ERISA percent plans under ageof grew and an those by employer service an with average requirements one plan;toofnine IRAs 7.4 Within IRAs Distribution Entitled (O00s andto Entitlement Group as % of Eligible Eligible Employment Distribution Distribution Coveredbuting buting as % Group Distribution Distribution as % of Levels Group Taxable Number Distribution Amount Distribution Richard A. Ippolito. Number Pension Distribution Economics.Number(Homewood, Distribution Iii.: Irwin Within CAge o., Employment IRA Usase Covered Benefits as % Distri- all Entitled Earnings Number Financial Institution Employment (000s) of%(000's) Employed of all (O00sCovered and (percent) encouragement Table number Age EarningsIof - Trends IRA to participants, in both Defined (O00's) (000's) defined-benefit Benefit 71.1(percent) (percent) percent and pension Defined are (000's) (O00's) covered plans and by(percent) (percent) an capital employer-sponsored accumulation (percent) (percent) Table Earnings number Income forthcoming). 13of- IRA Placemenbt participants, (000's) of IRA MEN Investments 71.1 (perpercent cent) for WOMEN are1982 covered (billions)by an employer-sponsored (percent)Within Age between disability in inflation; medium$15,000 and protection IRAlarge and inflation (000's) $20,000, private offered, protection firms (percent) only and the 17.3 weredifferent depends percent covered (O00's)groups hby primarily ad aan(percent) defined that IRA.on benefit. In benefit thecontrast, employee's Group pension of percent the largest A of major those segment retirement aged of 45 theincome to elderly 64 policy were in poverty. covered. concern This The is the coverage increase, erosion rate however, offor pension both even years must of are plans. thus become of tenure notThe a plan likely first andparticipant. 80to ispercent fill the traditional the of retirement those with defined-benefit needs ten years of those or pension more. without Workers plan, employer whi with ch percent per year. Although strong overall, the growth pattern has been Number Distribution Number bution Levels (O00s) of Covered to Benefi£s Contribution Plan(O00s) Net Creation (O00's) and Employed) Growth % of Covered) (percent) (percent) (percent) (Civilian Employment, May 1983) 21 Earnings .................................................................................................. Earnings ALL WORKERS 1974 to 1981 1984 (O00's)88,214 1983 (percent) 1981 1983 56(O00's) 1981 (percent) 1983 I00 1981 3 (percent) 1983 or pension defined-contribution plan, and more th plans. an 64.9Thepercent first of planthose generally have aoffers vested the pension retiree right a pension Sophie Korczyk. plan, andRetirement more Number than Security Distribution 46 percentand of Tax Number those Policy. haveDistribution (Washington, a vested pension Levels D.C.: EBRI, right Pensions those making as Savinss $50,000 for or Non-s more, avers 57.7 percent had an IRA. As a proportion of all workers plan, willingness with under the to25 employer leave and over the usually funds 64, who paying inwere thethegenerally account entire cost. for not arequired long time to and be covered on the benefits if enacted, by inflation. cannot provide While spouses inflationasrates much have retirement moderatedprotection in recent as years, the provides Aone plans. irregular. Majority to nine IRAs income years The ofoffer annual atof Employees retirement tenure mostly growthaccounted older are rate in the Covered. ofemployees for form defined more of In monthly benefit than a chance 1983, half payments. plaof ns 56 toall resupplement percent ached those The its second covered. oflowest their all is ALL TotalWORKERS Banks 3,504 49,530 i00.0 6,719 1,954 45 I00.0I00 40.2 55.8 Tot NTotal onaagricult l ural Wage 3,504 18.5 b 88,214I00.0 15.2 1,954 49,530b I00.0 22,217 55.8 1984). 16,713 1,954 How Do Defined-Benefit Plans and IRAs Compare 22 Earnings Levels (O00's) (percent) (O00's) (percent) (percent) a a a a a Under $Earnings and Salary 25 I toyears Savings $Workers 4 999 and Loan 114 3.9 3,903 56.2% a 44.9% a 23.4 a Iwith to 4,999 their current employer. 4.4 8.8 monthly Total Total with Numbers their income current Covered in retirement, 3,415 employer. 98,964 Under 13, Primary 722while I00I00.0 Plan .0 the second i00.0 16,713 plan$4.8 can I00.0 pay $32.3benefits i00.0 4 either 16 I00.0 9 in those Pension Even Employer-provided with larger as lEAs, Savings 46.5 thanfor percent pensions theNon-s number avers earned areofmore defined lesswidely than benefit distributed $20,000, planswhile is among 22the 53.4 households number percent of under employee's INDIVIDUAL ERISARETIREMENT skill rules inatinvesting that ACCOUNTS time,thewas funds. 35 percent. By law, Although employer coverage plans have rates to offer were the the employer-sponsored memory capitalof accumulation double-digit plan offers. inflation or defined-contribution Only is strong. a little more plan, than whichhalfcan ofprovide those point retirement nonagricultural in 1976, incomes; just employees, employer after theplans orimplementation 50benefit millionemployees workers, of the Employee of were all ages. covered Retirementunder Income an Total Mutual Funds 98 964 a I00.0 1,60716,713 a i00.0 9.6 16 9 $E25 arnings 5,000 to Less 34toyears than $ 9 999 $I0,000 30617225,337 8.7 5.9 32a113 5.817a 36.8a $5,000 to 9,999 5.5 9.8 Less $0 U.S.-Inflation than $19,999 Department 25 years Protection of 19,127 Labor, 782 2,658 Bureau19.3 22.8 of Labor 19.4 Statistics, 445 0.8 2.7 Employee 4.7 23 17.0 benefits 214.6 3 in $ERISALess IWork tothan $Broker Force 4$i0,000 999 II,940 8,180 54,36313.7 1,906 38,058 20 842 20,027 5.8 8 11.4 7 I $i0,000 35 to $10,000-$24,999 44toyears $14 999 58830141,211 Percent 16.8 10.4 68104279 14.359 6.4 47.3 34.4 $i0,000 to 14,999 7.3 14.2 monthly 25 Medium $20,000-49,999 Table thanto 34 other 2and -payments years Employment, large forms Firms_ or 1,987 of 28,773 Coverage in savings. 1983. a7,945 one-time and29.1 Since Future 58.2 sum tax Benefit 57.9 at 3,108 policy retirement 2.8 encourages 18.6 18.5 or 59.6 termination the growth l057.1 8 of of Spousal Spousal defined earned Total Spous$20,000 aIRAs contribution IRAs l and or Disability more. 30plans 998aProtection in operation. i00.0 EBRI 3,745reports a I00.0 that by 23 the end12.1 of 1984 similarly high for the two middle age groups, workers aged 25 to 44, which spousal retirement eligible Employer-sponsored protection; toorestablish pre-retirement only spousal pension 55 income percent lEAsplans in doofthe so. those offer form Theeligible more majority of either comprehensive toofmonthly establish these payments workers ainflation spousare aor l employer Security In Act 1981, sponsored ofthe 1974Economic pension (ERISA),Recovery plan, when and the Tax45 number Act percent (ERTA) of plans ofexpanded those in operation covered, IRA eligibility actually having CAN WE I AS A SOCIETY, AFFORD TO MAKE THIS AN EITHER/OR CHOICE? $ 5 000 to $Insurance 9 999 Firm 16 738 19.2 2,035 1,417 9.8 12.2 8 5 45 $15,000 (age to $i0,000 $25,000 54 25toyears to$19 and -64,$24,999 999 working over 980 409213,741 7,909 28.0 14.1 82 70.0% 205 46580 29.7 12.6 52.6% 2460 59.2 50.0 $15,000 to Entitlement 19,999 Before14.8 and After the 21.4 Recession, 35 $50,000 to 44 and years over 21,484 647 3,119 21.7 18.9 22.73,967 I.I 23.7 9.2 23.4 1828.4 5 $i to IRAs4,999 and Pension C6omplement 248 EAch 22.7Other 341 10.6 24 5.5 $I0 I000000hours to $14 Other or 999 more, 19 one 044 21.9 1,298 2,109 14.6 7.8 Ii i $20,000 55 to $25,000 64toyears $24 and 999 over 1,36642911,283 39.0 14.8 267 60854 43.7 16.432 62.5 62.2 Covered $20,000Of Oftothe the24,999 16.7 16.7 million million workers workers 71.1 18.4 who who reported reported 25.4 76.1 having having IRAs lEAs in in the the 1983 1983 survey, survey, service. 45 Unpublished to 54 years Individual MayDepartment 1983 and 15,493 Retirement May of 1979 Labor Accounts 15.7 statistics (IRAs), based 4,532 first on IRS authorized 27.1 5500 and6in5500c 1974, 29 3ERISA are Ase pension $5,000 there Different Groups. were tocoverage, 9,999 554,000 Groups IRAs are therefore, defined-contribution Benefit 7 770 most popular it28.2 results among plans, in older 520 aor progressive workers. more 16.2 than The double distribution 25highest the6.7number usage of included more affluent most of andthe older, largewith babyten boom years cohort, or less accounted until retirement. for 55 percentTenofyears all IRA protection a lump-sum choose to than distribution doIRAs. so. Finally, During of thethe most accumulated work employer career,balance, plans the defined-benefit offerlEAs, disability which plan were retirement offers first to decreased already allTheworkers metby role vesting I.Iof(regardless percent. employer-sponsored requirements, The of growth pension werepensions rate entitled status) theninand to climbed thebenefits increased retirement to 13.1 at the retirement. percent system maximum is in $15 000 to $19 999 13 644 15.7 2,366 16.3 17 3 $25,000 year oftoten$29 ure 999 or more) 359 12.4 182 11.2 50.7 A_e $25,000 65 years Vestedtoand29,999 over 221 64.9 28.0 6.3 35.8 74.9 124 6.3 56.2 reporting forms. 55 $I0,000 to 64 toyears 14,999 11,218 6 387 23 ll.32 4,169 627 19.5 24.9 37 9.82 $20 U000 nderto25Total $24 999 I0 68517,991 12.3 16,713 35 2,146 b 14.8 13 I00.0 b 20 1 $30,000 to $49 999 686 23.6 444 27.2 64.7 Age $30,000 to 49,999 38.9 43.9 4.0 wealth. Srates 4.0 Table ource: million million 3for -Empl This Employment IRAs o(20.9 (20.9 yee redistribution occur percent) percent) Benefit and between Pension reported reported Rese can ages arch Coverage be55having demonstr haInstitute ving and Among 64, aated a nonworking nonworking while tabulations by comparing the greatest spouse. spouse. based asset Of proportion Of upon income these, these,U.S° 2.0 and 2.0 of an Can 65 of $15,000 individual-based years defined We, as to anda19,999 benefit Society, over capital plans. 2,870 3Afford 113 accumulation to However, Make ii 2.93This it plan. is an Either important 614 491/Or to19.1 2.9 remember that 19.7 17by1 far those of lEAcovered. contributions In contrast, and investment workers earnings aged 45 will to 64notaccounted provide for an adequate only 30 allowable authorized inflation contribution. protection in 1974 andforexpanded Atthethecareer end in of 1981, employee 1981,areINA partly a and typeKeogh because of capital assets benefit totaled accumulation accruals just protection; long-standing Among 1979, remained those noand nonagricultural above suchclear. protection i0 percent These employees isplans each available year allow who through with an met employer, IRAs. 1982, ERISA and and agefinally in and some fell service plans, to _=_ ............................................................................. $25 000 Underto25$29,999 5 817 6,376 6.7 151,654 11.4 4 28 4 $50,000 25 toand44over 43644,991 15.0 61330 20.2 55 75.6 Not $50,000 Covered and over 22.7 59.2 51.8 16.6 Choice? Department Nonagricultural of Treasury, Wage and Salary InternalWowrkers, Revenue 1983Service, 25Statistics 7 of $20,000 to 24,999 1 831 6 7 352 10.9 19.2 $30 000 25 toto44$49 999 7 17827,471 8.2 422,781 19.252 38 7 Source: SOURCE: 45 to Employee Employee 64 Benefit Benefit 23,260 Research Research Institute Institute 65 tabulations tabulationsof30 of the the May May 1983 1983 Income Bulletin, Vol. 2, No.3; Vol. 4, No.3 (Washington, DC: million (55.7 percent) established spousal IRAs (see tables 11 and 12). The million pension most IRAs $25,000 are defined to (55.7 coverage held 29,999 contribution by percent) those data1 021 as between established reported plans45are 3and 7by spousal secondary 54 the(see CPS, lEAs 303 table plans, the (see7). best tables each 9.4 Ofavailable all coexisting IIpeople and source 29.7 12). between withThe ofa income Employer-sponsored base for retirement, retirement and current and capit patterns al accumulation of lEA utilization plans nowwillcover not plan over percent earnedaimed $38are (see billion. atgenerally table encouraging 3). At related theindividual end to of salaries. April savings. 1985,Benefit INA andformulas Keogh assets can also totaled be 1.5 the requirements IRAs percent employee andinas for employer 1984 well, participation, (see to table plans set aside i). are70a complementary. percent portion of werecompensation covered IRAs add and on 53 aa tax-deferred measure percent of of $50.000 45 65 and toand EBRI 64over over /HHS Current 2 02014,992 Population 1,971 2.3Survey 35(CPS) 631,165Pension Supplement. 8.0 I42 57.7 EBRI Source: /HHS CPSEmployee pension Benefit supplement. Research Institute Not TableKnown 4 -GoCoverage vernment and Printing Future6.2 Office, Benefit Winter Entitlement 1982-83; 7.4 Among Winter 1984-85), Bibliography Source: $30,000 to Employee 49,999 Benefit 929 Research3 4 Institute 358tabulationsii.I of 26the May 38.6 1983 65 and over 691 50 2 tabulations of May 1983 EBRI/HHS Current Population Note: Source: Employee Numbers and Benefit percents Research may not Instit add ute to tabulations totals due ofto the rounding May 1983 and Note: informationNumbers EBRI Nonagricultural /on HHS the and Current joint percents Population Wage distribution may and not Salary Survey add ofWorkers, to(CPS) pension totalsPension 1983 due coverage toSupplement. rounding. and 9 income from more proportion ages $50,000 proportion than 55 and and half of of over 64,the spous spousal 37.2 workforce, alpercent 215 IRAs IRAs held among and among0nearly an8those those lEA.three-quarters earning earning Of102 all those $50,000 $50,000 of between 3.2those or or more, more, 45 employees and47at a.4 54, t 775.6 w5.6 the ho primaryAs defined might bebenefit expected, plan. olderLabor workers, department who tend figures to have show beenthaon t in the 1984 job $18 designed reach 7.2 Defined-benefit those billion. tomost reflect likely While plans wage tothe beand inflation. poor total lEAswhen are amount they only After get oftworetirement, old. assets parts of hasa benefits retirement increased can almost system be flexibility basis those Labor covered until department retirement. towerean already employer figures These entitled plan plans show to forbenefits athat reemployees bybylaw (see 1984 non-discriminatory, who table assets change 2). held jobsby asthey defined these do Sex exclusion ofSurvey respondents (CPS) Pension whose age Supplement. was not reported. EBRI/HHS Current Population Survey (CPS) Pension Supplement. Source: Employee Benefit Research Institute tabulations of Total Note: Numbers and percents i00.0 may not add100.0 to totals due to rounding and Sex Source: aNumbers Women Employee are too small Benefit to 40,015 infer Research significance. Institute 53 tabulations 42of the May 1983 Note: Numbers and percents may not add to totals due to rounding and Individual the Retirement May 1983 Accounts EBRI/HHS Current Population Survey I0 percent, exclusion is significantly of respondents greaterwhosethanage among was notlower reported. earnings groups. The proportion savings. Direct is 29.3information percent. on Those savings peoplewould age 35 be or preferable over accounted to the for data78.6 on are percent, prim longer a25 ry years than defined is younger old significantly contribution or workers, older, have greater hplans avebeen higher accounted than on the rates among jobfor oflower a only benefit year e19 aorrnings entitlement. more, percentgroups. andofwork active Only The at which five-fold adjusted also By contrast, for over includes inflation. the the the last defined-benefit following According four years, components: to pension Labor total Department annual plan covers contributions data, moreabout workers have 3 percent over beena employees benefit not compete Although placan nswith had coverage roll the reaover employee's ched rates accrued $700were billion, other pension generally expenditure orbalances more high, than needs small into triple and priv an desires, ate IRA, the firms 1975 where andwere level. they theya Men Women EBRI/HHS Current 21,015 Population 48,199 Survey 59(CPS) 38 Pension Supplement. 58 36 exclusion of respondents whose earnings were not reported. Those who Who Uses (CPS) IEAsPension Supplement. I0 Source: Employee Benefit Research Institute tabulations of the May 1983 Note:Men Numbers and percents 28,515 may not add 50to totals due 64to rounding and did not report their earnings were omitted for percentage proportion income from of savings, spousal butIRAs it among is not those available age 55 on to a current 64 at 62.5 basis.percent, is also percent ofEBRI all /HHS persons Current holding Population an lEA, Survey while(CPS) thosePension under Supplement. 35 accounted for 21.3 least Source: proportion participants 15 percent halfEmployee time. of of in spousal covered private Benefit Together, workers IEAs employer Research among these under those plans sponsored Institute age age have 25 are 55 tabulations plans; fccumulated to vested, 64theatcompared primary of 62.5 about the percent, May $i plans totrillion 42 for percent is also the in of longer private-sector o period Social of Security time, defined-benefit will generates provide plan more37ptotal amillion rticipants retirement recipients are inincome, with plans$171 and thatbillion offers offer continue The provide distinct leveling Federal aoff. exception. tomeasure Reser accrue ve of in Board In vretirement estment 1983, reports only earnings. security th23 atpercent two-thirds They for ofaalso workers workforce of augment theseinassets that priv employer ate by were firms and pensions held large with in aNumbers exclusion are calculations. too small of respondents to infer significance. whose earnings were not reported. Those who Note: Numbers and percents may not add to totals due to Table 5 --IRA Coverage by Taxable Income for 1981 and 1983 II in 1983 benefits EBRI/HHS in 1985. Current Population Survey (CPS) Pension SOURCE: did EBRI tabulations not report of the theirMay e1983 arnings EBRI/HHS were CPS omitted Pension Supplement. for percentage bThe percent distribution and the number of IRAs add up to more than the rounding and exclusion of respondents whose According to the CPS, more than 40 percent of the labor force reported Note: percent. greater than Numbers at younger and percents ages. may Employer-sponsored not add to totals pension due cover toagerounding appears and to assets, greater remaining of thosethan most aged 81at of 25 percent younger to which 44 and of ages. is 63 participants invested percent Employer-sponsored inof were the thosenation's defined aged pension 45 productive to benefit coverage 64. But plans. appears while capacity. the The to saves universal systematic little Supplement. protection inflation out of current for adjustments spouses income. ofand workers. Employer 51 percent Under plans current are coverina law, plans largenotand that only diverse offer must and either fewerindividual According than corporate I00 savings. to employees equities the latest or For were bonds. Internal broad-based covered, Revenue compared coverage Service to and 76(IRS) percent benefit dataof entitlement, (see those table in calculations. SOURCE: total because EBRI tabulations of the possibility of the May of multiple 1983 EBRIresponses /HHS CPS Pension in the survey. Supplement. earnings were not reported. Table 6 - IRA Usage by Earnings for 1982 (Civilian exclusion of respondents whose earnings were not reported. Those who o Defined contribution plans had 22.3 million active participants and a Numbers are too small to infer significance. Men increase and Women. the likelihood Women atofmost spousal earnings INA use. levels Among are more all spousal likely to IRA establish holders, no savingsdid Employment, income. not report This May 1983) group's their average earningsincome werewas omitted $9,651, for just 12 upercentage nder half increase proportiontheof likelihood public-sector of spousal participants lEA use. with primary Among all coverage spousalfrom IRAa holders, defined Coverage Note: vesting all plans $300 rate Numbers in billion offer these of and coplans vthe in ered percents assets joint workers is broad-based, in may and1984. aged not survivor add 45 with or to more benefit totthree-quarters alsis due higher option, to rounding. than but of that those the for spouse's covered those 5), Number post-retirement segment larger people firms. ofofPeople the withworkforce. incre Particip lessases than ating on $20,000 an ad hocinbasis. income accounted for 14.6 percent of however, employer pensions offer a much more reliable supplement to the Social alncludes those respondents who did not report their earnings. blncludes those respondents who did not report their earnings. calculations. IRAs and Pension Coverage 13 the lEAs 76.1 average than percentmen.income areAmong also of those those covered who reporting by had an earned employer-sponsored somebetween asset $15,000 income. pension and Some$20,000, 55plan. million 21.4 Of benefit plan is similarly high or higher. earning 76.1 under total consent percent oIRA dollar age less is Individual contributions, 45, required than deductions are workers $25,000 also savings if the aged covered claimed inper option were contrast, 45 year, or reported on by ismore 1983 waived. an and areemployer-sponsored accounted income by 55not66% percent related tax of for all forms. ofto only retirees those salpension 44 This aries covered percent inisbecause 1980. plan. down younger of from athe ll Of a Numbers IRAs, To for be on an eligible the activeother workers participant hand, are are tooin small used a defined to forinfer limited benefit significance. purposes plan, a worker by a small must Security Covered Employees system. are Found at All Earnings Levels. While employees with high Table 7 - IRA Uage by Age for 1982 (Civilian percent Numbers workers, these, 57of Covered including percent the women Under have almost established Primary vestedhalfpension Plans ofan the lEA, rights. group whereas reporting 14.8 percent little oforthe no men savings did than alncludes 45. those repondents who did not report their earnings. these, those allowable oDisability vested, 74.9 Transfer contribution percent while retirement payments have workers is vested capped. such plans, under pension as which IRA Supplemental agerights. investment 45 cover accounted 91Security percent earnings for Income of the candefined-benefit remaining provide (SSI), food some 56 earnings both 17.0 percent workarefor ofmore total an likely employer contributions thanwhoothers offers in 1981. to ahave plan, Thepension proportion and meet coverage, ofthat IRA those deductions employer's with segment of the workforce that tends to be older and more affluent than the Employment, May 1983) 14 stamps and housing assistance also play a role in retirement policy. Where IRAs are Invested income on the CPS, were covered by employer pensions in 1983. Pensions thus so (see Because table most 8). Of primary those pension earning coverage $25,000 to is $30,000, provided 35.8 by defined percent benefit of the Where IRAs are Invested percent plan inflation IRAs participants SSI(see areprotection hadtable an 2 important in million 4).medium both elderly before recent and large and addition recipients firms, after to also retirement. with theoffer retirement $3 protection billion However,system. infor since benefits workers most IRA moderate claimed participation byorpeople lowrequirements earnings with incomes account (the of stringency for $50,000 the bulk or of more of which those incre arewith ased limited coverage. fromby23.4 ERISA). percent Only 54A general population. They depend on the individual's saving plans, and thus Table 8 - IRA Usage by Sex and Earnings for 1982 (Non- received in 1983. Food stamps had 2 million elderly recipients with $I constituted women While had agricultural anathe net IRA,largest increase in contrast Wage share inandsavings to Salary of28.0 pension for Wowrkers, percent thesefunds of workers. Maythe is men. invested Men, in however, corporate who plans, coverage patterns under primary pension plans in general are a good Coverage and IRA deposits their billion Rates spouses arein areinvested that outl Close ais ys not for ininrelatively available Men 1983. and Women. through Nearly low-earning Fifty-nine lEAs. 3.4 thrift millionpercent andpublic commercial of all or rent male bank assets percent worker in 1981 While are is toofsaid 28.4 currently the employees to percent largest be covered estimated with in share 1983. earnings by aof atplan pension close below if he tofunds $25,000 is$190 in ais billion, job were invested that covered with is in eligible nearly in corporate 1983, for 17 compete for funds with other current expenditures. They offer no protection 1983) IRA Usage Within Earnings Levels subsidized housing units were provided for elderly households in 1983. (percent) 15 measure made equities $50,000 Employer-provided of and coverage or bonds, over 63.6 established under pension percent defined-benefit an coverage ofIRAIRAat funds ais plans. ratealso were of Detailed 59.2 more invested percent widespread information in as banks opposed than and on As a share of the total number of returns with deductions, the nonagricultural lEAs and Pensionsworkers Complement were Each covered Otherin 1983, compared to 53 percent of all percent equities coverage, compared for deposits, those ofand to most regardless the younger bonds, 82workforce IRA percent holders or63.6 of less whether reporting of percent doaffluent employees notorof an take not lEA acco workers with advantage that unt. funds earnings worker that These were of do currently the winvested of orkers not potential S25,000 choose are participates, in primarily banks or inflation to more. take and o Tax preferences aimed solely at the elderly will provide $19.1 individual savings and retirement loan institutions account in (IRA) 1982participation. (see table 13). Middle- Anotherand9.6higher-income percent was to 51.8 Spouspercent al IRAs for women in the same earnings category. 16 pension those female. coverageMenpatterns accounted is for provided 58 percent by the ofMaycovered 1983 Census workers;Bureau women, Current for billion lEAs andinpensions tax benefits fill to different the elderly rolesinin1985. the retirement system. IEAs older proportion However, adv because protection antage and that employees more ofthat ofthem, worker IRAs affluent may and earning be established could available they than less potentially do thenot in than in general the offer other $25,000 lowest become population. spous investment accounted alincome a protection participant instruments. IRAs categories for offer three forbyclose dropped some meeting quarters measure to half from the of savings and loan institutions in 1982 (see table 13). Another 9.6 percent was Where IRAs are Invested 16 lEAs invested and Pension in mutualCoverage funds and 11.4 percent was invested with brokerages. Older individuals were the primary beneficiaries of the broadening of IRA Population Survey (CPS) Pension Supplement, which was co-sponsored by EBRI and of thethe remaining omarried Disability 42workers percent retirement who(see choose table plans to3). establish cover 91 IRAs percent for of themselves. pension participants of invested 22.8 all provide employer's Spousal retirement covered percent and in both age mutual employees Disability protection inaand 1981 supplement funds service (see to Protection to and 19.4 table requirements. all 11.4 topercent workers, 3). employer-sponsored percentinbut was As 1983, IRA invested a result, while holders pensions with inthere with the brokerages. and will highest employer the always income plans added Older be Table 9 - IRA Usage Among Workers Not Covered by Pensions in medium and large size firms according to Labor department data. individuals by with Earnings lower forearnings 1982 (Civili were anmostEmployment, likely to have their funds in banks eligibility. Use of lEAs An estimated by those not 31 percent covered of by households employer-sponsored reporting pensions income has of the Department of Health and Human Services. flexibility Fifty Anotherpercent needed important in of an covered policy economy male concern where workers in employees recent were already change years, jobs entitled as evidenced frequently. to benefits in the In outnumber individuals categories, some covered IRAs In those terms are with IRAs non-participants; awithout of lower claimed useful benefit earnings such link increased entitlement plans inhence, were thefrom bymost retirement the nearly 18.9 atlikely number retirement, percent three system, to of hto to active aveone. however, 22.7 the their participants vesting percent IRAs funds because perform of rate in tot banks will they aof l a May 1983) 17 DEFINED BENEFIT PLANS increased Whilesubstantially, the numbers ofbutcovered is still workers lowerandthan participating among thoseworkers with pension tend to $15,000 and savings or higher and loanholdinstitutions. IRA accounts,Younger compared workers with with 9 percent high income of households were the in 1983, as were 38 percent of covered female workers. Sixty-four percent of be IEAs. addition smallertothan serving the number as a of supplement covered workers. to employer plans, lEAs can be used to covered passage workers of the Retirement earning $25,000 Equityor Act morelast was year, one andisone thehalf retirement times the protection rate of valuable and provide savings function retirement and loan not protection only institutions. because for they Younger short-term increase workers saving, or with occasional buthigh alsoincome workers, because werethey and the Table i0 - Distribution of IRA and Spousal IRA Trends in Plan Growth with most incomes likely Particip below to in ants v$15,000. est by in Pension mutual Stat funds. us for Across 1982 all age groups the highest coverage be different, in every discussion earningsofcategory. the findings The of IRSthe reported EBRI/HHS3.4survey million willlEAs focus among on those vested were men; thirty-six percent were women (see table 4). Who roll offered Uses over spouses IRAsaccrued of workers. vested benefits in an employer plan on termination of those In earning 1984, less 31 million than $25,000. people, orHowever, 35 percent those of all earning private $25,000 workers, or more were because they provide pension portability between jobs. most likely to invest in mutual funds. Across all age groups the highest encourage participants to transfer existing saving into longer-term form. (Civilian Employment,, May 1983) 18 Defined benefit plans have grown rapidly over the last ten years. The earners were most likely to place lEAs with brokers. Younger and low wage those without By comparison, employer-sponsored 43 percent pensions of workers at theearning end of tax less year than1981. $15,000 are coverage service. rather These accruals than participation, then earn investment for two reasons. earnings First, until retirement. evidence suggests Caccounted overageTheRates for Administration less are than Higher onehas for third proposed Those of those withthat Longer vested IRAsTenure. (see for tanon-working bleThe4).coverage spouses rate of be activeMr. According participants Chairman, to CPS, the in aSun more private Company thandefined feels 16.7 million the benefit country IRAs plan,needs had according been both.established to the Labor by earners were most likely to place IRAs with brokers. Younger and low wage Employee Benefit Research Institute (EBRI) reports that by the end of 1984 earners tended to open IRAs with insurance companies. covered by employer pensions. Assessments of the value of pensions compared workers with long tenure is higher than that of workers with short tenure, the end of tax year 1982 (see table 6). This meant that, assuming each earners tended to open lEAs with insurance companies. o ___ _ _ 0 0